- Hi, I am Maithili Thanawala, an Accounting and Law professional (CA, LLB) with over 6 years of experience in consulting.
- I started my professional journey in Assurance Services and eventually moved to Tax Consulting, a keen area of my interest.
- You have probably heard about UAE implementing Corporate Taxation Law.
- Did you know that it will act as a catalyst for the ever-growing UAE job market?
What can you expect from a career in Tax?
My initial days as a tax consultant were an exhilarating yet overwhelming experience. There was a vast and complex ocean of Indian/ Global tax laws, case laws, complex projects and to top it all, stringent timelines.
The most intriguing and amusing part of being a tax professional is interpretation; two people reading the same thing and interpreting it in different ways.
It was the most rewarding move in terms of constantly learning, while practically understanding and applying various views/ interpretations of the tax law.
Fast forward to 2021/2022, my life changed completely. I went from surviving the covid lockdowns to returning to a mask-free world (almost), to eventually coming across the biggest career move. I found an amazing job opportunity in the UAE.
Given the changes in the corporate tax laws, and the people, and culture in the UAE, who in the right mind could ignore the offer?
Looking forward to the learnings, interpretations, and implementation of the newly minted tax laws and the overall experience.
Why is UAE implementing Corporate Tax?
The opening of an arena of opportunities in the UAE corporate tax market is a ripple effect of global developments. It was done to introduce measures for tackling profit shifting and tax avoidance.
One such initiative was the Base Erosion and Profit Shifting (‘BEPS’) framework. It discusses the rules for profit (re)allocation to the countries where sales arise.
It also talks about the introduction of a global minimum effective tax rate in order to plug the losses in tax revenues for the governments.
This would mean that the effective tax rate of businesses operating from a low/no-tax country (UAE) would increase significantly.
In light of the above and the position of the UAE as an international business hub, on 9th December 2022, the UAE issued the law for the taxation of corporations and businesses (‘CT law’).
This is the first time the UAE has introduced the levy of corporate tax at this scale. It is a massive but welcoming change.
The law imposes a tax on all persons carrying on business activities in the UAE, whilst giving exemptions to a certain class of organizations/ incorporations.
Any person (non-free zone), carrying on any business activity will be subject to a corporate tax of 9%, whether incorporated or not.
The supplementary information issued by the Ministry of Finance, UAE states that the levy of 9% would be on taxable income exceeding AED 375,000 (to be confirmed through subsequent Cabinet and Ministerial decisions).
With regards to Freezone individuals, the law suggests that they could have both qualifying and non-qualifying income which will be taxed at 0% and 9%, respectively.
UAE Corporate law has been designed to incorporate best practices globally and minimize the compliance burden for UAE businesses.
It is intended to help UAE achieve its strategic ambitions and incentivize businesses to establish & expand their activities in the UAE.
The law has its competitive edge, and together with UAE’s extensive network of double tax treaties, will cement UAE’s position as an international business hub and global financial center.
Opportunities will emerge due to UAE’s Corporate Tax Law
Corporate Tax Law will not only lead to increased economic activity but will also act as an additional booster for the ever-growing UAE job market.
Just as “every action has a reaction”, with every change in legislation, there are bound to be multiple effects.
However, further clarity is awaited on what constitutes such income. The Corporate Law also has dedicated articles to address the taxability of various types of businesses i.e. extractive, non-extractive, public benefit entities, investment funds, etc.
It is going to be an exciting time to evaluate the implications of UAE Corporate law on various types of businesses/ people and analyze its administrative and compliance requirements.
More than ever, there is a need for tax professionals in the UAE. Everyone including consulting firms and corporate offices is on the lookout for the right tax talent. I personally am part of a constantly growing and evolving tax team.
To all tax professionals looking for an opportunity, this is the right time to take the plunge into the exciting UAE tax market.
Last but not least, if you are keen on reading and educating yourself on the UAE corporate tax law, you can find the English and Arabic law including the FAQs here.
Feel free to reach out to me on LinkedIn
(Disclaimer: The views expressed in this article are those of the author and not of any organization the author belongs to or works at)
