Corporate Tax in the UAE: A Summary of the Federal Decree-Law No. 47 of 2022 (the CT Law) issued on 3rd October 2022

On 9th December 2022, the Ministry of Finance published the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, a 60 - page document detailing the new Corporate Tax Law. Our goal in this comprehensive summary is to review the key features of Corporate Income Tax (CIT) to help you evaluate the potential impact this new legislation will have on your business. Please see below for an overview of the legislation, including a summary of the articles which detail the provisions and definitions of the law.

Overview

Effective Date:

·????????The UAE will introduce a federal corporate income tax (a direct tax) effective for financial years starting on or after June 1, 2023.

·????????Any company that adopts a fiscal year starting on 1 June 2023 and ending 31 May 2024 will be subject to CIT starting 1 June 2023. The first tax return filing is likely to be due towards the end of 2024.

·????????Any company that adopts a calendar year starting 1 January 2023 and ending 31 December 2023 will be subject to CIT starting 1 January 2024 and filing is likely to be due towards mid-2025.?

Most businesses will have approximately two years to assess the impact of the new tax on their business and to prepare internally for CIT filing and reporting.

How much is the UAE corporate income tax rate?

The UAE corporate tax rate that will be enforced on 1 June 2023 is set to be as follows:

Taxable Income / Category

1. Taxable income up to AED 375,000

0%

2. Taxable income over and above AED 375,000

9%

Scope

The CIT regime is expected to apply to all business (i.e., commercial, industrial, and professional) activities in the UAE, except for the extraction of natural resources, which is already (and will remain) subject to taxation at an Emirate-level.

The CIT regime will also apply to individuals to the extent they hold (or are legally required to hold) a business license or permit to carry out commercial, industrial and/or professional activities in the UAE. This includes income earned by freelance professionals for activities carried out under a freelance license or permit.

The MOF has stated that the proposed federal CIT regime will also apply to banking operations in the UAE (although branches of foreign banks are already subject to a CIT regime at an Emirate-level).

It was also announced that corporate tax incentives currently offered to free zone businesses will continue to be honored, to the extent the free zone business complies with all applicable regulatory requirements and does not conduct business in mainland UAE. This may affect many businesses currently operating in both mainland UAE and in free zones under a dual licensing scheme. It is important to mention that the application will be the same across all freezones i.e. (there will be no difference between the normal freezones and financial freezones. Free zone businesses will nevertheless have to comply with certain obligations under the CIT regime, including the requirement to register and file a CIT return.

The ministry of finance has also emphasized that the newly introduced corporate income tax will not apply to individuals and their personal income such as Salaries, Dividends, & Capital Gains, or Investment Returns. Corporate income tax will only apply to individuals who hold or a required to hold a license permit.?

Importantly, corporate tax is not a personal income tax. And no corporate tax will apply to personal income from either employment, real estate, and other investments or income.

Below is a summarized version of the articles to help guide your understanding of your corporate tax liability:

Article 1 – Key Definitions

Qualifying Income: Any income derived by a Qualifying Free Zone Person that is subject to Corporate Tax (CT) at 0%.

Person: Any natural person or juridical person.

Free Zone: A designated and defined geographic area within the State that is specified in a decision issued by the Cabinet at the suggestion of the Minister.

Free Zone Person: A juridical person incorporated, established or otherwise registered in a Free Zone, including a branch of a Non-Resident Person registered in a Free Zone.

Unincorporated Partnership: A relationship established by contract between two persons or more, such as a partnership or trust or any other similar association of persons, in accordance with the applicable legislation of the State.

Investment Manager: A Person who provides brokerage or investment management services that is subject to the regulatory oversight of the competent authority in the State.

Foreign Partnership: A relationship established by contract between two persons or more, such as a partnership or trust or any other similar association of persons, in accordance with laws of a foreign jurisdiction.

Foreign Tax Credit: Tax paid under the laws of a foreign jurisdiction on income or profits that may be deducted from the CT due, in accordance with the conditions of Clause 2 of Article 47 of this Decree-Law.

Accounting Income: The accounting net profit or loss for the relevant Tax Period as per the financial statements prepared in accordance with the provisions of Article 20 of this Decree-Law.

Foreign Permanent Establishment: A place of Business or other form of presence outside the State of a Resident Person that is determined in accordance with the criteria prescribed in Article 14 of this Decree-Law.

Withholding Tax: CT to be withheld from State Sourced Income.

Authority: Federal Tax Authority

Minister: Minister of Finance

Non-Extractive Natural Resource Business: The Business or Business Activity of separating, treating, refining, processing, storing, transporting, marketing or distributing the Natural Resources of the

Article 2 – Imposition of Corporate Tax

CT shall be imposed on taxable income.

Article 3 – Corporate Tax Rate

The taxable person shall pay 0% CT on taxable income not exceeding the threshold and 9% on taxable income exceeding the threshold. The threshold shall be specified in the Cabinet Decision, and we assumed it will be Dh 375,000 as provided in the Ministry's initial announcement related to the CT.

The qualifying free zone person shall pay 0% CT on the qualifying free zone income and 9% on the non- qualifying taxable income. The definition of the qualifying income will be provided in the Cabinet Decision.

Article 4 – Exempt Person

These persons:

(i)???????????Government entity,

(ii)??????????Government controlled entity,

(iii)?????????Person engaged in an Extractive Business,

(iv)?????????Person engaged in a Non-Extractive Natural Resource Business,

(v)??????????Qualifying Public Benefit Entity,

(vi)?????????Qualifying Investment Fund, (vii) public and private pension or social security fund, and

(vii)???????UAE incorporated person wholly owned and controlled by (i), (ii), (vi) and (vii) of this article are exempt from CT subject to fulfilling the conditions.

Article 5 – Government Entity

The Govt entity shall be exempt from CT, unless it conducts a business or business activity under a licence issued by a licensing Authority.

Article 6 – Government Controlled Entity

The Govt controlled entity shall be exempt from CT, unless it conducts a business or business activity that is not its mandated activity.

Article 7 – Extractive Business

The provisions of the CT law shall not apply to the extractive business where the person (i) directly or indirectly holds or has an interest in a right, concession or license issued by a local government to undertake its extractive business, and the person (ii) is subject to Emirate level tax. To avail of this exemption, the person will have to notify the Ministry.

Article 8 – Non-Extractive Natural Resource Business

The provisions of the CT law shall not apply to the non- extractive business where the person (i) directly or indirectly holds or has an interest in a right, concession or licence issued by a local government to undertake the non-extractive business, (ii) derives income from this business solely from persons that undertake a business or business activity, and (iii) subject to tax at the Emirates level. To avail this exemption, a person must notify the Ministry.

Article 9 – Qualifying Public Benefit Entity

A qualifying public benefit entity shall be exempt from CT, if all the following conditions are fulfilled:

i.?????????????It is established and operated exclusively for religious, charitable, scientific, artistic, cultural, athletic, educational, healthcare, environmental, humanitarian, animal protection or other similar purposes. As a professional entity, like a chamber of commerce or a similar entity operated exclusively for the promotion of social welfare or public benefit.

ii.????????????It does not conduct a business or business activity except required for the main purpose.

iii.???????????Its income or assets are used exclusively in the furtherance of its main purpose.

iv.??????????Its income or assets are not payable to, or otherwise available to, for the personal benefit of any shareholder member, trustee, founder or settlor except Qualifying Public Benefit Entity, Government Entity or Government Controlled Entity.

Article 10 – Qualifying Investment Fund

An investment fund may apply to the FEDERAL TAX AUTHORITY to be exempt from CT as a qualifying investment fund where all of the following conditions are met:

i.?????????????The investment fund or the investment fund’s manager is subject to the regulatory oversight of a competent authority.

ii.????????????Interests in the investment fund are traded on a recognized stock exchange or are marketed and made available sufficiently widely to investors.

iii.???????????The principal purpose of the investment fund is not to avoid CT.

Article 11 – Taxable Person

The resident taxable persons include any of

(i)???????????the juridical person incorporated in the UAE, including free zones businesses,

(ii)??????????the juridical person established out of the UAE but controlled and managed from the UAE,

(iii)?????????any natural person who conducts a business or business activity in the UAE or

(iv)?????????any other person determined in a decision issued by the Cabinet. While the non-resident taxable persons comprise any of

(i)???????????the permanent establishment (PE) of the non-resident person in the UAE,

(ii)??????????UAE-sourced income of the non- resident person, or

(iii)?????????nexus in the UAE of the non- resident person to drive UAE-sourced income. Sole establishment and civil companies are considered natural persons, and LLCs, PSCs, PJSCs etc. are juridical persons in the UAE.

Article 12 – Corporate Tax Base

The juridical resident taxable person and juridical non- resident taxable person, which are being controlled and managed from UAE, shall be subject to CT on their worldwide taxable income, while a natural resident taxable person shall pay CT on the taxable income of the UAE business (including income earned out of UAE). The non-resident taxable person shall be liable to pay tax on the taxable income attributable to the PE in the UAE, UAE-sourced taxable income not attributable to the PE and taxable income that is attributable to the nexus of the non-resident person in the UAE.

Article 13 – State Sourced Income

State-sourced income includes that income derived from

(i)???????????the UAE resident person or

(ii)??????????the PE of the non- resident person in the UAE or

(iii)?????????activities performed, assets located, capital invested, rights used, services performed or benefitted in the UAE. For example, income from the sale of goods or provision of services in UAE, income from contracts performed in the UAE, income from the use or right to use intellectual property in the UAE etc.

Article 14 – Permanent Establishment

Where the non-resident person

(i)???????????has a fixed or permanent place in the UAE through which the business of the non-resident person is conducted; or

(ii)??????????has a person in the UAE that habitually exercises an authority to conduct a business or business activity in the UAE on behalf of the non-resident person or

(iii)?????????has any other form of nexus in the UAE, then it will be assumed that non-resident person has PE in the UAE.

The fixed establishment includes a place of management, branch, office, factory, workshop, real property and building sites where activities would be carried out for more than six months. Installations and structures used in exploring natural resources, mines, oil or gas wells, quarries and other places to extract natural resources will also be considered PEs. A Person shall be considered as a habitually exercising authority if the person habitually concludes or negotiate contracts on behalf of the non-resident person.

If the person performs support services like preparatory or auxiliary services to a non-resident person, or there is a fixed place where the goods of the non-resident person are displayed and delivered, shall not be considered the PE. If a person conducts a business or business activity in the UAE as an independent agent and acts for the non- resident person in the ordinary course of that business or business activity, then it will not be assumed that the person habitually exercises authority to conduct a business or business activity in the UAE on behalf of the non-resident person.

Article 15 – Investment Manager Exemption

The investment manager shall be considered an independent agent when acting on behalf of a non- resident person if the investment manager is:

(i)???????????providing investment management or brokerage services,

(ii)??????????subject to regulatory oversight,

(iii)?????????carrying out transactions in the ordinary course of business,

(iv)?????????acting in an independent capacity,

(v)??????????transacting on arm’ length basis and receiving compensation for services, and

(vi)?????????not representing non-resident person related to any other income in the UAE which is subject to CT.

Article 16 – Partners in an Unincorporated Partnership

An unincorporated partnership shall not be considered a taxable person in its own right, and partners of an unincorporated partnership shall be treated as individual taxable persons unless an application is made to the FEDERAL TAX AUTHORITY for the Unincorporated Partnership to be treated as a taxable person. An incorporated partnership where the liability of any partner is not unlimited shall be treated like a juridical person.

Article 17 – Family Foundation

Generally, the FF is a juridical person with a separate legal personality, and prima facie is subject to CT. However, the FF can apply to the FEDERAL TAX AUTHORITY to be treated as an unincorporated partnership if

(i)???????????FF is established for benefit,

(ii)???????????the principal activity is investing/disbursing or managing assets or funds with the saving or investment,

(iii)?????????FF does not conduct the business or business activity, and

(iv)?????????FF main purpose is not to avoid the tax. The FF shall be treated as an unincorporated partnership if approved by the FEDERAL TAX AUTHORITY.

Article 18 – Qualifying Free Zone Person

The persons shall be considered a qualifying free zone person if they

(i)???????????maintain adequate substance in the UAE,

(ii)??????????derive qualifying income,

(iii)?????????comply with transfer pricing rules, and

(iv)?????????not elected to be subject to CT. All free zone taxable persons shall be required to register and file a CT return, regardless of whether they are qualifying free zone persons.

Article 19 – Election to be Subject to Corporate Tax

The Qualifying Free Zone Person can elect to be subject to CT.

Article 20 – General Rules for Determining Taxable Income

The taxable income of each taxable person shall be determined separately based on financial statements prepared as per applicable accounting standards. To arrive at the taxable income, adjustments shall be made in the accounting income for the unrealized gain or loss, exempt income, reliefs, deductions, related party transactions, tax loss relief, incentives or special reliefs, income or expenditure that have not otherwise been considered.

Article 21 – Small Business Relief

If the taxable income of the resident taxable person does not exceed a threshold (to be set by the minister) in the current period and previous tax periods, and all other conditions (to be set by the minister) are met, then the taxable person may be elected to be treated as not derived any taxable income. If the resident taxable person has opted for this option, then privileges for the specific reliefs, deductions, and exempt income shall not be available. Moreover, the person will not be required to comply transfer pricing documentation requirement.

Article 22 – Exempt Income

The following income and related expenditures shall be exempt while calculating taxable income:

i.?????????Dividends and other profit distributions received from the juridical resident person.

ii.?????????Dividends and other profit distributions received from a participating Interest in a foreign ?juridical person. where:

???????????a. the person is at least holding a 5% interest in the shares or equity for an uninterrupted ???????????period of 12 months,

???????????b. participation is subject to a tax of at least 9% in a foreign jurisdiction.

???????????c. this participation entitles the taxable person to receive at least 5% profit and proceeds upon liquidation.

???????????d. At least 50% of the assets of the participation would have qualified for CT exemption if held by the taxable person.

iii.????????Any other income from a qualifying participating Interest.

iv.???????Income of a foreign PE where the person has opted not to take his income and associated ???????????expenses.

v.????????Income derived by foreign operators from operating aircraft or ships in international ???????????transportation, where the same privilege is available to the UAE’s operators in that country.

Article 23 – Participation Exemption

Income from a participating interest shall be exempt from CT if the conditions given in 23(ii) are fulfilled. Out of the given conditions, the main conditions are that the taxable person holds at least 5% shares of the foreign entity for an uninterrupted period of 12 months and participation income is at least subject to 9% tax. Moreover, the person is entitled to at least 5% of taxable profits and assets of the company in which the person has participated. Exemption does not apply to a loss realised on the liquidation of a Participation.

Article 24 – Foreign Permanent Establishment Exemption

A resident person can make an election to not take into account, the income, and associated expenditure, of its foreign permanent establishments in determining its taxable Income, and the taxable person can claim this exemption if the tax on foreign income is at least 9%.

Article 25 – Non-Resident Person Operating Aircraft or Ships in International Transportation

Income derived by a non-resident person shall not be subject to tax if (A) that income is derived from the operation of aircraft or ships in international transportation, where the non-resident person is in the business of (i) International transport of passengers, livestock, mail, parcels, merchandise or goods by air or by sea, or (ii) leasing or chartering aircraft or ships used in international transportation or (iii) leasing of equipment which is integral to the seaworthiness of ships or the airworthiness of aircraft used in international transportation, and (B) the same exemption is available to UAE operators of aircrafts and ships also in their country.

Article 26 – Transfers within a Qualifying Group

No gain or loss shall arise on transferring assets or liabilities between two taxable members of the same qualifying groups if the assets or liabilities are not transferred out of the qualifying group within 2 years from the date of transfer or taxable person does not cease to be members of the same qualifying group. Two taxable persons shall be treated as members of the same qualifying group where (i) Taxable persons are juridical resident person, or PE of non-resident person,

(ii) either taxable person has 75% ownership in other taxable person or third person has at least 75% ownership in two taxable persons,

(iii) none of them is exempt or qualified free zone persons,

(iv) same financial years, and

(v) apply same standards to prepare financials statements. The transfer will be recorded at book value.

Article 27 – Business Restructuring Relief

Upon fulfilment of the conditions, no gain or loss shall be taken into account if a taxable person transfers its entire business or an independent part of its business to another taxable person or to the person who will become a taxable person as a result of the transfer in exchange for shares or other ownership interests of the transferee. Where the entire business is being transferred, and even the transferor ceases to exist as a result of transfer, still, no gain or loss shall be booked related to this transfer. The assets and liabilities transferred shall be treated as being transferred at their net book value.

Article 28 – Deductible Expenditure

Revenue nature expenditure incurred wholly and exclusively for the taxable person’s business shall be deductible in the tax period in which it is incurred, subject to the provisions of the Law. Non-business expenses, non-business loss, and expenses related to the exempt income shall not be allowed. If the expenditures have been incurred for more than one purpose, then identifiable part and proportionate expenditures shall be allowed.

Article 29– Interest Expenditure

Net interest (interest expense less interest income) shall be allowed in the period it incurred, subject to the fulfilment of conditions as given in articles 28, 30 and 31 of the law.

Article 30– General Interest Deduction Limitation Rule

Net interest expense shall be deductible 100% if below the limit specified by the Minister. If its above the limit, up to 30% of EBIDTA (earnings before the deduction of interest, tax, depreciation and amortisation) shall be allowed in the tax period in which it is incurred, and the remaining interest can be carried forward for 10 tax periods. Exempt income shall not be considered while calculating EBIDTA. The interest capping rules shall not apply to the bank, insurance provider, taxable natural person and any other person specified by the Minister.

Article 31– Specific Interest Deduction Limitation Rule

Interest on loan taken from a related party for payment to the related party for (i) dividend or profit distribution, or (ii) redemption, repurchase, reduction or return of share capital, or (iii) capital contribution or (iv) acquisition of an ownership interest (even the party became a related party after acquisition), shall not be allowed unless the taxable person can demonstrate that loan has been taken not to gain a CT advantage. If the related party is subject to at least 9% CT, then it will be assumed that tax advantage has not been taken.

Article 32 – Entertainment Expenditure

Entertainment expenses for meals, accommodation, transportation, admission fees, facilities and equipment used in connection with such entertainment, amusement or recreation, and such other entertainment expenses as specified by the Minister if incurred during the tax period to receive and entertain the taxable person’s customers, shareholders, suppliers or other business partners, shall be allowed up to 50% only.

Article 33 – Non-deductible Expenditure

No deduction is allowed for (i) donations, grants, gifts (unless given to qualifying public benefit entity), (ii) fines and penalties unless awarded as compensation, (iii) bribes or other illicit payments, (iv) dividends, profit distributions or benefits of a similar nature paid to an owner, (v) amount withdrawn by natural person business owner or partner in an unincorporated partnership, (vi) corporate tax imposed, (vii) recoverable input tax (non-recoverable input tax is allowed), (viii) tax imposed out of UAE, and (ix) such other expenses as specified by the Minister.

Article 34 – Arm’s Length Principle

While calculating taxable income, transactions with the related parties and connected persons should be reported at arm’s length price. The law recommends applying transfer pricing methods given in the OECD guidelines which are [(i) Comparable price method, (ii) Cost plus method, (iii) Resale price method, (iv) Transactional net margin method and (v) transactional profit split method]. The taxable person can use other appropriate and justified methods or a combination of various methods to determine the arm’s length price. If the transactions are not at arm’s length, adjustments and corresponding adjustments shall be made by the FEDERAL TAX AUTHORITY, or foreign competent authority, as the case may be.

Article 35 – Related Parties and Control

Generally, related parties of an individual, refer to the individual’s relatives as well as companies in which the individual, alone or together with their related parties, has a controlling ownership interest (typically 50% or more of shares of the company). Similarly, related parties of a company, refer to any other companies in which the company, alone or together with their related parties, has a controlling ownership interest (typically 50% or more of shares of the company), or that are under greater than 50% common ownership.

Connected persons are different from related parties. A person will be considered “connected” to a business that is within the scope of UAE CT if they are (i) the owner of the business; (ii) a director or officer of the business; or (iii) related party of either of the above.

Article 36 – Payments to Connected Persons

Any payment made or benefit provided to the taxable person’s owner, director or officer; or related party of such owner, director, or officer shall be allowed for tax purposes if these payments or benefits are as per market value based on transfer pricing principles. This article shall not apply to the taxable person (i) whose shares are traded on the Recognized Stock Exchange, or (ii) who is subject to regulatory oversight, or (iii) whom the Minister specifies.

Article 37 – Tax Loss Relief

Taxable persons can carry forward their tax losses for an unlimited period and adjust it against the future taxable income, but the amount of tax loss that can be adjusted against the taxable income for any subsequent tax period should not exceed 75% or other % as specified by the Minister, of the taxable income for that tax period before any tax loss relief. The taxable person cannot claim tax loss relief if the losses are incurred before the commencement of CT and/or before a person becomes a taxable person. Moreover, the taxable person cannot claim tax loss relief related to the asset or activity, the income of which is exempt from CT.

Article 38 – Transfer of Tax Loss

Tax loss of one taxable person can be adjusted against the taxable income of another upon fulfilment of these conditions

(i)???????????Both taxable persons are juridical resident persons,

(ii)??????????either taxable person has 75% ownership in another taxable person or third person has at least 75% ownership in both taxable persons,

(iii)?????????common ownership exist before the start of the tax period in which loss is incurred, and remains till the loss is offset

(iv)?????????none of them is exempt or qualified free zone persons,

(v)??????????same financial years, and

(vi)?????????apply same standards to prepare financials statements.

Article 39 – Limitation on Tax Losses Carried Forward

Tax Losses can only be carried forward and utilized if there is a (i) continuity of ownership (same person(s) continuously owned at least a 50% shares from the beginning of the tax period in which the tax loss is incurred to the end of the tax period in which the tax loss or part thereof is offset); or (ii) continuity of business if there is a change in ownership by more than 50%, then taxable person continued to conduct the same or a similar business or business activity. Continuity of ownership and continuity of business does not apply to the taxable person listed on the Registered Stock Exchange.

Article 40 – Tax Group

A group of UAE resident companies can form a tax group. The parent company can file an application to the FEDERAL TAX AUTHORITY, where all these conditions are fulfilled

(i) all potential group members are juridical resident persons,

(ii) the parent company has at least 95% direct and indirect ownership, voting rights and entitlement in assets/profits in subsidiaries,

(iii) none of them is exempt or qualified free zone persons,

(iv) same financial years, and

(v) apply same standards to prepare financials statements. Govt entities are exempt from CT, but the govt entity holding at least 95% shares of subsidiaries can become a part of the tax group and can apply for the tax group.

Article 41 – Date of Formation and Cessation of a Tax Group

The beginning of the tax period as specified in the application submitted to the FEDERAL TAX AUTHORITY, or the beginning of any other tax period as determined by the FEDERAL TAX AUTHORITY, shall be considered the effective date of formation of the tax group. If there is any amendment in the tax group (if a member leaves and/or a new member joins), it will be effective from the commencement of the tax period in which the amendment took place. As a special case, if any subsidiary does not meet the conditions to be part of the tax group, it will be effective from the beginning of the tax period in which the subsidiary doesn’t meet conditions.

Article 42 – Taxable Income of a Tax Group:

i. The parent company shall consolidate the financial results of the tax group after eliminating intra tax group transactions.

ii. Pre-grouping tax losses of the subsidiary joining an existing tax group shall become carry-forward losses of the tax group, and can be used to offset the taxable income of the tax group insofar this income is attributable to the relevant Subsidiary. Similarly, unutilised tax losses of the existing tax group cannot be used to offset the taxable income of the tax group insofar this income is attributable to the new subsidiary.

iii. If the subsidiary leaves the tax group, then the unutilised pre-grouping tax losses of the subsidiary shall not remain with the tax group.

iv. On cessation of the tax group, unutilised tax losses of the tax group shall be allocated to the parent company, and if the parent company ceases to be taxable person, then tax losses of the tax group shall not be available for offset against future taxable Income of individual subsidiaries, except for any unutilized pre-grouping tax losses of such subsidiaries.

Article 43 – Currency

All amounts should be quantified in the UAE dirham, and if the amounts are not in the UAE dirham, then it must be converted at the applicable exchange rate set by the central bank of the UAE.

Article 44 – Calculation and Settlement of Corporate Tax

Out of the gross tax payable, the taxable person first shall adjust the withholding tax, then available foreign tax credit and then credits or other forms of relief specified by the Minister to arrive at the net tax payable.

Article 45 – Withholding Tax

The state-sourced income of the non-resident taxable person unless the income is attributable to the PE in UAE, or any other income specified by the Minister, shall be subject to 0% withholding tax unless any other rate decided by the Minister.

Article 46 – Withholding Tax (WHT) Credit

Withholding tax (which is zero per cent for the time being) shall be deducted from the gross amount of the payment and remitted to the FEDERAL TAX AUTHORITY. The maximum amount of WHT credit is up to the CT payables, and excess WHT shall be refunded to the taxable person upon submission of refund application.

Article 47 – Foreign Tax Credit (FTC)

FTC shall be allowed to taxable persons, but FTC cannot exceed the UAE CT due on the relevant foreign income. Any unutilized FTC cannot be carried forward or carried back.

Article 48 – Corporate Tax Payment

Taxable person must settle the CT payable within 9 months from the end of the relevant tax period or by such other date as determined by the FEDERAL TAX AUTHORITY.

Article 49 – Corporate Tax Refund

Taxable person may apply to the FEDERAL TAX AUTHORITY for a CT refund if the taxable person has unutilized WHT or overpaid CT.

Article 50 – General Anti-abuse Rule

The law does not support any arrangement or transaction to avoid the tax unless there is a valid commercial or other fiscal reason which reflects economic reality. By applying the provisions of the anti-abuse rules, the FEDERAL TAX AUTHORITY can decide to adjust the advantage taken.

Article 51 – Tax Registration

Every taxable person shall register for CT and get a tax registration certificate except in the circumstances prescribed by the Minister. The FEDERAL TAX AUTHORITY may also request certain exempt persons to register for UAE CT. Taxpayers are required to register before they file their first CT return. There is no registration threshold for UAE CT registration.

Article 52 – Tax Deregistration

A registered CT person shall apply for deregistration to FEDERAL TAX AUTHORITY where there is a cessation of its business or business activity, whether by dissolution, liquidation, or otherwise, in the form and manner and within the timeline specified by the FEDERAL TAX AUTHORITY. Before the deregistration taxable person shall be liable to pay the penalties and outstanding principal amount.

Article 53 – Tax Returns

Taxable person must file a tax return to the FEDERAL TAX AUTHORITY within 9 months from the end of the relevant tax period or by such other date as directed by the FEDERAL TAX AUTHORITY. The parent company shall file the return on behalf of the tax group.

Article 54 – Financial Statements

The FEDERAL TAX AUTHORITY may ask to submit the financial statements. Audited financial statements are not required, but the Minister may issue a decision and ask for audited or certified financial statements.

Article 55 – Transfer Pricing Documentation

If a taxable person has transactions with its related parties and connected persons, the person must maintain both a master file and a local file in the form and manner specified by the FEDERAL TAX AUTHORITY. FEDERAL TAX AUTHORITY may ask the taxable person to submit information pertaining to the related party transactions. If asked by the FEDERAL TAX AUTHORITY, the taxable person shall be liable to submit the information within 30 days following the date of request by the FEDERAL TAX AUTHORITY.

Article 56 – Record Keeping

Taxable person shall keep the record for 7 years following the end of the tax period to which it pertains. An exempt person shall maintain all records as well.

Article 57 – Tax Period

The tax period shall be the Gregorian calendar year or the 12 months period for which the taxable person prepares financial statements.

Article 58 – Change of Tax Period

A taxable person can make an application to the FEDERAL TAX AUTHORITY to change the start and end date of its tax period, or use a different tax period, subject to conditions to be set by the FEDERAL TAX AUTHORITY.

Article 59 – Clarifications

A person can make an application to the FEDERAL TAX AUTHORITY to seek clarification

Article 60 – Assessment of Corporate Tax and Penalties

Tax procedures and decisions will be issued, which will be helpful to implement the law and shall determine the penalties and fines related to this.

Article 61 – Transitional Rules

?The ending balances of the financial year that ends immediately before the first tax period commencement shall be considered the opening balances for CT purposes and opening balances shall be prepared considering the arm’s length principles.

Article 62 – Delegation of Power

Related to the CT law, the Minister may delegate his powers in full or partly to the FEDERAL TAX AUTHORITY.

Article 63 – Administrative Policies and Procedures

Related to the CT law, the FEDERAL TAX AUTHORITY shall issue the administrative policies, procedures and general instructions in coordination with the Ministry.

Article 64 – Cooperating with the Authority

All governmental authorities in the UAE shall fully cooperate and share information with the FEDERAL TAX AUTHORITY to implement the CT law.

Article 65 – Revenue Sharing

CT revenue and administrative penalties collected under the CT law shall be shared between the federal government and the local governments based on the related federal law.

Article 66 – International Agreements

If international agreements are in force in the UAE, and there is an inconsistency with the CT law, the provision of the international agreements shall prevail.

Article 67 – Implementing Decisions

Minister and the FEDERAL TAX AUTHORITY shall issue, and the Cabinet may issue at the suggestion of the Minister, the necessary decisions to implement the provisions of this CT law.

Article 68 – Cancellation of Conflicting Provisions

Any text or provisions contrary to or inconsistent with the provisions of this CT law shall be abrogated.

Article 69 – Application of this Decree-Law to Tax Periods

The law shall apply to tax periods commencing on or after 1 June 2023

Article 70 – Publication and Application of this Decree-Law

The law shall be published in the official gazette and shall come into effect in 15 days from the date of publication.