06 Jun
UAE readies for GCC’s lowest tax regime as global corporates brace for tariff hikes
The median corporate tax rates in leading economies worldwide fell to a new low of 25.1 per cent in 2021, which is nearly three times of the nine per cent tax rate that the UAE is going to implement from June 2023
Businesses worldwide are bracing for higher tax costs as cash-strapped governments seriously consider increasing taxes on corporates following a period of low tax regime, according to a study by a leading accounting network.
The median corporate tax rates in leading economies worldwide fell to a new low of 25.1 per cent in 2021, which is nearly three times of the nine per cent tax rate that the UAE is going to implement from June 2023.
The study by UHY, the international accounting and consulting network, says that with the Covid-19 pandemic leaving a gaping hole in the public finances of countries around the world, the trend of declining corporate tax rates worldwide is likely to be over for the foreseeable future.
“Countries around the world have wanted to remain competitive by keeping the tax burden on companies as low as possible in recent years. The cash strapped governments of 2022 will likely now be considering increasing taxes on corporations,” said Subarna Banerjee, chairman of UHY.
He said public finances will have to be shored up somehow and corporations can be an easier target politically than individuals. “Businesses worldwide should be prepared for their tax costs to begin to rise in the coming years.” Several countries have announced their intention to raise the tax rate. The UK already announced its intention to raise corporation tax rates to 25 per cent from April 2023, more than two percentage points higher than the European average.
President Joe Biden has also pledged to raise federal corporate income tax to 28 per cent, after it was cut to just 21 per cent by his predecessor Donald Trump in 2017.
Global corporate tax rates have been steadily decreasing over recent years, with the G7 average for a business recording profits of $1.0 million falling from 32 per cent in 2014-15 to just 26 per cent in 2020-21. Many countries sought to incentivise businesses to invest in their economies with attractive tax rates. France, often seen as a higher tax European economy, has lowered its headline rate from 31 per cent to 26.5 per cent in just the past three years.
The UAE, typically renowned as a low-tax jurisdiction, recently introduced corporate tax at one of the lowest rates across the globe — nine per cent — for financial years starting on or after June 1, 2023. “This measure is in line with the UAE’s ambition to establish a more transparent local economy while continuing to retain its attractiveness as a global hub for foreign investment,” the study said.
With the SME and start up sector constituting up to 94 per cent of the UAE economy, the UAE leadership has ensured the economic engine of the business landscape is empowered towards growing strategically while striking a balance in meeting compliance and regulatory obligations that protect businesses in the long haul, said the study.
“In the realm of multinationals, UAE will adhere to the global minimum tax rate of 15 per cent, which 136 countries have agreed to under the aegis of the Organisation for Economic Cooperation and Development (OECD),” it said.
James Mathew, chief executive and managing partner of UHY James Chartered Accountants, said the introduction of corporate tax in the UAE clearly reiterates the nation’s commitment towards aligning its economic environment with global best practices.
“However, the investor friendly corporate tax rate of nine per cent is indicative of the country’s efforts in cementing its position as a destination of choice for foreign investment while building a foundation on tenets of regulatory compliance, legislative obligations, and robust AML (anti-money laundering) measures.”
Mathew said corporate tax will bring a positive ripple effect into play in the UAE economy.
“The arrival of corporate tax in the UAE in 2023 has already put into motion discussions around effective tax planning,” he said.
“SME’s make up 94 per cent of the UAE economy and almost two thirds of the SMEs feel constrained due to lack of access to finance at a reasonable cost. With the introduction of VAT in the UAE in 2018, banks adopted a favourable approach in channelising finance to SMEs and now with corporate tax coming into force, the SME sector will stand to gain significantly with measures that increase the transparency factor of their business,”
Source:https://www.khaleejtimes.com/business/uae-readies-for-gccs-lowest-tax-regime-as-global-corporates-brace-for-tariff-hikes
03 Jun
Dubai emerges popular destination for entrepreneurs, millionaires and startups
Recent visa reforms, change in weekend in line with international markets and conducive environment for business will attract high net worth individuals (HNIs) and worldwide investors in key sectors of the economy
Dubai is an established international business hub and recent visa and labour reforms will further strengthen its position as a popular destination for entrepreneurs, millionaires, startups and scale-up businesses, experts say.
Analysts, executives and industry specialists said recent visa reforms, change in weekend in line with international markets and conducive environment for business will attract high net worth individuals (HNIs) and worldwide investors in key sectors of the economy.
Referring to the new rules for the 10-year Golden Visa, five-year Green Visa and other reforms, experts said Dubai will attract global talent, skilled professionals, freelancers, investors, and entrepreneurs that will ultimately benefit the economy
Saad Maniar, senior partner at Crowe, said Dubai has always been and will continue to be the popular destination for HNIs from tourism perspective, as Dubai has very high standards of safety and security coupled with the amazing infrastructure and plenty of to-do things in Dubai.
“From the business perspective the overall infrastructure is business friendly, with airlines offering connectivity to all major cities in the world, makes it very attractive for business owners to establish their presence in Dubai,” Maniar told Khaleej Times on Sunday.
“Over the years, we have seen that a small percentage of tourist are attracted toward Dubai, so much so that they end of getting employment or start their own business, which is not normally the case for other places in the world,” he said.
Tourism a major beneficiary
Fadi Rizkallah, general manager, Freedom2Work.com , echoed the similar views and said recent reforms will have positive impact on Dubai economy in general and tourism sector in particular.
“I believe that visa reforms will in turn have an encouraging effect on personnel from all high end backgrounds. The better facilitation for individuals to find and explore the economic benefits of a country, the more inclined they are to take risks and jump on the business wagon of establishing the next successful enterprise,” he said.
“Better visa reforms are a social security indicator which provides a safe investing haven for people with the right financial mentality, opening up a place and attracting the young and innovative mind to come,” he said.
Dubai a safe destination
Pratik Rawal, managing partner, Ascent Partners, said Dubai is an established international commercial hub and it is one of the safest destinations for high net worth individual and entrepreneurs.
“All of that and more. The banks appear optimistic with the new visa reforms, which reveal Dubai to be a stable and safe place to conduct business and scale-up for a long-term investment,” Pratik told Khaleej Times on Sunday.
Ms Sakina Dickenwala, associate partner – Legal at MBG Corporate Services, said a major purpose for the new visa reforms was to make the country more attractive investors, entrepreneurs, and HNIs.
“For one, holders of golden visas are no longer restricted by the amount of the time they can spend outside the country. This allows HNIs with international commitments the freedom of movement that they require. It will also be possible for those looking to create startups to apply for a green visa. Much like the golden visa, a green visa will not require a sponsor. This visa will allow entrepreneurs the ability to move to Dubai with the exclusive purpose of establishing a business, without having to be concerned with the hassle of finding a sponsor,” Dickenwala said.
Investors paradise
Hatem Elsafty, managing director, Business Link, said Dubai has long been home to various tourists and businesses in different industries – which to date, are flourishing increasingly.“This makes Dubai a massive business hub that continues to bring in local and foreign investors. With some of the best incentives offered and a highly flexible business environment, it’s one of the top locations for businesses of any size,” he said.
He said the reasons for the same are quite straightforward. Firstly, given the large scale at which businesses in the city operate, Dubai offers the opportunity to house your business in an economic zone best fit for your needs. Known as mainland, freezone, and offshore, these zones have their own laws and cater to your unique business requirements and needs, he said.
Secondly, he said the federal corporate tax imposed by UAE is among the lowest in the world. “Placed at nine per cent on profits up to Dh375,000, the tax regime is set to be effective after June 1, 2023. To run operations in an economy as vibrant as the one UAE has with minimal tax is nothing less of a dream for investors,” he said.
Lastly, he said with the UAE government looking to grow its economy, it is home to a plethora of startup incubators and funding initiatives.
“Partnering with investors looking to grow and start their brand not only helps the country and its economy but also provided necessary aid to investors looking for support,” Elsafty concluded.
01 Jun
Application of corporate tax on the individuals and legal persons
If the individual is conducting any commercial activity which requires a licence from the related authorities, the individual would be required to take the permit, and the UAE source income of the individual would be subject to corporate tax
The persons subject to corporate tax (CT), can be classified into natural persons and legal persons. The natural persons who fulfil the criteria would fall under the scope of CT, and in the same way, the legal persons that satisfy the specific conditions would be subject to CT. On the other hand, natural and legal persons who do not meet the criteria would be exempt from CT. In this article, we have covered the proposed treatment of CT on natural persons and legal persons.
Application of CT on the natural person:
The individuals can conduct some activities in the UAE without taking a commercial licence/permit, and such income of individuals would not be subject to CT. For example, individuals’ employment income, dividend income, rental income from the investment in the property and other investment income.
If the investments in the real estate and other areas are held through a private or family trust on behalf of individual beneficiaries, the trust would be subject to the same CT treatment like for a natural person. If the individual family members own the property/properties, they can create trust and shift all their properties under the trust. The trust would be managing all such properties on behalf of the individuals who would be beneficiaries of the income. Such income of the trust will not be subject to CT.
Application of CT on the legal person:
The legal persons can be classified into incorporated persons like limited liability companies (LLC), public joint-stock companies (PJSC), private shareholding companies etc. and unincorporated persons like partnerships, joint ventures (JVs) and associations of persons (AoP). The incorporated persons may be incorporated in the UAE or out of the UAE. If the legal persons are incorporated in the UAE, their worldwide income will be subject to CT, and if the businesses are incorporated out of the UAE, still their income would be subject to CT in the UAE if these businesses:
• are being controlled and managed in the UAE (worldwide income will be subject to CT).
• have Permanent establishment in the UAE (UAE source income will be subject to CT)
• earn any UAE source income (UAE source income will be subject to CT)
Like incorporated persons, unincorporated persons like partnerships, JVs, and AoP may be in the UAE or out of the UAE. If these are in the UAE, businesses would be required to assess whether their partners have limited or unlimited liability. If any of the partners have unlimited liability, these entities are called “transparent” and their income would be subject to CT in the hands of the partners or members. This means that these entities will not be subject to CT but their net taxable income will be subject to CT in the hands of the partners or members. On the other hand, where the liability of all partners is limited, such partnerships will be treated like an incorporated company in the UAE.
If the partners or members are living in the UAE, and unincorporated persons are located out of the UAE, then some countries may treat them as “transparent” entities and others may treat them as a company. Such non-resident unincorporated persons will have the same CT treatment in the UAE like these will have in their respective countries.
The businesses and natural persons are required to assess their status and be prepared for the CT accordingly.
Source:https://www.khaleejtimes.com/finance/application-of-corporate-tax-on-the-individuals-and-legal-persons
20 May
Transforming finance: NAFA 2022 to highlight business resilience in uncertain times
Taking place on May 17 in Dubai, the third edition of the event will take a deep dive into how organisations can prepare for any future uncertainty, where growth opportunities lie, and how CFOs can play a critical role in influencing business resilience and change
As economies across the Middle East look towards overcoming the challenges brought about by the Covid-19 pandemic over the past two years, finance and accounting leaders say that there has never been a better time for the region’s finance and accounting community to come together and learn how to survive and thrive.
Towards this mission, Khaleej Times has organised the third edition of the New Age Finance and Accounting Summit (NAFA 2022) which brings together several industry-leading experts to debate and discuss on strategies that designed to promote responsible financial trends. Taking place on May 17 in Dubai, the third edition of the event will take a deep dive into how organisations can prepare for any future uncertainty, where growth opportunities lie, and how CFOs can play a critical role in influencing business resilience and change.
The event is presented with the support of Vuram as the event’s Hyper Automation Partner; Gold Sponsors Jedox and Qashio; Silver Sponsor Crowe; Associate Sponsor Zoho; and Automation Anywhere as the events RPA Partner.
The cross industry forum is designed as an in-person format that will bring together finance leaders and professionals from across the GCC countries to discuss on the existing professional landscape, deliberate on the role of technology within their domain, and develop strategies for upcoming opportunities and challenges. With deep rooted research and observations of the industry, the summit will focus on finance transformation through advanced technologies, cultural transformation after the pandemic, the impact of AI, Machine Learning, RPA, Predictive Analytics, Blockchain, Cloud infrastructure and more.
The event features an in-person conference that presents an unprecedented opportunity for the finance and accounting experts of the region to gear up for the future with technology and innovation. Attendees will also gain insights on areas like financial planning, risk management, digital innovation, and emerging technologies. They will also be a part of interactive masterclasses focusing on specific upcoming technologies and offering practical solutions to challenges and issues faced by the modern finance and accounting professional.
Lastly, the event will also feature the NAFA CFO POWERLIST which will shine a spotlight on and celebrate exemplary achievements of finance leadership, innovation, and raised benchmarks by top CFOs from the field of accounting and finance in the Middle East.
Source:https://www.khaleejtimes.com/finance/transforming-finance-nafa-2022-to-highlight-business-resilience-in-uncertain-times
