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Post By: admin January 09 2024

Effect of UAE Corporate Tax Law On International Businesses

UAE has introduced the corporate tax regime this year on June 1st at a rate of 9%, which is quite lower than the other GCC countries, which still helps the UAE hold its position as the best ground for international business and investors. The main aim of the introduction of this new regime is to reduce the dependency of the countries on income from oil and gas and to diversify the sources of income for the authorities. The introduction of CT in the UAE has resulted in a threefold increase in the compliance requirements for businesses, opening a new tax era and providing a new landscape for business.

For international businesses, there are many opportunities still hidden in this business landscape, along with some stringent rules that are to be followed by foreign businesses in the UAE. In this blog, we will unwind the impact of the corporate tax on international businesses.

Corporate Tax Impact On International Business

Prior to the introduction of the corporate tax in UAE, it was known for its tax-free environment. After the implementation, there has been a significant shift in the tax landscape of the UAE, which might result in various queries in the minds of various business owners. Some of the impacts of CT on international business might include:

  1. Review and evaluation of tax planning strategies: Prior to the introduction of the new regime, international business entities could retain a higher chunk of profit for themselves, but now onwards, the picture has changed. The international entities are now required to review their tax structure and compliance framework and adopt the new regime.
  2. Strategic positioning of businesses: After the introduction of the corporate tax regime in the UAE, it might have caused international businesses to reconsider their investment plans in the UAE and discover other tax-free jurisdictions. But even though the implementation of CT has taken down the tax-free label in the UAE, it still provides competitive advantages to international businesses in the UAE.
  3. Diversification of economy: As discussed earlier, the main aim of the introduction of the CT was to reduce the dependency on oil and other natural resources; hence, this paves the way for international businesses as well. International business entities that are capable of providing developmental infrastructure and services can get wide opportunities in the UAE.
  4. Ensuring confidence of foreign businesses: Businesses that have already started their business in the UAE, believing there might not be any tax compliance, need not feel any insecurity due to the implementation of the new CT regime, as the government might take all the required steps to ensure that the businesses are not exploited in any manner due to the new tax regime.
  5. Agreements and tax treaties in favour of international businesses: The UAE has signed various treaties, like double tax avoidance agreements, whereby businesses might not be required to pay taxes twice on the same income. The international business must review the provisions of DTA and ensure that they are not required to pay the taxes twice.

You can also read: Application of Corporate Tax on Non-Extractive Natural Resource Businesses in UAE

Various Strategies For International Business To Overcome The Change in Tax Regime

There are various ways through which international businesses can overcome the transition of the UAE environment. Some of them are listed below:

  • Restructuring Options

Companies can restructure their international businesses in order to maintain their tax position, acquire possible exemptions, etc.

  • Proper Tax Planning

Tax planning stands as a high priority for international businesses to get pure insights into the new CT regime. International businesses can approach tax consultants to get a clearer idea of the CT.

  • Investment in Specific Sectors

International businesses can acquire various incentives and exemptions regarding CT by investing in various developmental projects like health care, education, etc. where the tax liability will be minimal.

  • Robust Business Advantage

Even after the introduction of CT, the UAE provides various advantages to international businesses by providing them with various legal supports and a business-friendly environment that boosts international business growth.

You can also read: Are Unincorporated Partnerships Subject to Corporate Tax?

Key CT Areas To Be Focused On By International Business in UAE

  • Transfer pricing regulation
  • Tax exemptions and reductions
  • Identification of PoEM, PE, and Nexus
  • Tax registration procedure
  • Double taxation and treaties
  • Compliance framework and administration
  • Specific time lines
  • Frequent updates in tax regulation and many more

CDA As Your Tax Consultant

Consult the world-class tax experts at CDA to get your corporate tax sorted out easily. CDA has been providing various accounting, auditing, and tax consultancy services to its clientele in the UAE for more than a decade, which has made it one of the leading accounting and auditing firms in UAE. Our team is always ready to serve your requirements. We can assist you in sorting out tax intricacies while you focus on your core business operations. To learn more about our client-friendly services, contact our team now.