United Arab Emirates (UAE) Tax News July 2021

FTA clarification on New Administrative Penalty Resolution

The United Arab Emirates (UAE) has published Cabinet Decision No. (49) of 2021, which amends Cabinet Decision No. (40) of 2017 on Administrative Penalties for Violations of Tax Law in the UAE. The amendments came into effect from 28 June 2021.

The FTA now reserves the right to waive off the unpaid penalties by 70% subject to the specified conditions.

Further to this, there are revisions in other penalties like late registration, late de-registration, wrong invoice etc.

Public Clarification on Automotive Sector

The Federal Tax Authority have issued a public clarification on Automotive Sector which primarily deals with the taxability of supplies of Automotive sector in the UAE.

This clarification sheds lights on to Profit Margin Scheme, Record keeping requirements, VAT Implications on Leased Cars among others.

Netherlands Publishes Synthesized Text of Tax Treaty with the UAE as Impacted by the BEPS MLI

On 1 June 2021, the Dutch Ministry of Finance published the synthesized texts of the Netherlands tax treaty with the UAE, and few other countries as impacted by the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI).

The MLI applies for the 2007 Netherlands-UAE tax treaty:

with respect to taxes withheld at source on amounts paid or credited to non-residents, where the event giving rise to such taxes occurs on or after 1 January 2020; and
with respect to all other taxes levied by each Contracting State, for taxes levied with respect to taxable periods beginning on or after 1 March 2020.
Article 16 of the MLI (Mutual Agreement Procedure) has effect for a case presented to the competent authority of a Contracting State on or after 1 September 2019, except for cases that were not eligible to be presented as of that date under the treaty prior to its modification by the MLI, without regard to the taxable period to which the case relates.

Tax Treaty between Kuwait and the UAE to be Negotiated

Officials from Kuwait and the United Arab Emirates met on 15 June 2021 to discuss bilateral relations, including the negotiation of a tax treaty. Any resulting treaty would be the first of its kind between the two countries and must be finalized, signed, and ratified before entering into force.



Tax Treaty between Costa Rica and the UAE has Entered into Force

The income and capital tax treaty between Costa Rica and the United Arab Emirates entered into force on 9 June 2021. The treaty, signed on 3 October 2017, is the first of its kind between the two countries.

The Effective date of the Tax Treaty is from 1 January 2022.

Environment, Social and Governance (‘ESG’) disclosures for Companies listed on UAE stock exchanges

Public joint stock companies listed on the UAE Stock Exchanges are now required to publish a sustainability report. Such disclosures should observe the Global Reporting Initiative (‘GRI’) standards as well as any sustainability standards and requirements that are issued by the Dubai Financial Markets and Abu Dhabi Stock Exchanges.

Additional guidelines have been set out by some free zone jurisdictions in the UAE, such as the Dubai International Financial Centre (‘DIFC’) and Abu Dhabi Global Markets (‘ADGM’).

Corporate Tax