Kavan Choksi – How Will the New Corporate Tax Work in the UAE?
In January, the Finance Ministry in the UAE announced it will launch the first-ever corporate tax laws across the seven emirates commencing on and after June 1st, 2023.The Ministry made this decision to put an end to the tax avoidance problems in the region. It has been structured in accordance with the base erosion and profit shifting plan under The Organization for Economic Cooperation and Development.
Kavan Choksi – An overview of how the new corporate tax will work?
Kavan Choksi is a successful entrepreneur with business management, finance, and leadership skills. Besides work, he is fond of travel and photography. According to him, this Planmandates nations to release legislation for corporate tax in 2022., with the intent to enforce the new laws in 2023. The UAE is among the 141 nations following the above program for combating tax avoidance problems and ensuring a better transparent tax environment.
Tax brackets for the region
According to the OECD, it costs nations across the globe between $100 billion to $240 billion for shifting their tax liabilities as an annual loss. This is equal to 4 to 10 % of the income tax corporate revenue across the globe.
In this region, corporate tax will be charged on the net profit that will be adjusted from all the firms and commercial functions in the nation under commercial licenses. The extraction of natural resources will be the only exception to the above. This sector will be under the emirate levels of corporate taxes.
Aid to small business owners and startup firms
Large organizations and multinationals with a yearly consolidated turnover of more than Euros 750 million are subject to a higher tax rate; this is likely to be 15%, the rate the OECD recommends.
One of the lowest tax rates in the region and across the globe
The above will be one of the lowest tax rates among all the GCC nations and across the globe. These new corporate tax laws will also help companies benefit from tax exemptions.
This corporate tax is not only applicable to dividends and capital gains income from qualified shareholdings, like ownership interests in the region or foreign organizations that cater to specific criteria.
According to Kavan Choksi, intragroup projects and restricting costs will also be free from specific conditions. Several projects receive funds via intercompany transactions. It is a common practice in the region, so is exempted from the corporate tax will be a primary benefit.
The region will invite and still be attractive to foreign investors who are seeking to create a holding company for investing abroad. The income of foreign investors will not be subject to corporate tax from capital gains and dividends.