United Arab Emirates Tax Updates February 2022

Corporate Tax Introduced in the UAE – Effective from 1 June 2023

The Finance Ministry in the UAE announced introduction of Corporate Income Tax.

The UAE Corporate Tax regime will become effective from financial years starting on or after 1 June 2023 and will be applicable to all UAE businesses / Commercial activities except for extraction of natural resources (which are already subject to Tax).

The new regime implies a standard statutory tax rate of 9% when taxable profits exceeds AED 375, 000. There is an indication that there will be a different tax rate for large multinationals that meet the criteria under ‘Pillar Two’ of the OECD Base Erosion and Profit Shifting project (i.e. that have consolidated global revenues above EUR 750m).

Individuals would be subject to Corporate Tax only if they have ongoing and regular business in UAE. Employment income, income from real estate, income from savings, investment returns and other income earned by individuals in their personal capacity that is not attributable to a UAE trade or business shall not be subject to corporate tax.

Foreign Companies and Individuals would be subject to tax only if they are engaged in a business in the UAE on a regular basis.

The detailed law on Corporate Tax is yet awaited.

UAE Issues Rules on Installment and Waiver of Administrative Penalties

UAE Cabinet Decree No. 105 of 2021 was issued on 28 December 2021, providing new rules for the installment and waiver of administrative penalties.

It is provided that requests for both installments and waivers of administrative penalties must be submitted to the FTA, which shall review the request within 40 business days.

Dubai Customs issues notice concerning procedures for Cross Border e-commerce

The Notice No. (15/2021) issued by Dubai Customs on procedures for Cross Border e-commerce with the purpose of simplifying and facilitating customs procedures and regulating the movement of goods through cross-border e-commerce channels, came into effect from 01 January 2022. This notice repeals Customs Notices No. (9/2021), (13/2021) and (14/2021).

UAE to Sign Tax Treaties with Dominica, Guyana, and Jamaica and Protocols to Tax Treaties with Algeria and Finland.

As reported by Bloomberg tax, on 14 January 2022, the United Arab Emirates Cabinet approved the signing of income tax treaties with Dominica, Guyana, and Jamaica, as well as amending protocols to the 2001 tax treaty with Algeria and the 1996 tax treaty with Finland.

The treaties will be the first of their kind between the UAE and the respective countries and the protocols will be the first to amend the respective treaties. The treaties and protocols must be signed and ratified before entering into force.

Tax Treaty between Israel and the UAE has Entered into Force

The income tax treaty between Israel and the United Arab Emirates entered into force on 29 December 2021. The treaty, signed 31 May 2021, is the first of its kind between the two countries.

UAE has launched its first Space Economic Zone in Masdar City

The UAE Space Agency and Masdar have announced they have agreed to establish the country’s first Space Economic Zone in Masdar City.

The Masdar City Free Zone will offer tailor-made business licenses for space-related companies across the launch sector, satellite communication, logistics, data analysis, science, technology, engineering, among other things.

New UAE Cybercrimes Law to come into force in January 2022

The Federal Decree Law No. 34 of 2021, effective from January 2, 2022, covers new areas of the internet, bringing major amendments to the Federal Law 5 of 2012 on Combatting Cybercrimes.

The new law criminalises publishing and sharing fake news, rumours and misleading or inaccurate information that cause panic on online platforms. Violators will face at least one year in prison and a minimum Dh100, 000 fine. The penalty increases to two years in prison and a minimum Dh200, 000 fine if the crime was committed during pandemics, emergencies and crises.

Corporate Tax