Corporate Tax – Impact Assessment

As you would know already, the UAE published Corporate Tax Law towards the end of 2022 and Corporate Tax is applicable for businesses for financial years starting on or after June 1, 2023.

Even though the first Corporate Tax return filing will be due only in 2025 (9 months from the end of the relevant financial year), we urge companies to perform an impact assessment at the earliest to understand the implications of the new corporate tax on their business.

A detailed study and analysis of the corporate and operational structure of your business/group will help you to plan for the future, optimize costs and ensure better tax compliance. The findings from such study will help to evaluate alternatives for restructuring at various levels. Simulation of corporate tax calculations on prior financial results will give you a fair idea of your potential tax liability.

The CT impact assessment will also help you to identify the tax impact of transactions that you may have with related and unrelated parties – some of which may not have even been considered by you as a business transaction. This will help you to limit or mitigate any negative impact thereby reducing costs.

Our corporate tax compliance and planning services will cover the following.

• Evaluate the impact of CT on the basis of the existing legal and operational structure – Tax Group & Qualifying Group criteria, Free Zone entities and Qualifying Income, Non-deductibles and restricted expenses, Tax losses Relief, Foreign tax credits etc.
• Review of ERP/Accounting system and identifying gaps.
• Computation of CT based on previous Audited Financial Statement.
• Assessment of implication under IAS-12 – Income taxes.
• Identify transactions with related parties and connected persons.
• Advise on potential business restructuring.
• Assessment of transitional provisions and key elections to be made.
• Identify operational challenges and potential work-arounds
• Provide CT implementation and compliance support.

Arm’s Length Principle and Transfer Pricing

The UAE Corporate Tax law requires that arm’s length principle is applied to transactions and arrangements between Related Parties and Connected Persons, as set out in the OECD Transfer Pricing Guidelines. Businesses will be required to submit disclosures containing relevant information to the authorities and certain businesses will need to maintain additional Transfer Pricing documentation, in the form of master and local file, based on the thresholds announced.