Corporate Tax Law UAE 2022

Federal Tax Authority of the United Aram Emirates (UAE) Government has finally published their Law, duly issued by His Highness Sheikh Mohamed bin Zayed Al Nahyan, President of the United Arab Emirates as Federal Decree-Law No. 47 of 2022 which will be effective 15 days after the date of publish.

The complete law is divided into 20 Chapters and 70 Articles

Chapter 1 – General provisions

Which has only one article i.e. Article 1 containing definitions of the words used in the law

Chapter 2 – Imposition of Corporate Tax and Applicable Rates 

Chapter two talks about applicability of the law, applicable tax rates have only Article 2 and Article 3

Chapter 3 – Exempt Person

Under this chapter law specifies who all are exempted from corporate tax like government entity, govt. controlled entity, extractive business, non-extractive natural resources business, qualifying public benefit entities and qualifying investment funds which covers from Article 4 to Article 10 of the UAE corporate tax Law. 

Chapter 4 – Taxable Person and Corporate Tax Base

Under chapter four of the law Article 11 to Article 17 are covered which covers the following areas of taxation like Taxable Person, Corporate Tax base, State Source of Income, Permanent Establishment (PE), Exemption to investment managers, partners of unincorporated partnership firm, Family Foundations

Chapter 5 – Free Zone Person

Chapter five of the talks about who can be qualifies to be free zone person to take the taxation exemptions granted to person and entities registered in free zone and election for subject to corporate tax by covering Article 18 and Article 19 of the UAE corporate tax law.

Chapter 6 – Calculating Taxable Income 

Under chapter 6 law talks about relief to small business from taxation and general rules for determining taxable income vide Article 20 and Article 21.

Chapter 7 – Exempt Income 

Chapter seven of the UAE corporate tax law is talks about exempted incomes e.g. dividend income, participation exemption, exemptions to Foreign Permanent Establishments and Non-Resident Person Operating Aircraft or Ships in International Transportation from Article 22 to Article 25.

Chapter 8 – Reliefs 

This chapter specifies about relief to be granted in special case transactions like Transfers Within a Qualifying Group and Business Restructuring. This chapter covers Article 26 and Article 27

Chapter 9 – Deductions 

This chapter is all about what all expenditures to be allowed to be deducted from the revenue/income for calculation of taxable income spread across from Article 28 to Article 33. Article 28 talks about general deductible business expenditures, Article 29 is for Interest Expenditure, Article 30 is for General Interest Deduction Limitation Rule, Article 31 is for Specific Interest Deduction Limitation Rule, Article 32 is for Entertainment Expenditure and Article 33 is for all Non-deductible Expenditure.

Chapter 10 – Transactions with Related Parties and Connected Persons

Under this chapter the law covers related party transaction and its controls, calculation of arm’s length price and payments to connected person/entities through Article 34 to Article 36 

Chapter 10 – Tax Loss Provisions 

Under this chapter of the law it talks about tax relief in case of loss, set-off of loss, transfer of loss with income of other person and limitations on carry forward of loss . Covered through Article 37 Tax Loss Relief, Article 38 Transfer of Tax Loss and Article 39 Limitation on Tax Losses Carried Forward 

Chapter 12 – Tax Group Provisions 

Chapter twelve is about taxation of holding company and transactions between holding group company and its subsidiary also lays down the procedure for consolidation of the financials an calculation of tax liability. Article 40 is Tax Group, Article 41 what will be the of formation and cessation of the tax group and Article 42 Taxable Income of a Tax Group  

Chapter 13 – Calculation of Corporate Tax Payable 

Under chapter 13 of the UAE corporate tax law provisions related to currency, calculation and settlement of corporate tax liability, withholding tax, credit of withholding tax, credit of foreign tax paid as per DTAA. These provisions covered through Article 43 Currency, Article 44 Calculation and Settlement of Corporate Tax, Article 45 Withholding Tax, Article 46 Withholding Tax Credit and Article 47 Foreign Tax Credit 

Chapter 14 – Payment and Refund of Corporate Tax 

This chapter is divided into two articles Article 48 Corporate Tax Payment which specifies that corporate tax payable to be paid within nine months from the end of tax period or any other date specified and Article 49 Corporate Tax Refund under this article provisions specified about excess credit of withhold corporate tax than corporate tax liability 

Chapter 15 – Anti-Abuse Rules 

Under this chapter there is only one article, Article 50 General Anti-Abuse Rules which broadly talks about what will be considered abuse of law or wrongfully taking advantage of law 

Chapter 16 – Tax Registration and Deregistration 

This chapter of the corporate tax law lays down the provisions for the Tax Registration and Tax De-Registration through Article 51 and Article 52 

Chapter 17 – Tax Returns and Clarifications 

Under this chapter of the law which spread from Article 53 to Article 59 as the name of the chapter suggest provisioned around annual compliance, filings, record keeping and clarification. Article 53 is about Tax Return which need to be filed not later than 9 month from the end of relevant year,   Article 54 Financial Statements , Article 55 Transfer Pricing Documentation, Article 56 Record Keeping which need to be kept 7 years from the end of relevant year. 

Article 67 Tax Period for the purpose of law Financial Year for Taxable Person shall be the Gregorian calendar year, or the (12) twelve-month period for which the Taxable Person prepares financial statements, Article 68 Change of Tax Period, Article 69 Clarifications under this article advance ruling or clarification can be sought from tax authority about advance pricing ang applicability   

Chapter 18 – Violations and Penalties

This chapter of the Decree-Law covers one Article which is Article 60 Assessment of Corporate Tax and Penalties, assessment can be requested by taxable person and can also be initiated by tax authority 

 Chapter 19 – Transitional Rules

This chapter of decree law covers only Article 61 which lays down transitional phase provision how first year financials to be prepared etc.  

Chapter 20 – Closing provisions 

This chapter of the decree law covers internal departmental administrative policies, procedure, powers, delegation of authority, revenue sharing etc. Contains Article 62 to Article 72

Disclaimer: This article is not any kind of opinion and legal applicability, any guidance and opinion on this newly published UAE law to be sought in writing only.

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