United Arab Emirates (UAE) have announced the introduction of Corporate Income Tax on 31 January 2022. As a signatory to the Two Pillar package driven by the Organization for Economic Co-operation and Development (OECD), UAE has introduced the Corporate Tax (CT) in line with the Global Minimum Tax Proposal under Pillar 2.
Companies based in UAE need to be geared up to adapt to these new changes. The companies need to evaluate the applicability of the provisions, align structure to make it tax efficient in UAE, align policies for related party transactions, book-keeping, etc.
Applicability to foreign persons
Foreign entities and foreign individuals will be subject to CT only if they conduct a trade or business in the UAE in an ongoing or regular manner. Moreover, CT will generally not be levied on a foreign investor’s income derived from dividends, capital gains, interest, royalties and other investment returns.