VAT is an indirect tax applied to tax registered businesses on the consumption or use of goods and services and is collected by companies on behalf of the Government.
The Federal Tax Authority (FTA) has specified a fixed VAT rate of either 0% or 5% on the sale of goods and services. Certain businesses are eligible for exemption.
A business must register for VAT if the value of their taxable sales and imports within the UAE exceeds the registration threshold of AED 375,000. Businesses can also voluntarily register for VAT if the total value of their taxable supplies and imports exceeds AED 187,500. Companies who have an annual turnover below AED 150 million must file their VAT returns on a quarterly basis with the FTA, and companies who have an annual turnover of more than AED 150 million must file their returns monthly. The FTA may however assign different filing periods for certain types of businesses. If any company fails to file their tax returns on a timely basis, they will face strict penalties and fines.
“Understanding VAT intricacies is vital for businesses aspiring for higher growth. At MNV Associates, we simplify complexities to ensure your expanding operations remain compliant and cost-effective.”
The rate at which businesses are subject to Corporate Tax (CT) is 9% for taxable incomes over and above AED 375,000. Exceptions are given to certain types of businesses and government related entities.
Free Zones may be eligible for 0% CT, if they meet required criteria/conditions. One of the primary conditions to claim benefit of 0% CT is to maintain substance in the Freezone and earn qualifying income.
Businesses may also choose to group multiple UAE entities as a single tax group under the CT regime and prepare a single tax return at the end of each financial year. Such grouping can only be possible if all the entities in the group meet certain requirements. With the introduction of CT, companies transacting with related parties will be required to comply with the transfer pricing regulation.
In line with the Organisation for Economic Co-operation and Development (OECD) regulations, Ministry of Finance (MoF) has issued transfer pricing rules outlining how to regulate transactions and document the pricing of transactions between related parties or connected persons.
If one entity undertakes a transaction / enters into an arrangement with another group entity, within or outside UAE; and the two group entities qualify as related parties.
If one entity makes any payment or provides any benefit to the connected person.
Such goods are taxable if they are imported, produced or stockpiled in the UAE. No registration threshold applies for excise tax. Only once a company is registered for excise tax, can they engage in any excise good transactions.
Excise tax and their specific rates apply to the goods below:
A person must register and pay excise tax if they are involved in the following activities:
Since 2019 all local companies in the UAE, whether located in free zones or onshore, and any resident business entities are required to file for ESR. To comply with ESR, companies must be managed or directed within the UAE, have a certain level of full-time based UAE staff, generate most of their income within the country, keep adequate assets and be able to show any operating expenditure within the country. The purpose of ESR is to clamp down on businesses with ulterior motives of registering their business in the UAE, solely to enjoy tax and economic benefits.
Strategic and management decisions of the business must be conducted in the UAE, and an ‘Economic Substance Test’ should be met. The level of economic substance that a business must meet is dependent on the type of relevant activity that they have conducted in the UAE. Business must ensure they file a notification with the authority within 6 months of completion of financial year informing if they fall under the relevant activities. Further if they fall under relevant activities they need to submit an ES report for the financial year within 12 months of completion of financial year.
The Tax Residency Certificate (TRC) is issued by the Federal Tax Authority (FTA) in the UAE and is valid for one year from the date of issuance. Individuals or companies may apply for the tax residency certificate to avoid any double taxation schemes with other countries. A tax treaty known as the Double Tax Avoidance Agreement (DTAA) is signed by two countries, to avoid there being any double taxation. Once this agreement is signed, the tax residency certificate must be issued to the relevant party by the tax authority.
We support obtaining TRC for both individuals and corporates.
Country-By-Country Reporting (CBCR) is part of the Base Erosion and Profit Shifting (BEPS) action plan 13. Entities that are headquartered in the UAE and are part of Multinational Groups of Entities (MNES) with a consolidated revenue of AED 3.15 billion or more, are required to file a CBCR within 12 months after the end of the reporting financial year. Such CBCR include details on the revenue, profit before tax, income tax accrued, shared capital, and certain other indicators of economic activities for each jurisdiction in which the MNEs operate.
We support clients in the preparation and filing of CBCR in UAE.
VAT is an indirect tax applied to tax registered businesses on the consumption or use of goods and services and is collected by companies on behalf of the Government.
The Federal Tax Authority (FTA) has specified a fixed VAT rate of either 0% or 5% on the sale of goods and services. Certain businesses are eligible for exemption.
A business must register for VAT if the value of their taxable sales and imports within the UAE exceeds the registration threshold of AED 375,000. Businesses can also voluntarily register for VAT if the total value of their taxable supplies and imports exceeds AED 187,500. Companies who have an annual turnover below AED 150 million must file their VAT returns on a quarterly basis with the FTA, and companies who have an annual turnover of more than AED 150 million must file their returns monthly. The FTA may however assign different filing periods for certain types of businesses. If any company fails to file their tax returns on a timely basis, they will face strict penalties and fines.The Federal Tax Authority (FTA) has specified a fixed VAT rate of either 0% or 5% on the sale of goods and services. Certain businesses are eligible for exemption. A business must register for VAT if the value of their taxable sales and imports within the UAE exceeds the registration threshold of AED 375,000. Businesses can also voluntarily register for VAT if the total value of their taxable supplies and imports exceeds AED 187,500. Companies who have an annual turnover below AED 150 million must file their VAT returns on a quarterly basis with the FTA, and companies who have an annual turnover of more than AED 150 million must file their returns monthly. The FTA may however assign different filing periods for certain types of businesses. If any company fails to file their tax returns on a timely basis, they will face strict penalties and fines.
The rate at which businesses are subject to Corporate Tax (CT) is 9% for taxable incomes over and above AED 375,000. Exceptions are given to certain types of businesses and government related entities.
Free Zones may be eligible for 0% CT, if they meet required criteria/conditions. One of the primary conditions to claim benefit of 0% CT is to maintain substance in the Freezone and earn qualifying income.
Businesses may also choose to group multiple UAE entities as a single tax group under the CT regime and prepare a single tax return at the end of each financial year. Such grouping can only be possible if all the entities in the group meet certain requirements. With the introduction of CT, companies transacting with related parties will be required to comply with the transfer pricing regulation.
In line with the Organisation for Economic Co-operation and Development (OECD) regulations, Ministry of Finance (MoF) has issued transfer pricing rules outlining how to regulate transactions and document the pricing of transactions between related parties or connected persons.
The transacting group entities can use their transactions and arrangements to shift earnings from group entities in higher tax countries to group entities in lower tax jurisdictions, and from high-tax entities to low tax entities, resulting in an overall reduced tax burden for the group.
To avoid any pricing discrepancies, Federal Tax Authority (FTA) may examine the arrangements between the related parties or payments made to the connected persons to determine if the given arrangements / payments were priced at market value. If a transaction is not found to be at arm’s length with market value, FTA may perform a transfer pricing adjustment.
If one entity undertakes a transaction / enters into an arrangement with another group entity, within or outside UAE; and the two group entities qualify as related parties.
If one entity makes any payment or provides any benefit to the connected person.
Such goods are taxable if they are imported, produced or stockpiled in the UAE. No registration threshold applies for excise tax. Only once a company is registered for excise tax, can they engage in any excise good transactions.
Excise tax and their specific rates apply to the goods below:
A person must register and pay excise tax if they are involved in the following activities:
Since 2019 all local companies in the UAE, whether located in free zones or onshore, and any resident business entities are required to file for ESR. To comply with ESR, companies must be managed or directed within the UAE, have a certain level of full-time based UAE staff, generate most of their income within the country, keep adequate assets and be able to show any operating expenditure within the country. The purpose of ESR is to clamp down on businesses with ulterior motives of registering their business in the UAE, solely to enjoy tax and economic benefits.
Strategic and management decisions of the business must be conducted in the UAE, and an ‘Economic Substance Test’ should be met. The level of economic substance that a business must meet is dependent on the type of relevant activity that they have conducted in the UAE. Business must ensure they file a notification with the authority within 6 months of completion of financial year informing if they fall under the relevant activities. Further if they fall under relevant activities they need to submit an ES report for the financial year within 12 months of completion of financial year.
The Foreign Account Tax Compliance Act (FATCA) is a set of US tax regulations, introduced by the US Government to prevent tax evasion by its nationals. Since 1st July 2014, the UAE signed and inter-government agreement with the US to introduced the rules of FATCA into the country. The inter-governmental agreement between the UAE and US made it mandatory for banks to provide necessary information to all authorities, which is then sent back to the US. Banks are required to provide information about accounts held with them by us persons or entities controlled by US persons.
The Tax Residency Certificate (TRC) is issued by the Federal Tax Authority (FTA) in the UAE and is valid for one year from the date of issuance. Individuals or companies may apply for the tax residency certificate to avoid any double taxation schemes with other countries. A tax treaty known as the Double Tax Avoidance Agreement (DTAA) is signed by two countries, to avoid there being any double taxation. Once this agreement is signed, the tax residency certificate must be issued to the relevant party by the tax authority.
We support obtaining TRC for both individuals and corporates.
Country-By-Country Reporting (CBCR) is part of the Base Erosion and Profit Shifting (BEPS) action plan 13. Entities that are headquartered in the UAE and are part of Multinational Groups of Entities (MNES) with a consolidated revenue of AED 3.15 billion or more, are required to file a CBCR within 12 months after the end of the reporting financial year. Such CBCR include details on the revenue, profit before tax, income tax accrued, shared capital, and certain other indicators of economic activities for each jurisdiction in which the MNEs operate.
We support clients in the preparation and filing of CBCR in UAE.
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