On 9 December 2022, the UAE Ministry of Finance (MoF) released the Federal Decree-Law No. 47 of 2022 on business taxation to enact a new Corporate Tax Law in the UAE. The new law has been supplemented with Frequently Asked Questions (FAQs).

The corporate tax law will be effective for financial years starting on or after 1 June 2023.

Tax Period

Corporate Tax is imposed on an annual basis, it is necessary to specify the “Tax Period”. The Tax Period will normally be the Gregorian calendar year (i.e., from 1 January to 31 December), unless the business applies a different 12-month period for preparing its financial statements.

Tax Registration

All taxpayers, as prescribed by the Minister, will be required to register for corporate tax and obtain a Corporate Tax Registration Number. The Federal Tax Authority may also request certain Exempt Persons to register for corporate tax.

Taxpayers will be able to electronically register for corporate tax through the website of the Federal Tax Authority. Taxpayers are required to register for corporate tax, even if they are already registered for VAT.

Tax rate

Tax Return

The corporate tax return will generally be due within 9 months following the end of the Tax Period. No provisional or advance corporate tax filings will be required. If the companies meet the requirements to form a Tax Group and their application to form a Tax Group is approved, they can file a single tax return covering all the members of the Tax Group.

Where companies cannot form a Tax Group, they will each be required to file a corporate tax return on a standalone basis. Corporate tax returns will need to be filed electronically. Corporate tax will generally need to be paid before the end of the 9 months following the end of the relevant Tax Period.

Financial Records

Taxpayers are expected to prepare and maintain financial statements for the purposes of calculating their taxable income, and should maintain all documents and records that support the information in the corporate tax return or in any other filing made with the Authority.

The Federal Tax Authority may request for the financial statements to be submitted alongside the corporate tax return, or for the financial statements to be provided upon request. Financial records and documents should be kept for at least 7 years following the end of the relevant Tax Period.

Transfer Pricing

Transfer pricing rules apply to UAE businesses that have transactions with Related Parties and Connected Persons, irrespective of whether the Related Parties or Connected Persons are located in the UAE mainland, a Free Zone or in a foreign jurisdiction.

Transfer pricing rules seek to ensure that transactions between Related Parties are carried out on arm’s length terms, as if the transaction was carried out between independent parties. To prevent the manipulation of taxable income, various articles in the Corporate Tax Law require that the consideration of transactions with Related Parties and Connected Persons needs to be determined by reference to their “Market Value”.

Generally, taxpayers are required to apply one or more of the following methodologies to determine the arm’s length values for transfer pricing purposes:

• The comparable uncontrolled price method
• The resale price method
• The cost-plus method
• The transactional net margin method
• The transactional profit split method.

Businesses will be required to maintain information regarding their transactions with Related Parties and Connected Persons, and certain businesses will be required to submit this information along with their tax return. Businesses that claim small business relief will not have to comply with the transfer pricing documentation rules. Certain businesses may be requested to maintain a master file and a local file.