GCC’s Low rate Corporate Tax Announced in the UAE
Taxation is a growing science, much like medicine. Norah Al Khalaf explains how the Gulf Cooperation Council members’ tax laws have changed and what the next step is for tax departments to get ready for. In the GCC area, tax policy is continually evolving and changing. The risk of audits and investigations related to international taxes may be very significant for taxpayers who are interested in expanding their activities to other countries. Understanding the pertinent laws and regulations is crucial, and as a result, there is a rising demand for tax consultations. Tax policy is developing and becoming more complex in the GCC nations. Numerous tax regulations have been established and many have been changed during the last five years. The GCC’s lowest corporate tax announced in UAE is:
In the UAE, excise taxes on several items were implemented in 2017 at varying rates ranging from 50% to 100%. The Federal Tax Authority (FTA) expanded the list of items on December 1st, 2019. In compliance with the GCC agreement, the UAE imposed a VAT for the first time in 2018. The UAE tax corporate zone is:
Additionally, the FTA announced on January 20, 2022, the implementation of a corporate income tax (CIT) on enterprises’ net earnings at a rate of 9%. It will be in effect for fiscal years beginning on or after June 1, 2023. The CIT regime is anticipated to include requirements for eligible taxpayers as well as transfer pricing rules.
Saudi Arabia, on the other hand, also enacted VAT for the first time in 2018. Since they were initially issued, the Zakat, Tax & Customs Authority (ZATCA) has altered the rules multiple times. Due to the epidemic, the VAT rate was raised on July 1, 2020, from 5% to 15%. In 2019, transfer pricing regulations were announced. However, the Income Tax Law included the arm’s-length concept. As of October 4, 2020, the real estate transaction tax (RETT) regulation went into force at a rate of 5%. A few changes were made to the regulations. Additionally, a number of changes were made to the Corporate Income Tax and Zakat rules, and the final versions were released in 2019.
Major CIT reforms were implemented in Oman in 2017 by royal order, which included raising the rate from 12% to 15%, adding a 3% CIT rate for small taxpayers, and expanding the 10% withholding tax to dividends, interest, and payments for services, among other modifications.
Additionally, Oman became the sixth nation to enact an excise tax on June 15, 2019. Depending on the type of goods, there was an excise tax at a rate of either 50% or 100%. In addition, Oman became the fourth GCC nation to enact VAT at 5% in 2021 with some items exempt.
On December 30, 2017, the Bahrain National Bureau for Revenue (NBR) implemented an excise tax at a rate of 50% or 100% depending on the kind of goods. In addition, the Council of Ministers authorized an increase in the VAT from 5% to 10%, which became effective on January 1 2022 as a result of the epidemic.
The future of tax in the GCCs:
Given that both nations fall under the same GCC framework for value-added tax, Qatar and Kuwait are now implementing VAT. The global minimum tax rate will guarantee that multinational companies (MNEs) will be subject to a least 15% tax rate starting in 2023. In addition, a few nations may adopt or raise their corporate income tax rate to 15% in alliance with the global minimum tax rate. Other nations may enact digital service taxes (DSTs), which might be directed at major tech firms. On the other hand, nations that raised their VAT rates to combat COVID-19 may lower them once their economy stabilizes.
Utilizing tax perks and exemptions to lower your tax bill is permissible when done through tax planning. You must establish a tax strategy for your company and make appropriate plans. Analyzing your present tax status would be the first step, especially if you are an MNE. Recognize the rules and regulations that are relevant to your company. Utilize any tax breaks or exemptions. Learn about the pertinent tax treaties and agreements. Know your tax rights and how to take advantage of the law.