United Arab Emirates Tax Updates October 2021

Contributed by Emerates chartered accountants group, UAE

a) Redetermination of Administrative Penalties Levied Prior to the Effective Date of Cabinet Decision No. 49 of 2021
Federal Tax Authority has issued guidance on the conditions for benefiting from the redetermination of tax penalties and how to obtain such benefit. The redetermination is subject to fulfillment of certain conditions.

b) Turnover declaration letter format includes out of scope supplies.
The Federal Tax Authority has revised the format for providing Turnover Declaration at the time of registration and deregistration. According to the new format available on the FTA website, applicant must disclose the standard rate sales, zero rated sales, sales out of scope and taxable expenses from 2018 till date.

c) FTA Adopts New design for ‘Digital Tax Stamps’
The Federal Tax Authority has announced the adoption of new features for ‘Digital Tax Stamps’ to be placed on packaging of cigarettes, electrically heated cigarettes, and Waterpipe Tobacco vide Decision No. 3 of 2021.
Orders for the first category of stamps, where the red design will be placed on packaging of all types of cigarettes and purple design on electrically heated cigarettes and waterpipe tobacco authorized for trade in local markets and arrival halls at airports, will be open for orders from October 1, 2021.
The second category will be open for orders as of January 1, 2022, where the green design would be placed on the packaging of cigarettes and blue design on electrically heated cigarettes and waterpipe tobacco authorized for trade in duty-free shops in departure halls at airports.
d) Emirates Maritime Arbitration Centre and DIFC Arbitration Institute Merge Into Dubai International Arbitration Centre
In an announcement made on Saturday 18 September 2021 by His Highness Sheikh Mohammed bin Rashid Al Maktoum, the Emirates Maritime Arbitration Centre and the Dubai International Financial Centre Arbitration Institute are to be dissolved and their operations and assets merged into the Dubai International Arbitration Centre ('DIAC').
e) New Tax Treaty between Egypt and the UAE has Entered into Force
According to a recent update from the UAE Ministry of Finance, the new income tax treaty with Egypt entered into force on 19 April 2021. The treaty, signed 14 November 2019, replaces the 1994 tax treaty between the two countries.
The Withholding Tax Rates as per the new Treaty is as under:
o Dividends - 5% if the beneficial owner is a company that has directly held at least 10% of the paying company's capital throughout a 365-day period that includes the day of the payment of the dividend; otherwise 10%
o Interest - 10%
o Royalties - 10%
o When recipient is government/its political sub-divisions/central bank/state controlled Financial institutions of one of the contracting states - Exempt
The treaty applies from 1 January 2022. The 1994 tax treaty between Egypt and the UAE will terminate and cease to have effect from that date.

f) Ukraine Approves Pending Protocol to Tax Treaty with the UAE
On 8 September 2021, the Ukraine parliament approved the ratification of the pending protocol to the 2003 income and capital tax treaty with the United Arab Emirates.
The protocol, signed 14 February 2021, is the first to amend the treaty and includes changes to bring the treaty in line with OECD BEPS standards, as well as amendments to the withholding tax provisions for dividends, interest, and royalties, and other changes.

g) Dubai Integrated Economic Zones created to function as independent legal entity
Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, issued a Law No. (16) of 2021 to create Dubai Integrated Economic Zones (DIEZ) Authority, an independent legal entity with financial and administrative autonomy.
Dubai Airport Free Zone, Dubai Silicon Oasis and Dubai Commerce City will now operate under the supervision of the newly created DIEZ.
Companies and individuals licensed in the zones under its jurisdiction are exempted from all taxes, including income tax, for 50 years, effective from the date of the new law.

Corporate Tax