Highlights of Digital Public Consultation on Implementation of Global Minimum Tax in UAE

In a proactive stand towards global tax regulations, the Ministry of Finance had launched a digital public consultation on the introduction of a Global Minimum Tax (GMT) or Global Anti-Base Erosion Model Rules (Pillar Two) (GloBE Rules) and other matters related to tax in UAE. The Ministry requested stakeholder feedback towards shaping policies that will align with global standards and regulations as part of its ongoing efforts to ensure compliance internationally. This action demonstrates the government’s dedication to taxation transparency and collaboration.

Importance of Implementing the Global Minimum Tax in UAE

The importance of the implementation of a global minimum tax within the United Arab Emirates cannot be ignored as it helps to boost international tax compliance as well. The UAE can increase its status as an attractive financial centre by adhering to international taxation standards thus attracting more foreign direct investments and stimulating economic growth around the country. UAE, aligning with other countries’ regulations, could be instrumental in reducing profit shifting through the prevention of tax evasion hence creating a fair competition environment among businesses operating within its territories. This step underpins the principles that have been used under international taxation in UAE thereby creating an enabling environment for sustainable economic development.

You can also read: All About Taxation of Foreign Banks under UAE CT

Objectives and Outcomes of the Public Consultation

The Ministry of Finance (MoF) had a digital public consultation on implementing the global minimum tax in the UAE to get insight and feedback from various stakeholders including businesses, tax professionals, and citizens. The government wants to make sure that it follows a well-informed transparent and inclusive process by gathering different ideas. By doing so, the government seeks to ensure that the implementation process is well-informed, transparent, and all-inclusive. This consultation aimed at refining the proposed implementation framework, addressing challenges likely to arise, and identifying strategies for maximizing returns from global tax changes for the UAE economy.

All stakeholders including multinational groups, advisors, service providers, and investors were able to participate in providing their input on these issues. It had two elements; the first part sought views from stakeholders regarding possible policy choices that may be adopted within the UAE such as establishing a domestic minimum tax.

A guideline for jurisdictions interested in implementing qualified rules has been published by the OECD, known as the GloBE Model Rules.

The second part of the consultation aimed to gather stakeholders’ opinions on whether or not incentives based on substance should be added to the UAE Corporate Tax regime. For easy comprehension of these rules and providing feedback that is based on facts, a Global Minimum Tax briefing document has been released by the Ministry together with this consultation.

GMT Proposals for the UAE

• Applicability: The new rules (GloBE Rules) would apply to all MNEs in the UAE including those operating within free zones.
• Free Zone Incentives: Free zone companies may offer more tax exemptions that conform to GloBE Rules.
• Who’s Exempt?: The QDMTT would not apply to domestic groups or small multinationals excluded from GloBE Rules.
• Threshold: €750 million revenue threshold globally for GloBE Rules would be adopted as opposed to converting it into UAE Dirhams.
• Financial Reporting: International Financial Reporting Standards (IFRS) are used for calculating income or loss, which is consistent with existing corporate tax laws in the United Arab Emirates (UAE).
• Filing Demands: GloBE Information Return must be filed to the Federal Tax Authority (FTA) within 18 months from the time an MNE group falls under UAE’s GloBE Rules. The next filing would be due fifteen months after each fiscal year-end.
• Tax Returns Options: There are two proposed return options by the government: Separate returns – one for GloBE Information Return and another for minimum top-up tax (DMTT), which may be connected to UAE corporate tax returns. One combined return with both GloBE information and DMTT inclusive.
• Payment Schedule: Under the GloBE rules, it is possible that a minimum amount of taxes will have to be paid annually by the UAE. This could either align with the current corporate tax payment date or follow a different timetable altogether.

The UAE Ministry of Finance is working on finalizing a global minimum tax (GMT) after calling for public opinion. The new rules are expected to be referred to as the GloBE Rules and will affect all multinational groups’ UAE-based entities including those located in free zones. Taking part in the digital public consultation on global minimum tax in UAE is a great opportunity for stakeholders to speak their minds and contribute to shaping future policies. There are only a few exceptions but the majority of them will have to comply. International reporting standards would be used and information returns filed by the companies with the tax authority. Compliant tax incentives may also be offered for free zone businesses while combined tax return filing may be introduced to make this easier. In general, they want a GMT system that in accordance with international norms does not drive away firms doing business there

How can CDA assist?

CDA, being one of the best professional firms in providing tax consultancy and advisory services, can assist the firm and business to stay updated on the new tax regulations that might be adopted by the authorities. Business firms can approach the CDA team to get clear insights into the tax updates and their implications for business. The entities can avail premium tax consulting services like tax registration, tax return filing, tax calculation, etc. as per their requirements. CDA’s team of experts is well equipped to ensure the proper compliance of their clients with the existing tax laws.

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