How this new tax regime has affected businesses and taxable individuals so far

Dubai: The UAE Corporate Tax (CT) regime was first announced by the Ministry of Finance on 31 January 2022, with a planned introduction date of 1 June 2023. As the first direct tax to be levied in the country, businesses and taxable individuals have had to assess how they have been impacted and address these issues.

Initially, taxable persons have had to understand how they are impacted by the regime, asking themselves key questions, such as:

• Am I subject to the new regime?
• What income will be taxable?
• Do I need to file a tax return, and if so, when?
• What can I do to manage my tax liability?

As with any new legislation, it can be confusing to those without a tax background to find the answer to all their questions, let alone begin to mitigate any potential exposure or problems. Moreover, given the parameters outlined, it is highly likely that the majority of individuals and businesses will fall within the scope. 

One of the primary impacts of the CT regime on taxable individuals is its effect on financial processes and data. Previously, it was common for businesses in the region to operate without undertaking an audit. However, under the new regime, any entity with revenue exceeding AED 50 million, as well as those seeking to benefit from the Free Zone CT regime with a tax rate of 0%, will be required by law to have audited financial statements.

Similarly, individuals, while exempted from tax on their salaries, may find themselves liable for taxation on income derived from their sole trade business. Therefore, preparing financial statements becomes necessary for these individuals, as these statements will serve as a basis for assessing, submitting, and settling any tax liabilities.

Finally, as is the case with all tax regimes, there are plenty of reliefs and exemptions available to those that meet the criteria. These include:

• Small Business Relief
• Loss Relief
• Group Relief
• Exemptions for Income from Real Estate and Personal Investments

By assessing and understanding the nuances of UAE CT, businesses and individuals can turn this change into an opportunity for growth and financial resilience.

This article is contributed by Nathan Patterson, Head of UAE Corporate Tax and Finance. Nathan Patterson is the Head of UAE Corporate Tax and Finance at Sanctuary

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