RVG Newsletter

The UAE introduces its first-ever corporate taxes, set to start in 2023s

The United Arab Emirates will be introducing a federal corporate tax on business profits for the first time, the Ministry of Finance announced on December 9, 2022.The news represents a significant shift for a country that’s long attracted businesses from around the world thanks to its status as a tax-free commerce hub. Businesses will be subject to the tax from June 1, 2023.

The country’s statutory tax rate will be 9% for taxable income exceeding 375,000 UAE dirhams ($102,000), and zero for taxable income up to that amount “to support small businesses and startups,” the ministry said, adding that “the UAE corporate tax regime will be amongst the most competitive in the world.”

Individuals will still not be subject to tax on their incomes from employment, real estate, equity investments or other personal income unrelated to a UAE trade or business, the ministry said. The tax also won’t be applied to foreign investors who don’t conduct business in the country.

UAE: Federal Tax Authority activates EmaraTax

The Federal Tax Authority (FTA) launched its new integrated and fully developed digital tax administration platform EmaraTax on December 5, 2022.

The transition from the previous system to the new platform was done seamlessly, with data of all existing users successfully migrated to EmaraTax, enabling them to easily use the new digital platform, with no effect on the transactions carried out by any of the authority’s customers, the FTA said.

The authority noted that the EmaraTax smart application will be launched soon and made available for mobile devices.

FTA Director General Khalid Ali Al Bustani said: “Launching the new platform is a milestone in the authority’s ambitious plans to become a leading digital authority in the tax sector, marking a notable leap forward towards advancing the UAE’s tax system.”

Al Bustani stressed that the EmaraTax platform and the EmaraTax smart mobile application offer smart solutions such as registration, submitting tax returns, and paying outstanding taxes for all taxpayers registered in the system, in addition to tax refund services for those eligible.

The platform also allows for submitting reconsideration requests, among many other services.

VAT Public Clarification: Gold and Diamonds–Amendment to Tax Treatment of Making Service

Pursuant to a resolution issued by the Cabinet, the Ministry of Finance (MoF) announced the amendment of the VAT treatment on workmanship services when supplying gold and diamonds between Registrants in the State.?

According to the resolution, there will be a temporary replacement for the definition of “goods” contained in Article (1) of Cabinet Decision No. (25) of 2018 on the Mechanism of Applying Value Added Tax on Gold and Diamonds between Registrants in the State to be “gold, diamonds and any products whose main component is gold or diamonds, which may include workmanship services directly related to the supply of these commodities”.

This amendment will be applied for the period from June 1, 2018 to December 31, 2022, noting that the term provided in the aforementioned Cabinet Decision No. (25) of 2018 (goods) will be re-applied starting from January 1, 2023.

Tax registrants supplying Gold are not required to impose VAT on the supply of Gold and products which mostly consist of Gold, if the conditions of Cabinet Decision No. 25 are met. In such instances, VAT in respect of the Gold is accounted for under a special reverse charge mechanism which requires the registered recipient to account for VAT on the supply instead of the supplier. Based on a new decision by the Cabinet, the definition of goods in Cabinet Decision No. 25 has been amended to state that it may include Making Services directly in connection with the Gold, for the limited period between 1 June 2018 and 31December 2022. This temporary change in definition would allow for the application of the reverse charge mechanism on the Making Services that are directly in connection with the supply of Gold, where the conditions as stipulated in Cabinet Decision No. 25 of 2018 are met for that specific period only. However, from 1 January 2023, the application of the reverse charge mechanism will be restricted to the supply of Gold and any products where the

principal component consists of Gold. Hence, if the supplier1 charges separate considerations for the Gold and the Making Services, or reflects the price of these components separately, from 1 January 2023, the supplier is required to impose VAT on the service component.

UAE: Unemployment insurance scheme start from January 1

Subscription to the unemployment insurance scheme will start on January 1, 2023, the Ministry of Human Resources and Emiratisation (MoHRE) has announced. The ministry has also called on UAE nationals and residents who work in the federal government and private sector to subscribe.

The insurance pool, which is represented by Dubai Insurance, is responsible for providing the insurance service and offers seven subscription channels, namely:

The website www.iloe.ae, the smart application iloe, Kiosk machines, businessmen service centres, Al Ansari Exchange, bank ATMs and application, telecommunication bills. The scheme, which stemmed from the Federal Decree-Law No. 13 of 2022, aims to create a low-cost job safety net that supports employees while providing them with career stability at no cost on employers.

According to MoHRE, anyone who loses their job as a result of termination of services (except for disciplinary reasons or resignation) is entitled to a maximum three-month cash compensation.

The subscription fees depend on the employee’s basic salary. Those with a basic salary of Dh16,000 or less have to pay a subscription fee is Dh5 per month (Dh60 annually) and are eligible for a monthly cash compensation reaching up to Dh10,000.The second category of people, whose basic salary is higher than Dh16,000 must pay Dh10 per month (Dh120 annually) and is entitled to a maximum monthly cash compensation of Dh20,000.

The insurance fees can be paid monthly, quarterly, once every six months, or annually. The insurance compensation is calculated at a rate of 60 per cent of the employee’s basic salary in the last six months prior to his or her unemployment.

The compensation should be paid within two weeks from the date the claim is submitted. The insured can submit the claim through various claim channels, including the website, the app, or the call centre of the insurance pool.

The insured must be subscribed for at least 12 consecutive months to be eligible for a cash compensation. However, they would lose the right to claim the compensation should they leave the country or take up a new job.

Investors or owners of establishments in which they work, domestic workers, temporary contract workers, juveniles under 18 years, and retirees who receive a pension and joined a new job are not eligible to subscribe to the insurance scheme.