List of Charities That May Recover Input Tax
Charities That May Recover Input Tax Charities that may recover input tax for the purposes of Federal Decree-Law No. 8 of 2017 on Value Added Tax. The following list of charities can recover input VAT paid at the time of supply or import of goods and services with the exception of tax excluded from recovery by virtue of the UAE Executive Regulations on VAT and tax paid for goods and services used for making exempt supplies. List of Charities Registered with Federal Entities List of Registered Charities in Abu Dhabi List of Registered Charities in Dubai List of Registered Charities in Sharjah List of Registered Charities in Ajman List of Registered Charities in Quwain List of Registered Charities in Ras Al Khaimah List of Registered Charities in Fujairah
Most Common Types of Audit Services
The Most Common Types of Audit Services and Their Benefits Factors that can significantly help you with navigating your business include audits which are performed in various methods. These audit services are meant for financial accuracy, enhance operational efficiency, risk management, and comply with regulatory standards. Audit services help create accuracy and confidence in every business, whether you are starting up a new business or managing the existing one. Most professional auditing firms ease the process by providing different types of audits that you require according to your business needs. When it comes to audit service, there are several different approaches and ways to add value to your organization. What are the Types of Audit Services and How Do They Work? There are several types of audits that serve different purposes and focus on various aspects of an organization. According to the specific goal, every audit is performed to address certain objectives of financial accuracy, regulatory requirements, business performance, and so on. We are going to present the most frequently conducted audits as narrated below 1. Financial Audit A financial audit mainly focuses on asserting the accuracy of financial statements of an Organization. It ensures that financial statements are free from material misstatement and comply with regulations, nurturing trust among investors, customers, creditors, and regulators. Key Benefits of Financial Audit Assessing the accuracy and fairness of the financial statements Enhance the transparency with stakeholders confidence Ensures compliance with accounting standards and regulations Financial audit mostly conducted for regulatory purposes only; that is why they constitute an integral part of every business audit, as they reveal the fairness of the financial activities performed and serve to improve them. Premier Auditing and Accounting, provides Financial Audit services offering a comprehensive suite of audit and assurance solutions tailored to meet the specific needs of the client. 2. Internal and External Audit Internal and external audits, though often mentioned together, serve different purposes and are conducted either by internal or outsourced Internal Audits Internal audits are conducted by the firm’s internal auditors or outside consultants to assess internal controls, risk management, and governance processes within the organization. Internal audit services from Premier Auditing are guided by a comprehensive, validated methodology, which is carried out by qualified professionals performed with an in-depth understanding of the business culture, systems, and processes. Key Benefits of Internal Audit Identifies potential risks and help mitigate them Provides better internal controls, procedures, and overall operations Enhanced compliance with internal policies and regulatory requirement External Audit Independent auditing firms conducts external audit. The primary purpose of external audit is to confirm the accuracy of the financial records and compliance of company’s financial / internal policies to specific rules and regulations. External Auditors like Premier Auditing & Accounting, examine the organization’s financial records and assess the internal control systems as a basis to form an audit opinion on the financial statements. Key Benefits of Financial Audit Examining the accuracy of the financial records Enhances the credibility of financial statements, that results in stakeholders confidence Ensures compliance with laws and regulations, avoiding potential penalties 3. Due Diligence Audit A due diligence audit is vital in major business deals like mergers and acquisitions. It reviews the target company’s performance, operational efficiency, legal compliance, and reputation. Why Due Diligence Audit is Important: Identifying the weaknesses and mitigate potential risks Insights in to business viability to find investment opportunity Enabling improved negotiation outcomes and decision-making For instance, if a tech startup wants to acquire another company, a due diligence audit checks if the target company’s networth value is fair. Auditing firms like Premier Auditing & Accounting, verify the accuracy of the information provided by the target company that help businesses feel confident in making business deals. 4. Inventory Audit Managing stock is crucial for most retail, wholesale and manufacturing companies. It involves checking inventory records against the actual stock available. Benefits of Inventory Audit Identifying discrepancies between book stock and actual stock Reducing losses due to theft, mismanagement, or errors Ensuring proper valuation of inventory in financial statements For instance, a large retail chain may use an inventory audit for year-end reporting. Auditing firms like Premier Auditing & Accounting, use tools like RFID and data analytics for reviewing inventory records. 5. Compliance Audit Compliance audit ensure a business follows laws, regulations, and internal policies. Compliance audit is essential for business with strict regulations. Industries that Benefit Most Healthcare: Given the sensitivity of patient information, it ensures that data is handled in compliance with privacy laws Manufacturing: Ensuring that an organization complies with the laid-down environmental laws Money Exchange: Compliance ensures exchange house meets regulations and follow anti-money laundering laws For instance, a pharmaceutical company may conduct a compliance audit to ensure it meets health regulations. Accounting firms in Dubai, like Premier Auditing & Accounting, play a crucial role in helping businesses identify potential compliance gaps, address issues promptly, and avoid penalties for non-compliance, ensuring long-term success and regulatory adherence. 6. Forensic Audit Where there are concerns of fraud, embezzlement, or any other unusual activity carried out in business dealings, then forensic audit comes in. Forensic Audit involves investigation to uncover financial fraud, misconduct or criminal activity which always result in legal proceedings. Key uses of Forensic Audit: Uncovering fraudulent transactions or misconduct Resolving disputes between business partners or stakeholders Gathering evidence in legal cases for use in court For instance, a company might request a forensic audit after noticing unauthorized withdrawals from its bank accounts. Forensic auditors analyze transaction histories, internal controls, and financial systems to uncover fraud or misreporting. Businesses often turn to audit firms like Premier Auditing & Accounting, with specialized forensic teams to handle these fraudulent cases. 7. Information System Audit As businesses increasingly rely on technology, information system audit has become vital. Information System Audit focuses on evaluating IT infrastructure, data security, and system reliability. Focus Areas for Information System Audit Ensuring cybersecurity and protecting sensitive data Assessing compliance with data privacy regulations like GDPR or HIPAA Identifying inefficiencies in IT
List of Auditors and Accountants in Dubai, UAE
Comprehensive List of Auditors and Accountants in Dubai Dubai’s business environment remains a throbbing economic hub in the Middle East. The selection of appropriate auditors and accountants will benefit your business, whether it’s a startup, operating, or business poised for growth. This article highlights Dubai’s top 10 audit firms, shares a list of auditors and accountants, and offers tips on selecting the perfect professionals to meet your company’s requirement. A business requires financial integrity, corporate governance, and strategic guidance that supports company’s overall health and sustainable growth. To achieve this, you need to hire one of Top 10 Auditors and Accountants in Dubai UAE. List of Top 10 Auditors and Accountants in Dubai Selecting an appropriate auditor or accountant in Dubai is one of the crucial decisions of your business. Such professionals should understand not just adheres to legal and regulatory standards but also provide knowledge of regional markets and industry specifics. Here’s a list of top 10 auditors and accountants in Dubai to help you narrow down your search 1. Premier Auditing & Accounting For expert auditing and accounting services you can choose Premier Auditing & Accounting (PAA), Chartered Accountants, the one of top-notch auditors in Dubai. With years of experience in audit and accountancy practice, PAA has solid reputation in the provision of auditing and accounting services to many businesses in the UAE. PAA has expert professionals with extensive experience working with businesses of all sizes, from small startups to big corporations. Premier Auditing & Accounting (PAA) maintain highest standard of service, pay attention to understanding client’s unique needs and deliver tailor-made solutions that help businesses grow and fully comply with legal and regulatory requirements. Premier tops the list of DMCC Approved Auditors; hence, the businesses in the Dubai Multi Commodities Centre (DMCC) trust it as one of the best auditing and accounting firms in Dubai. 2. Deloitte Deloitte is one among the Big Four accounting firms, operates in over 150 countries, with a vast network of offices and professionals worldwide. In addition to years of experience, the Deloitte is famous for offering services in Audit and Assurance, Risk and Financial advisory, and tax consulting. It has team of experts consist of high-calibre professionals who understand the complexity of the businesses in the UAE and international arena. 3. Ernst & Young (EY) Ernst & Young is one among the Big Four accounting firms, the largest global professional audit and accounting services firm, known for providing a wide range of services across industries. It provides advisory, tax consulting, audit and assurance, and transactional advisory services. EY Dubai office has helped it deliver sophisticated, value-added services to small and large group of entrepreneurs. EY has been rewarded for solutions that help companies to grow and support their customers through the complexity of the UAE’s regulatory environment. 4. KPMG KPMG is one among the Big Four accounting firms, the largest global professional services firm operates in over 146 countries. It offers audit and assurance, tax advisory, business consulting, and risk management services and deal advisory services. Its Dubai office has been instrumental in offering expert services to both small and large businesses in the UAE. KPMG has been recognized for its solutions that help companies expand and assist their customers in navigating the regulatory requirements in the UAE. 5. PricewaterhouseCoopers (PwC) PwC is one of the largest global professional services firms, and it is part of the “Big Four” accounting firms, alongside Deloitte, EY, and KPMG. It offers audit and assurance, consulting, tax advisory, deal and M & A advisory and transactional advisory services. It boasts vast experience helping companies in myriad fields, such as banking, insurance and real estate. PwC has maintained an excellent reputation for high standards, industry expertise, digital transmission and corporate social responsibility. 6. BDO BDO is a global network of professional services firm that offers from auditing, tax advisory to business consulting. BDO operates in over 160 countries, with more than 1,700 offices worldwide. The firm has a broad network of member firms, providing both local and global services to clients. BDO has maintained an excellent reputation for high standards, industry expertise, focus on innovation and technology, talent development and employee growth, sustainability and corporate social responsibility. 7. Grant Thornton Grant Thornton is a global professional services network serves clients with local presence, offering variety of services in audit and assurance, and provides tax and advisory solutions. With a strong international exposure, Grant Thornton has become a trusted advisor for companies looking for tailored services and expertise knowledge. 8. PKF UAE PKF is a global network of independent accounting and consulting firms, offering audit, tax, advisory and consulting services. PKF is known for its high-quality services, with a strong international presence, particularly in mid-market businesses, have experience in deal with intricate business solutions and can advise clients based on its strategic guidance. 9. Baker Tilly International Baker Tilly is a leading global network of independent accounting and advisory firms that provides services across various sectors, offering audit, tax, advisory, and consulting. Baker Tilly is known for its broad range of professional services, offers tailored solutions to help businesses succeed in a competitive global marketplace. Its international network, combined with localized expertise, enables Baker Tilly to provide valuable insights and services across a variety of industries, with an emphasis on innovation, sustainability, and employee development. 10. HLB Hamt Our list of top 10 auditors and accountants in Dubai would be incomplete without mentioning the name of HLB Hamt. HLB Hamt is a member firm of the HLB International network, a global network of independent accounting and advisory firms. HLB Hamt is a prominent firm based in the Middle East, with a significant presence in the UAE and other regions. The firm offers audit, tax, consulting and advisory services to clients across various industries. With International network, HLB Hamt offers clients access to global resources and it helps businesses across diverse industries navigate challenges, optimize operations, and achieve sustainable growth. Choosing the Best Auditors and Accountants with Regional Expertise
Corporate Tax Registration UAE – Guide, Process and Required Documents
Effortless Corporate Tax Registration UAE for Your Business You would be surprised to know that, from June 2023, the UAE has introduced a Corporate Tax rate of 9% on business profits. This applies to earnings above AED 375,000. Such a landmark decision encourages transparency and ensures sustainable economic growth in the UAE. As businesses adapt to this new tax environment, Corporate Tax Registration is a vital step to meet Federal Tax Authority (FTA) regulations. This guide will give you the complete guide for Corporate Tax Registration in the UAE. It will also help you avoid common errors during registration. What is Corporate Tax in the UAE? The UAE Corporate Tax is a direct tax based on the net profit gained by companies operating in the country. It is charged to corporations and other business enterprises carrying out trade. The tax takes effect for fiscal years starting on or after June 1, 2023. It is called corporate income tax or business profits tax. It mandates businesses pay a percentage of their profits as tax. This framework promotes economic transparency and aligns the UAE with global tax systems. Who Must Register for UAE Corporate Tax? Businesses in the UAE must be registered for corporate tax if they satisfy specified conditions. Here’s who needs to register Mainland Companies All kind of business operating in the mainland holding the trade license. Free Zone Entities Businesses registered and operating from the free zones. Foreign Businesses Foreign companies with a branch or permanent establishment in the UAE. Partnerships and Joint Ventures All partnership ventures engage in commercial activities. Natural person Business or Business Activities conducted by a natural person in the UAE are subject to Corporate Tax if the total Turnover exceeds AED 1 million within a Gregorian calendar year. Key Documents Required for Corporate Tax Registration To successfully register for corporate tax in the UAE, businesses must prepare and submit some of the following essential documents. The list of mandatory documents follows Trade License Original trade license issued by the relevant authority for the business activity. Memorandum of Association (MOA) Document of the legal structure, ownership, and operations of the business. Passport copy of Owners/Partners/Shareholders Copy of passports of all individuals who own the business license. Identification of Owners/Authorized Representatives Copy of Emirates ID & Passport of the license holders and authorized representatives. Lease Agreement Showing a physical office or business address in the UAE. Power of Attorney If a representative or tax agent is making the application on behalf of the business. Contact Information Phone number and Email contact details of the company. Ensure that all documents submitted are latest, clearly scanned, and meet the FTA’s requirements. Submissions are completed, and accurate documentation helps avoid delays in the registration process. Step-By-Step Guide to Corporate Tax Registration Corporate Tax Registration is a vital procedure followed by businesses in the UAE. The following step-by-step helps process it in no time. Step 1: Access the Emara Tax Portal Step one is to go to the Federal Tax Authority – Emara tax portal, where first-time users register by creating an account on this portal using a valid e-mail address and phone number. The already registered users log in to their portals using their login credentials. Make sure your login details are secure, as this account will be used for tax-related processes. Step 2: Create a Taxable Person Profile Once logged in, you need to create a Taxable Person Profile. This profile represents your business entity in the tax system. Enter accurate details about your business, such as trade name. Step 3: Fill out the Corporate Tax Registration Form After setting up the profile, you can access the Corporate Tax Registration form. Provide critical details such as: The legal structure of your business. Information about the owners, shareholders, or partners. Company address and contact information of the company. Step 4: Upload Supporting Documents Add the supporting documents required for your application. These include your trade license, passport copies of owners or shareholders, Emirates ID, and financial statements. Include other documents like lease agreement if applicable. Use clear scanned copies to prevent delays in the processing process. Step 5: Submit the Application Once everything is complete, carefully review the form and documents. Confirm that all details are correct and match your business records. Apply through the Emara tax portal. Once the application has successfully been submitted, you will receive an email confirmation. Step 6: Track Registration Status Following this, you can check your application status on the Emara Tax portal. It shows that the application is under review, additional information required or approved. Respond to any FTA requests promptly to avoid delays. Common Mistakes to Avoid During Registration Here are some common mistakes in corporate tax registration for businesses in the UAE that can cause delays or rejections of their process Incomplete Information Omitting key details or leaving sections of the registration form incomplete can cause your application to be rejected. Always review the form to ensure all fields are filled. Incorrect Documents Submission Uploading outdated, or unclear documents, such as expired trade licenses or illegible scans, can delay approval. Make sure all documents are current, clear, and accurate. Inaccurate Business Details Mistakes in the trade name, license number, business activity, company address and contact information can cause discrepancies with the Federal Tax Authority (FTA). Verify that all business information matches your official records. Never Ignore Deadlines Failure to register on time might subject to pay penalties and compliance issues. Make sure you complete your registration before the deadline. Not Responding to FTA Requests Respond promptly to any questions or clarifications the FTA may require for additional information. Delays can further extend the approval timeline. Lack of Professional Assistance Registration could be managed with professional support to avoid errors. The best thing is to hire a Tax Consultant in Dubai, such as Premier Auditing and Accounting, to ensure that they prevent costly mistakes and maintain the smooth flow of compliance. Staying Current With UAE Corporate Tax Laws Corporate Tax
Top 10 Audit Firms in Dubai, UAE
Choosing the Right Audit Firm for Your Business Needs in Dubai Dubai as one of the world’s leading international business hubs, offering a dynamic environment that attracts companies and entrepreneurs from all over the globe. Whether you’re starting a small business or launching a large-scale enterprise, Dubai offers a thriving environment with its strategic location, favorable business climate, diverse economy, top-tier infrastructure, and access to global markets make it an ideal hub for businesses attracting international companies and entrepreneurs. An audit is essential for ensuring that a company operates transparently, maintains financial integrity, and adheres to legal and regulatory standards. It builds trust with stakeholders, helps prevent fraud, improves financial management, and strengthens corporate governance, all of which are crucial for long-term business success. That’s why you need to hire one of Top 10 Audit Firms in Dubai, UAE, they help ensure financial accuracy, enhance corporate governance, and provide strategic guidance that supports company’s overall health and sustainable growth. List of Top 10 Audit Firms in Dubai, UAE Here’s the list of top10 audit firms in Dubai, UAE, businesses can hire anyone among these audit firms for their financial audits, tax advisory and strategic consulting 1. Premier Auditing and Accounting Premier Auditing and Accounting (PAA), Chartered Accountants, is one of the Top 10 Auditing and Accounting Firms in Dubai UAE, that focuses on providing Accounting, Audit, Tax and Consulting services. The firm is registered with the Dept. of Economy and Tourism, Dubai Chamber of Commerce, Reputed Banks and Free Zone Authorities in the UAE. PAA has more than 15 years of experience in Audit, Tax and Consulting services, nurtured the trust and confidence of the Business Community, Financial Institutions and Government Agencies in order to become a reputed audit firm in Dubai UAE. The team of experts in PAA offer tailored solutions to promote your company’s growth while ensuring regulatory compliances. PAA is committed to maintaining the highest standard of service and integrity, take pride in understanding each client’s unique needs and delivering customized best services that will meet beyond the expectation of the client. 2. Deloitte Deloitte, part of the Big Four, along with EY, KPMG, and PwC, audits some of the biggest names in business. In Dubai, their Emaar Square and DIFC offices being hub for consulting, VAT advisory, and financial strategy. With industry knowledge, Deloitte helps businesses understand and overcome the challenges that improve their operational efficiencies. The company has addressed many large corporations through quality service delivery and professionalism. In a bustling market like Dubai, Deloitte’s worldwide experience gives it a clear edge. 3. Ernst & Young (EY) EY is one of the leading Big Four accounting firms globally and a key player in Dubai’s financial services industry. EY provides audit, tax advice, consulting, and financial support services in the UAE from its Dubai International Financial Centre and National Tower 2, Corniche, Abu Dhabi. They specialize in external audits – helping businesses meet local and international standards. EY also provides tax services, including VAT consulting and corporate tax planning, which are essential for the UAE’s changing tax system. Besides, they provide consulting and advisory services to companies in digital transformation, risk management, and mergers & acquisitions. A global network and reputation for integrity make EY a trusted partner for organizations in Dubai. 4. KPMG KPMG, part of the Big Four, provides audit, tax, advisory, and consulting services. Since 1987, KPMG has served companies in many industries. They do audit according to local and international standards. In the tax advisory services, KPMG provides corporate tax compliance & VAT consulting services to UAE businesses. KPMG also provides consultancy and advisory services for business strategy, digital transformation and risk management. 5. PricewaterhouseCoopers (PwC) PwC, part of the elite Big Four, ranks among the top audit firms in the city. They provide businesses across the globe with essential services like auditing, tax advice, and consulting. It performs full auditing services to local and international standards. Tax advisory services cover corporate tax, VAT & international tax planning – all the basic UAE tax structures. PwC is an advisor to businesses on strategy, digital transformation, and mergers and acquisitions. Those credentials extend to its worldwide clientele, including 86% of Fortune 500 companies. 6. BDO BDO has been an auditing firm since 1963. In 166 countries, it provides audit, tax, advisory, and consulting services through its global network of BDO. It provides auditing and assurance services to local and international standards, corporate tax compliance & VAT consulting. In addition to Advisory Services on business strategy and risk management, BDO provides Consulting Services on mergers, acquisitions and financial restructuring. With clients across finance, healthcare, real estate and technology, BDO provides sector expertise & tailored solutions. 7. Grant Thornton Grant Thornton was established in year 1924. It provides professional auditing, tax consulting, and advisory services to companies in all sectors. It provides audit and assurance, tax services, advisory services and business consulting on compliance, strategy, mergers & tax planning. Grant Thornton employs over 800 professionals to provide top-notch auditing services in UAE. 8. PKF UAE PKF UAE was established in Dubai in 1976, provides consulting, accounting, and auditing firm that specializes in statutory and internal audits, tax advisory, business consultancy, and financial management. The auditors’ services meet local and international standards and reveal a company’s financial health. It also provides tax consulting covering corporate tax, VAT advisory and transfer pricing to keep businesses in line with the changing tax rules. The firm provides strategic business consulting and customized solutions on operational efficiency, profitability, and corporate governance. It uses advanced technology and innovative practices to keep clients ahead of regulatory changes and become a reliable partner in the UAE. 9. Baker Tilly International Baker Tilly was established in year 1987, is among the one of Dubai’s top auditing and accounting firms. The firm caters to the diverse financial requirements of businesses in the UAE. External and internal audits, forensic investigations, VAT services, and company liquidation support – Baker Tilly offers local compliance and industry solutions.
Small Business Relief in the UAE: A Comprehensive Guide
Despite its complex and dynamic tax system, the business-friendly status of the United Arab Emirates is widely recognized. With the implementation of Corporate Tax and Value Added Tax (VAT), the UAE not only ensures regulated tax policies but also employs significant relief options for small enterprises. In this comprehensive guide, we’ll explore the relief measures offered for small businesses in Corporate Tax and VAT, empowering entrepreneurs to make informed decisions and navigate financial challenges with ease. Corporate Tax & Small Business Relief in the UAE The UAE business landscape shifted with the introduction of corporate tax by the UAE Ministry of Finance on 1 June 2023. Corporate Tax is a direct tax levied on the company’s profits or income. The 9% Corporate Tax rate of the UAE has been levied only on businesses whose taxable income exceeds the threshold of AED 375,000, and these businesses must register for Corporate Tax. Businesses whose taxable revenue is less than AED 375,000 will be subject to a 0% rate. In addition to a low Corporate Tax rate of just 9%, certain relief have also been provided, including exempt sectors like public benefit entities and small businesses. If a business wants to elect for small business relief, it is essential to consider the applicable eligibility criteria, accounting standards, and compliance requirements. Eligible Entities for Small Business Relief To elect for a small business relief, a business must have a revenue of less than or equal to AED 3 million in the relevant tax period and any previous tax period, and the Person must be a Resident Person for Corporate Tax Purposes. This threshold is applicable to all tax periods that begin on or after 1 June 2023 and end before or on 31 December 2026. Businesses that want to benefit from the small business relief and meet the required conditions must first register for Corporate Tax and make an election for small business relief in their Tax Return. This election should be made for each Tax Period that a Tax Return is filed for the relief to apply for that Tax Period. Impact on other Corporate Tax Rules: Any disallowed Net Interest Expenditure and Tax Losses can be carried forward to future tax periods in which Small Business Relief is not elected by the business. Value Added Tax (VAT) & Voluntary Registration for Small Businesses in UAE Value Added Tax (VAT) was introduced in the UAE with the aim of diversifying income sources and providing high-quality public services. VAT is an indirect consumption tax on goods and services and is levied on the price of a product or service at each stage of the supply chain. The cost of VAT is borne by the end consumers, while businesses act as tax collectors for the government by collecting and accounting for VAT. 5% is the standard VAT rate in the UAE. However, some sectors have been exempted from the VAT, while some are subjected to a 0% rate. A small business can voluntarily register for VAT, keeping in mind the eligibility criteria and compliance with VAT regulations. Eligibility criteria Voluntary Registration of Small Businesses UAE-based businesses whose taxable supplies and imports exceed AED 375,000 per annum are mandated to register for VAT. However, businesses are eligible to voluntarily register for VAT in UAE if their yearly taxable revenue exceeds AED 187,500. Hence, small businesses or startups with taxable revenue exceeding AED 187,500 can consider voluntary VAT registration to avail the benefits associated with it and reflect their firm as reputable. VAT Registration: The Federal Tax Authority has facilitated VAT Registration with an online process. Businesses that want to register can create and activate an EmaraTax account through FTA’s website. The required documentation, including financial statements and trade licenses, must be prepared for the initial process of VAT registration.
Updates and Implications on UAE Tax Procedures
The United Arab Emirates (UAE) Ministry of Finance (MoF) recently announced Cabinet Decision No. (74) of 2023 introducing significant changes to the Executive Regulation of Federal Decree-Law No. (28) of 2022 on Tax Procedures, also known as the New Tax Procedures Law. The Cabinet Decision aims to align definitions, procedures, and processes with the recently introduced Corporate Tax Law, which became effective on 1st June 2023. This blog will delve into the critical updates by Cabinet Decision No. (74) and explore its implications for taxable persons in the UAE. Background and Purpose of Cabinet Decision No. 74 of 2023 The UAE government has been actively enhancing its tax regulatory framework to meet international standards and ensure effective taxation. Cabinet Decision No. (74) is part of this ongoing effort, updating the existing Executive Regulation on Tax Procedures. By introducing these amendments, the government aims to provide clarity to taxpayers and ensure ongoing compliance with the newly introduced Corporate Tax Law and other tax regulations. Key Updates and Amendments Cabinet Decision No. (74) brings several noteworthy changes to the UAE’s tax procedures. Some of the critical updates include: 1. Expanded Definition of Assets The definition of “Assets” has been amended to include intangible assets like patents, trademarks, copyrights, and goodwill, among others. This expansion aims to cover a broader range of assets subject to taxation, promoting transparency in tax reporting. 2. Enhanced Recordkeeping Requirements Taxable persons are now required to retain additional records, including correspondence, contracts, invoices, transfer pricing documentation, and documents supporting election/calculation made regarding the estimation method. This change seeks to ensure taxpayers maintain comprehensive and accurate records to facilitate tax compliance and audits. 3. Extended Period for Recordkeeping The retention period for real estate records has been extended to 7 years from the end of the year the record was created. Additionally, the general document retention period of 5 years can be extended by one year from the date of voluntary disclosure submission in the 5th year from the end of the relevant tax period. Legal representatives must also retain records for one year from their representation’s end. 4. Language Flexibility The Federal Tax Authority (FTA) can now accept tax-related documents and information submitted in English or Arabic. This language flexibility aims to facilitate communication and compliance for businesses operating in the UAE. 5. Tax Agent System Update The New Executive Regulation introduces changes to the tax agent system. Natural persons acting as tax agents must now meet specific requirements, including specialism, experience, education, and fluency in Arabic and English. Additionally, the concept of a juridical person tax agent has been introduced, setting out requirements for juridical persons to become tax agents. Implications for Taxable Persons The Cabinet Decision significantly impacts taxable persons in the UAE, especially those subject to the Corporate Tax Law. Businesses are advised to carefully review the changes and amendments introduced by the new regulation and assess their impact on their operations. Understanding the new requirements for recordkeeping, tax agent obligations, and timelines for tax assessments and objections is crucial to ensure compliance and avoid penalties. Implementation Readiness The effective date of the New Executive Regulation is 1 August 2023, except for the provisions relating to the conditions for registering juridical tax agents, which come into effect on 1 December 2023. As this date approaches, taxable persons must proactively familiarize themselves with the updated regulations and ensure their businesses are fully prepared to meet the new requirements.
Participation Exemption for Corporate Tax
The Ministry of Finance has issued Ministerial Decision No. 116 of 2023, which aims to simplify the participation exemption and provide valuable guidance on the taxation of corporations and businesses. This decision streamlines the tax treatment of various aspects of the participation exemption, bringing clarity and coherence to the Federal Decree-Law No. 47 of 2022. The key points of Ministerial Decision No. 116 of 2023 are as follows: Definition of Ownership Interests (Article 2): The decision provides a comprehensive definition of ownership interests, which includes various securities and rights such as ordinary shares, preferred shares, redeemable shares, membership and partner interests, and similar instruments. To be recognized as an ownership interest, the interest must also be classified as an equity interest under the accounting standards applied by the Taxable Person holding the ownership interest. Aggregation of Ownership Interests (Article 3): In order to determine whether a Taxable Person possesses a Participating Interest as stated in Clause (2) of Article (23) of the Corporate Tax Law, the following guidelines are applicable: Different types of ownership interests in the same legal entity, as outlined in Article (2) of this Decision, shall be combined. Ownership interests in the same legal entity held by members of a Qualifying Group, as defined in Clause (2) of Article (26) of the Corporate Tax Law, in which the Taxable Person is a member, shall be combined with those of the Taxable Person. These provisions shall be implemented to determine whether the minimum ownership requirement is met under Clause (11) of Article (23) of the Corporate Tax Law. Transfer of Ownership Interests (Article 4): Article 4 clarifies the treatment of ownership interest transfers. It states that when a taxable person exchanges one ownership interest in a juridical person for another, these interests will be treated as a continuous ownership interest under certain conditions. This provision offers clarity and eliminates ambiguity or uncertainty regarding the tax treatment of such transfers. Treatment of Debt Instruments (Article 5): Article 5 focuses on debt instruments and specifies their treatment. If the accounting standards applied classified the Debt Instrument as equity interest, the income derived from such instruments issued by the Participation where the Taxable Person has Participating Interest will be treated as income from a participating interest. This provision ensures consistent treatment of income generated from debt instruments and aligns it with the participation exemption framework. Conditions for Taxation (Article 6): Article 6 introduces the conditions for participation to be considered as being subject to Tax in another country, which is of similar nature to Corporate Tax Participation will be considered to have met the tax requirement if they are residents for tax purposes in another country or foreign territory that levies a tax meeting specific criteria. These criteria include the tax being applied on a similar basis to corporate tax and levied at a rate of not less than nine percent. This provision prevents potential abuse of tax regulations while ensuring a fair and consistent approach to taxation. Requirements for Holding Companies (Article 7): Article 7 outlines the conditions for holding companies to benefit from the participation exemption. Factors such as being directed and managed in another country or foreign territory, compliance with relevant laws and regulations, and focusing primarily on activities related to acquiring and holding shares or equitable interests are highlighted. These requirements ensure the participation exemption targets legitimate holding companies and support the tax system’s integrity. Minimum Acquisition Cost Threshold (Article 8): Article 8 sets a minimum acquisition cost threshold for a taxable person to be eligible for the participation exemption. If the aggregated acquisition cost of the ownership interests in a juridical person equals or exceeds AED 4,000,000 (four million dirhams), the taxable person will qualify for the exemption. This provision ensures that the exemption is available to substantial investments and provides a clear benchmark for determining eligibility. Methods for Determining Asset Conditions (Article 9): Article 9 offers two methods for determining whether the condition related to assets of the participation is satisfied. The first method involves assessing the consolidated balance sheet of the participation, while the second method allows for a market value valuation. This provision allows flexibility in assessing the asset conditions and ensures a fair and accurate representation of the participation’s assets. Expenditure Related to Participating Interests (Article 10): Article 10 clarifies the treatment of expenditure related to the acquisition and disposal of a participating interest. It specifies that such expenditure, including professional fees, due diligence costs, and stamp duty, is generally not deductible except for interest expenditure, which is subject to the Corporate Tax Law. This provision ensures consistency in treating expenditures and prevents potential abuse of deductions. Exemption of Income from Participations (Article 11): Article 11 highlights that income derived from participation will be exempt from corporate tax if it is received by the taxable person in his capacity as an owner of ownership interest in the participation. This exemption encourages investment and clarifies the tax treatment of income derived from participation. Liquidation Proceeds and Losses (Article 12): Article 12 addresses the treatment of liquidation proceeds and losses. It states that participants will be considered liquidated if it ceases to have legal existence. It outlines the calculation of liquidation losses and the treatment of assets or liabilities transferred during liquidation. This provision ensures a clear and consistent tax treatment of liquidation proceeds and losses. Foreign Permanent Establishments (Article 13): Article 13 extends the scope of the decision to businesses operating a Foreign Permanent Establishment. It mandates that the taxable income of the Foreign Permanent Establishment should fully offset any tax losses incurred. Only after offsetting the losses can the taxable person elect for the Foreign Permanent Establishment exemption or take advantage of provisions related to income arising from the incorporation of the establishment under Article 23. This provision ensures an appropriate balance between losses and income from Foreign Permanent Establishments and prevents potential abuse of the exemption. In conclusion, Ministerial Decision No. 116 of 2023 is a significant step towards simplifying the
