All the federal level tax laws cover Dubai as well: there is no income tax in Dubai, VAT is levied at a national level and Dubai inherits and benefits from all the Double tax treaties signed by the UAE.

As for 01/01/2020 Emirates, including Dubai, have signed 115 double taxation treaties with countries across the world. The list of double taxation avoidance agreements includes, but not limited to: Albania, Algeria, Armenia, Austria, Azerbaijan, Andorra, Belarus, Benin, Belize, Bangladesh, Bermuda, Barbados, Bosnia and Herzegovina, Belgium, Mauritius, Canada, Bulgaria, China, the Czech Republic, Egypt, Estonia, Ethiopia, Cyprus, Finland, Fiji, Georgia, Gambia, New Guinea, Germany, Greece, Hong Kong, Italy, India, Ireland, Japan, Kazakhstan, Kyrgyzstan, Kenya, Indonesia, Lebanon, Luxembourg, Latvia, Liechtenstein, Lithuania, Malaysia, Macedonia, Malta, Mongolia, Montenegro, Morocco, Mauritius, Mauritania, Mozambique, Mexico, the Netherlands, New Zealand, Nigeria, Pakistan, Philippines, Poland, Portugal, Palestine, Panama, Romania, Russia, Seychelles, Singapore, Senegal, Switzerland, Spain, Serbia, Slovenia, Slovakia, Sri Lanka, South Korea, South Africa, Sudan, Syria, Tajikistan, Thailand, Turkmenistan, Tunisia, Turkey, New Zealand, Ukraine, Uzbekistan, Uruguay, Uganda, Venezuela, Vietnam, Yemen.

For more detailed information please click here.

Locally, however, some of Dubai taxes can differ from the rest of the UAE.

Companies incorporated in Dubai are required to pay taxes on their earnings, but not all companies have to do so. Corporate taxation in Dubai is limited only to banks and oil companies. Other types of companies in Dubai are not subject to the corporate tax.

Oil companies in Dubai are subject to a maximum amount of 55% corporate income tax on the UAE-sourced income. As for branches of foreign banks in Dubai, these are obliged to pay a 20% tax rate on their Dubai source income. The calculation method for the taxable income is different for the two types of taxable businesses: the tax for banks is calculated according to their audited financial statements, while for oil companies the tax is due according to their concession agreements. Oil companies also have to pay other types of taxes in Dubai, like royalties. Please consider that the companies mentioned above are not subject to withholding taxes on remitted dividends and interests abroad.

VAT was introduced in the UAE in January 2018 on a federal level. VAT is charged at a rate of 5%. The exception is food items, health, education, petroleum products, social services and bicycles. The financial services and residential property sectors are also exempt from VAT (with certain exceptions). 

AT brings a lot of opportunities and also a lot of challenges with it. VAT is extremely complex and strenuous tax system that companies find hard to cope with. VAT stands for Value Added Tax also known as Good and Services Tax (GST). It is a type of consumption tax, VAT is an indirect tax applied upon the consumption of the goods and services. VAT is levied on all the stages of the supply chain and it is collected by the businesses on behalf of the government. Businesses must follow the rules and law of Federal Tax Authority (FTA) in order to avoid VAT fines and penalties. Most of the companies are outsourcing the VAT services in Dubai.

Implementation of VAT Applicability

• If your annual turnover exceeds the mandatory threshold limit of AED 375,000, then you are liable to pay tax.
• Voluntary registration threshold limit is AED 187,500/- per year, where, any businessperson can voluntarily register for VAT and continue with the normal compliance process.

Rates of VAT

The types of rates applicable are:

• Standard rate (5% VAT)
• Zero rate
• Exempted
• Zero-rated Industries
• Exports of goods and services outside the UAE
• International transportation, and related supplies
• Supplies of the certain sea, air and land means of transportation (such as aircrafts and ships)
• Certain investment grade precious metals (e.g. gold, silver, of 99% purity)
• Newly constructed residential properties, that are supplied for the first time within 3 years of their construction
• Areas exempted from VAT
• Supply of certain financial services
• Residential properties – sale and lease
• Bare land – sale and lease
• Local passenger transport

VAT Registration

VAT registration is mandatory for the businesses who are exceeding the annual turnover of AED 375,000. Through VAT registration, companies will get their Tax Registration Number (TRN) and after that they have to start collecting VAT and file their VAT returns on quarterly or monthly basis.

VAT Invoicing

After getting the Tax Registration Number (TRN), invoicing format will be changed. FTA has defined a VAT invoice format in UAE. A VAT invoice must have Tax Registration Number (TRN). All the businesses must follow the format of VAT invoice issued by FTA otherwise they will get the VAT fines and penalties.

VAT Fines & Penalties in UAE

Federal Tax Authority (FTA) has approved the complete and final list of all the administrative VAT Fines and Penalties in UAE that will be imposed on businesses for violations of the VAT laws.

Every VAT fine or penalty will be no less than AED 500. The complete and approved list of the administrative VAT fines and penalties in UAE for breaching the law related to VAT and excise tax are as follows:

Violations related to tax procedures

1. Failure to keep the required records specified by the tax procedures law and the tax law.
   AED 10,000 for the first time.
   AED 50,000 for each repeat violation.
2. Failure to submit the required records in Arabic when requested by the Authority.
   AED 20,000
3. Failure to submit a registration application within the timeframe specified by the tax law.
   AED 20,000
4. Failure to submit a deregistration application within the timeframe specified by the tax law.
   AED 10,000
5. Failure to inform the Authority of an amendment to tax records that needs to be submitted.
   AED 5,000 for the first time.
   AED 15,000 in case of repetition.
6. Failure to notify the authority that a legal representative has been appointed for the business within the specified timeframe. The penalties will be charged to the legal representative.
   AED 20,000
7. Failure of the legal representative to file a tax return within the specified timeframe. The penalties will be charged to the legal representative.
   AED 1,000 for the first time.
   AED2,000 in case of repetition within 24 months.
8. Failure of the Registrant to submit a tax return within the time frame specified by the tax law.
   AED 1,000 for the first time.
   AED 2,000 in case of repetition within 24 months.
9. Failure to pay the tax stated in the tax return/tax assessment form within the time frame specified by the tax law. The taxable person will incur a late payment penalty as follows:
   1. 2% of the unpaid tax is due immediately.
   2. 4% is due on the seventh day following the deadline for payment.
   3. 1% daily penalty will be charged on any amount that is still unpaid one calendar month after the deadline for payment, up to a maximum of 300%.
10. Submission of incorrect tax returns. Two penalties are applied:
    1. Fixed penalty of:
       1. (AED 3,000) for the first time.
       2. (AED 5,000) in case of repetition
    2. Percentage-based penalty shall be applied on the amount unpaid to the Authority due to the error as follows:
       1. (50%) if the Registrant does not make a voluntary disclosure or he made the voluntary disclosure after being notified of the tax audit and the Authority has started the tax audit process, or after being asked for information relating to the tax audit, whichever takes place first.
       2. (30%) if the Registrant makes a voluntary disclosure after being notified of the tax audit and before the Authority starts the tax audit.
       3. (5%) if the Registrant makes a voluntary disclosure before being notified of the tax audit by the Authority.
11. Voluntary disclosure by a business of errors in a tax return, tax assessment, or refund application. Two penalties are applied:
    1. Fixed penalty of:
       1. (AED 3,000) for the first time.
       2. (AED 5,000) in case of repetition
    2. Percentage-based penalty shall be applied on the amount unpaid to the Authority due to the error as follows:
       1. (50%) if the Person/Taxpayer makes the disclosure after either of the following conditions applies: a) they have been notified of the tax audit and the Authority has started the audit process, or b) they have been asked for information relating to the tax audit.”
       2. (30%) if the Person/Taxpayer makes a voluntary disclosure after being notified of the tax audit but before the start of the tax audit.
       3. (5%) if the Person/Taxpayer makes a voluntary disclosure before being notified of the tax audit by the Authority.
12. Failure of a business to voluntarily disclose errors in a tax return, tax assessment, or refund application before a tax audit. Two penalties are applied:
    1. Fixed penalty of:
       1. (AED 3,000) for the first time
       2. (AED 5,000) in case of repetition
    2. 50% of the amount unpaid to the Authority due to the error.
13. Failure of a person or business to facilitate the work of the tax auditor. AED 20,000
14. Failure of the Registrant to calculate tax on behalf of another person as required under the tax law. The Registrant shall incur a late payment penalty as follows:
    1. 2% of the unpaid tax is due immediately once the payment is late.
    2. 4% of the amount of tax which is still unpaid is due on the seventh day following the deadline for payment.
    3. 1% daily penalty will be charged on any amount that is still unpaid one calendar month after the deadline for payment, up to a maximum of 300%.
15. Failure to account for tax due on import of goods as required under the tax law. 50% of unpaid or undeclared tax.

Penalties and Fines Related to VAT

Failure by the taxable person/business to display prices inclusive of tax AED 15,000

Failure by the taxable person/business to notify the Authority of applying tax based on the margin. AED 2,500

Failure to comply with conditions and procedures related to the transfer of goods in designated zones.

The penalty will be the higher of AED 50,000 or 50% of the tax, if any, unpaid on the goods as the result of the violation. Failure by the taxable person/business to issue a tax invoice or alternative document when making any supply. AED 5,000 for each missing tax invoice or alternative document.

Failure by the taxable person/business to issue a tax credit note or alternative document. AED5,000 for each missing tax credit note or alternative document.

Failure by the taxable person to comply with the conditions and procedures regarding the issuance of electronic tax invoices and electronic tax credit notes. AED 5,000 for each incorrect document.

VAT Accounting

It is mandatory for every taxable person to maintain books of accounts under the VAT law. VAT Accounting will push businesses to be aware of all the elements and processes that should be implemented in order to properly account for VAT and be responsible of other VAT elements such as VAT returns and VAT refund.

VAT Return Filing

VAT Returns must be filed according to the specified dates and duration mentioned on the VAT Application or VAT Certificate, within 28 days from the end of the tax period.

Tax Agent

Businesses may appoint an FTA Tax Agent to act in his name and on his behalf with regard to his tax affairs before the Authority.

VAT Voluntary Disclosure

A voluntary disclosure is a form provided by Federal Tax Authority (FTA) to allow businesses and taxpayers to notify FTA about the errors/mistakes and omission/changes in a Tax return or Tax Refund. A VAT Voluntary disclosure form 211 in UAE helps a taxable person to make correction in the errors they have committed while submitting a VAT Return or applying for the VAT Refund.

Excise tax has been implemented in UAE on tobacco products, energy drinks and carbonated drinks.
Excise tax in UAE will also was implemented on electronic cigarettes (e-cigarettes), electronic liquids (e-liquids) and many other soft drinks starting from December 1, 2019. Federal Tax Authority (FTA) has issued a complete list of excise tax in UAE along with the standard excise tax rate on all the excise goods. The goods that will be charged under excise tax in UAE will be:

The zero income tax policy in Dubai won’t be changed in the foreseeable future.

Sheikh Mohammed bin Rashid Al Maktoum, the Vice-President and Prime Minister of the UAE and the Ruler of Dubai stated that his country would never adopt an income tax as a way to tackle the deficit.

“My country would never adopt an income tax as a way to tackle the deficit. My reply is: No income taxes” - Sheikh Mohammed bin Rashid Al Maktoum.

Dubai residents also enjoy the tax-free rental income, no stamp duty, no tax on capital gains or inheritance. However, just because you reside in Dubai, it doesn’t mean that you can enjoy a tax-free income. The main question is your tax residency. This means that it is unlikely that tax will ever be levied on an individual’s income in Dubai.

Are you a tax resident in Dubai?

This is a very important question which actually defines whether you pay tax when working in Dubai or not.If you earn your income in Dubai but are tax resident elsewhere, you may be subject to taxation on your income. This is because most expats pay tax according to their residency.

What is your tax residency?

If you take a 6-month contract in Dubai and live and work in the emirate for just 6 months, you are likely to remain ordinary resident in your home country for tax purposes and your income could be subject to your home country taxation.

If you live elsewhere and have an investment property in Dubai from which you earn a rental income, you will have to declare this income on your tax return in the country of your tax residence and potentially pay tax on it if your overall earnings are above the nil rate band for income tax.

If you move to Dubai for a long term, or you are out of your home country for a long enough period to qualify you as a non-resident for tax purposes, then you may be able to earn your salary in Dubai 100% free of income taxation.

A tax year trick

Many countries qualify their citizens for tax purposes based on a tax year. From this point of view, the question when you leave your country of domicile for Dubai is crucial.

If you spend the most part of the current tax year in your country of domicile, you might be considered a tax resident for that tax year by the tax authorities and taxed on your income for the whole year regardless of the fact that part of the income for that year was earned in Dubai.

If you are a UK citizen and UK domiciled, even a year-long contract in Dubai can be not enough to exempt you from your income tax obligations in the UK, as it might cover just half of the current tax year and half of the next tax year.

The good news is that as long as your stay in Dubai covers the qualifying part of a tax year in your country of domicile, you most likely will be able to enjoy your Dubai income tax-free.

Every person’s position is unique, and you have to be fully clear about your tax status and obligation for taxation at home or abroad. If you are unsure, seek qualified professional advice.

Profits of international banks and energy firms are taxed at the federal level.

Alcohol is heavily taxed upon importation. It’s 50% to bring it into the country and then another 30% if you have a liquor license and buy alcohol for home consumption.

Tax on any visit to a hotel in Dubai for a stay or even a meal out. The tax adds 10% to your bill and is called Dubai tourist tax. This tourist tax in Dubai is included in the bill and imposed on every guest staying at a hotel, guestroom or a hotel apartment.

There is also a form of council tax secretly levied when you pay your utility bills – and many people protest against this tax as it is supposedly for street lighting, waste collection etc., and yet most residents pay for this through maintenance fees.

So, you are effectively charged council tax in Dubai twice –and there is a 10% municipality tax as well as a 5% municipality tax on rented accommodations collected through utility bills.

You will have to pay 4 AED toll tax on crossing every toll booth in Dubai.

There is also 10 AED knowledge tax + 10 AED innovation tax on using government services.

If you are using centralised cooling system (district cooling) you might find that your bills are much higher than those for traditional individual air conditioning units. Although formally it’s not a tax, however, it’s a bill for you to pay to the district cooling companies for their investments into innovative technologies.

The Cabinet:

Pursuant to the perusal of the Constitution,
- Federal Law No. (1) of 1972 Concerning the Competencies of the Ministries and
Powers of the Ministers and its amendments;
- Federal Law No. (5) of 1975 on the Commercial Register;
- Federal Law No. (2) of 2015 on Commercial Companies and its amendments;
- Federal Law No. (14) of 2016 concerning the Violations and Administrative
Sanctions in the Federal Government;

- Federal Decree-Law No. (20) of 2018 on Anti-Money Laundering and Combating the
Financing of Terrorism and Financing of Illegal Organizations;
- Cabinet Decision No. (10) of 2019 on the Executive Regulations of Federal DecreeLaw No. (20) of 2018 on Anti-Money Laundering and Combating the Financing of
Terrorism and Financing of Illegal Organizations;
- Cabinet Decision No. (34) of 2020 concerning Regulating the Beneficial Owner
Procedures; and
- Upon the proposal of the Minister of Economy and the approval therefore of the Cabinet,

Has resolved: 

For more information please click here

We would like to inform all DACC Licensees that undertake a Relevant Activity, that the deadline to submit the ESR Notifications and Report has been extended to the 31^st of January 2021.

The Ministry of Finance ESR Portal is live and fully operational. Please click here to access the Portal.

Please click here to find an informative webinar from the Ministry of Finance regarding the ESR and how to use the ESR Portal. To access the Portal, Licensees are required to have an existing Ministry of Finance corporate account. The user details that are recorded in the corporate account can be used to access the ESR Portal for filing purposes. Licensees that are not registered as corporate users need to create a new account to file the ESR Notification and Reports.

All DACC Licensees that undertake a relevant activity must file their Notifications within six months from the end of their financial year. All ESR Reports must be submitted within 12 months of from the end of their financial year.

For further clarifications, please use the relevant legislation found on the Ministry of Finance’s website.

It should be noted that DACC will not advise or instruct any of its Licensees on how to fill out the Notification or whether the Licensee undertakes a Relevant Activity. DACC recommends consulting a professional for any of their queries regarding the Economic Substance Regulations.

Dear Valued Customers,

We would like to inform you that the Ministry of Economy has published a document Regarding Nominee Shareholder Director - formal or informal. 

To view the document please click here.

If you have any inquiry, please send it to [email protected]. 

On January 31, 2022, the UAE announced the introduction of Corporate Tax effective for financial years starting on or after June 1, 2023.

What is Corporate Tax?
By definition, Corporate Tax is a form of direct tax levied on
the net income or profit of corporations and other
businesses.
Applicability
● The corporate tax will apply to all persons (individuals and
legal persons) carrying out business activities under a
commercial license in the UAE;
● The CT will apply to the net profit/income of a
business/entity (subject to certain adjustments) reported in
the company’s Financial Statements prepared in
accordance with international accounting standards;
● Being a federal tax, it will be applied across all Emirates;
● Foreign entities and individuals will be subject to
corporate tax only if they conduct a trade or business in the
UAE in an ongoing or regular manner;
● Businesses will be allowed to use losses incurred (as from
the corporate tax effective date) to offset taxable income
in subsequent financial periods. A loss for corporate tax
purposes (tax loss) would arise when the total deductions
the businesses can claim are greater than the total taxable
income for the relevant financial period;
● Foreign corporate tax paid on UAE taxable income will be
allowed as a tax credit against the UAE corporate tax
liability.
Corporate Tax Exemptions
● Business engaged in the extraction of natural resources,
which will remain subject to Emirate level corporate
taxation;
● Interest, royalties, other investment returns, capital gains
and dividends of qualifying shareholding, which is defined
as an ownership interest in a UAE or foreign company that
meets certain conditions;
● Qualifying intra-group transactions and reorganizations,
provided the necessary conditions are met;
● It must be noted that corporate tax will not apply on an
individual’s salary and other employment income (whether
received from the public or private sector).
Corporate Tax Rates
The Federal Tax Authority announced the following tax
rates:
● 0% - applied on net income up to AED 375’000;
● 9% - applied on net income above AED 375’000;
● A different tax rate which is yet to be announced but
might be applied to MNEs (multinational corporations
that operate in more than one country through foreign
subsidiaries, branch or other forms of
presence/registration) that have consolidated global
revenues in excess of EUR 750M (AED 3.15B).
Free Zones
Free zone businesses will be subject to corporate tax, but
the corporate tax regime will continue to honors the
corporate tax incentives currently being offered to free
zone businesses that comply with all regulatory
requirements and that do not conduct business with
mainland UAE.
Filing of Corporate Tax Return
● The Federal Tax Authority clarified that the Corporate
Tax Return will be filed electronically per financial year
(which is generally a year);
● No advanced or provisional corporate tax filings will be
required;
● The qualifying persons (individuals and legal persons)
will be required to register with the Federal Tax Authority
and file the corporate tax return.
Penalties
Similar to other taxes in the UAE, all persons (individuals
and legal persons) subject to corporate tax will be
subject to penalties for non-compliance with the
corporate tax regime.

Additional information along with the relevant legislation and ongoing
compliance obligations are expected to be released by the
competent authorities in due course.

❖ UAE ESR Background

In 2019 the UAE introduced the Economic Substance Regulations (ESR) to honour its commitment as a member of the OECD Inclusive Framework on Base Erosion and Profit Shifting (BEPS), and in response to a review of the UAE tax framework by the European Union (EU) which resulted in the UAE being included on the EU list of non-cooperative jurisdictions for tax purposes.

The UAE Cabinet of Ministers issued Cabinet Resolution No. (31) of 2019 concerning Economic Substance Regulations (the “Resolution (31)”). On 10 August 2020 amendments were introduced to Resolution (31) by the Cabinet of Ministers by Resolution No. (57) of 2020 which repealed and replaced Resolution (31) (the “Regulations”).

The Regulations require UAE entities that undertake certain activities to maintain an adequate “economic presence” in the UAE and demonstrate that they have effective substance in the UAE jurisdiction. UAE Authorities wish to ensure that the jurisdiction does “not facilitate structures or arrangements aimed at attracting profits which do not reflect real economic activity in the jurisdiction”.

❖ Relevant Activities

The ESR Regulations apply to all UAE mainland and Free Zone companies carrying out and deriving income from 9 relevant activities (the “Relevant Activities”) listed in the Regulation:

✓Banking Business

✓Shipping Business

✓Insurance Business

✓Holding Company Business

✓Investment Fund Management Business

✓Intellectual Property Business

✓Lease-Finance Business

✓Distribution and Service Centre Business

✓Headquarters Business

Entities are expected to use a ‘substance over form’ approach to determine whether or not they undertake a Relevant Activity and as a result will be considered Licensees for the purposes of the ESR Regulations, irrespective of whether such Relevant Activity is included in the trade license or permit of the entity. Any form of passive income from a Relevant Activity would bring the entity within scope of the ESR Regulations.

Entities undertaking Relevant Activities are required to submit notifications (the “Notification”) each year, meet ESR test (the “ESR Test”) and file ESR Report (the “Report”).

❖ Key Aspects

➢Licensee is defined as a juridical person or an unincorporated partnership, registered in the UAE, carrying out a Relevant Activity. Hence, natural persons, sole proprietors, trusts and foundations are not within the scope of the Regulations anymore and don’t need to comply with it;

➢A branch of a foreign entity registered in the UAE that carries out a Relevant Activity, is required to comply with the ESR Regulations, unless the relevant income of such branch is subject to tax in a jurisdiction outside the UAE;

➢The Regulations exclude certain forms of entities from the requirement to meet the ESR Test:

-an Investment Fund;

-an entity that is tax resident in a jurisdiction other than the UAE;

-an entity wholly owned by the UAE residents, provided that entity is not part of a multinational enterprise group and entity carries activities only in the UAE;

-branch of a foreign entity the relevant income of which is subject to tax in a jurisdiction other than the UAE. It should be noted that any entity that pays withholding tax in a foreign jurisdiction will not be considered as tax resident in a foreign jurisdiction other than the UAE solely on that basis

➢ Connected person is an entity that is part of the same group as the licensee. Group is a two or more entities related through ownership or control such that they are required to prepare consolidated financial statements for financial reporting purposes under the accounting standards applicable thereto. 

➢ Licensee is considered to be engaged in a Distribution and Service Centre Business if it:

- Purchases goods from a foreign group company and resells those goods; or

- Provides services to foreign connected persons.

➢ Where an entity carries out a Relevant Activity during the course of a liquidation or winding up process, the entity, its liquidators (or equivalent) must ensure that the entity continues to satisfy all its obligations under the ESR Regulations.

➢ Although a business may determine that it does not carry on a Relevant Activity and is therefore not within scope of the ESR Regulations, the Regulatory Authority may request information from the business to demonstrate that position.

➢ All licensees are required to file a notification electronically on the Ministry of Finance (the “MOF”) portal within six months from the financial year end.

➢ The Federal Tax Authority (the “FTA”) has been appointed as the National Assessing Authority is authorized to undertake assessments on ESR Test, impose penalties, hear appeals, etc.

❖ ESR Test

In order to comply with the ESR requirements, the following ESR Test criteria must be met:

✓ conducting income generating activity in the UAE (CIGA);

✓ be “directed and managed” in the UAE - frequent meetings of board of qualified directors recorded in written minutes which shall be kept in the UAE;

✓ have adequate number of qualified full-time employees, who are physically present in the UAE - depending on the activity, company needs to demonstrate sufficient number of employees for operations of the company;

✓ have adequate level of expenditure in the UAE;

✓ have adequate operating expenditure in the UAE;

✓ have physical assets (e.g. business premises leased or owned) in the UAE.

In order to meet “directed and managed” test, Board of Directors shall meet in the UAE with adequate frequency and quorum physically present. Additionally, all strategic decisions and minutes of meeting must be recorded and kept in the UAE. Determination as to whether an adequate number of meetings are held and attended in the UAE will be dependent on the level of Relevant Activity being carried out by the company.

The Guidance further clarifies that “it is not intention of the Economic Substance Regulations to impose requirements on businesses to engage more employees than is actually required by the business or incur expenditures beyond its needs, or beyond any existing requirements in relation to employees, provided that the business is engaged in genuine business activity and carrying out a core income generating activity in the UAE with the employees, expenditures and premises it has.”

Holding companies shall satisfy Economic Substance requirements if they submit documents, records or information when requested by the authorities and have adequate employees and premises for holding and managing the company.

A High-Risk IP entity must comply with increased reporting requirements and higher evidentiary threshold of the ESR Test.

Company can outsource or delegate the core income generating activity to related parties or to third party service providers as long as the outsourced activities are performed in the UAE and the company retains the ability to control the outsourced activities. Effectively, this means that a company can use UAE based (i) employees and (ii) physical assets (including premises) of third parties to satisfy the Economic Substance Test. Activities that are not CIGAs (e.g. back office functions) can be outsourced to third party service providers that are outside the UAE without adversely impacting the economic substance of the company in the UAE.

❖ Reporting Requirements

Only companies that earn income from a Relevant Activity during the relevant financial period and that are not exempt from the Regulations are required to demonstrate economic substance in the UAE and file an Economic Substance Report.

The Report shall include the following information and documents:

1. The type of Relevant Activity conducted by it;

2. The amount and type of the income from the Relevant Activity;

3. The amount and type of operating expenses and assets in respect of the Relevant Activity;

4. The location of the place of its business and, if applicable, plant, property or equipment used for the Relevant Activity in the UAE;

5. The number of full-time employees with qualifications and the number of personnel who are responsible for carrying on its Relevant Activity;

6. The Core Income-Generating Activity in respect of the Relevant Activity being carried out by it;

7. Financial statements of the Company;

8. A Declaration as to whether or not it satisfied the ESR Test;

9. In the case of a Relevant Activity being an Intellectual Property Business, a declaration as to whether or not it is a High-Risk IP licensee.

❖ Penalties and implications of non-compliance

The FTA may impose various administrative penalties for non-compliance:

Failure to submit Notification - AED 20’000

Failure to submit ESR Report - AED 50’000

Failure to meet ESR Test - AED 50’000 and exchange of information with the relevant foreign authorities

Provision of inaccurate information - AED 50’000

Failure to meet ESR Test for the second reporting year - AED 400’000 and exchange of information with the relevant foreign authorities

In case the economic substance requirements have not been met, the UAE competent authority, pursuant to the international agreements, will provide information relating to the company to the country in which the parent company, the ultimate parent company and the ultimate beneficial owner reside.

The UAE Ministry of Finance will exchange information with relevant Foreign Competent Authorities pursuant international agreement, treaty or arrangement in the following circumstances:

- Entity fails to meet ESR Test;

- Entity is a High-Risk IP Business;

- Entity claims to be a tax resident in a jurisdiction outside the UAE;

- UAE Branch of a foreign entity that claims to be subject to tax in a jurisdiction outside the UAE.

❖ What are the next steps?

Licensees (including exempted) are required to submit a Notification in accordance with the provisions of the ESR Regulations on the Ministry of Finance Portal until June 30, 2022.

Licensees that fall within the scope of the Regulations, shall start preparing information and documents for satisfying the ESR Test for the financial year ended December 31, 2021.

Companies registered in the UAE and conducting Relevant Activities should review their level of economic substance in order to be compliant with the substance requirements. Companies that undertake the Relevant Activities, but are managed remotely, shall reassess their operations in order to be compliant with the economic substance requirements.

INTRODUCTION

A new UAE labour and employment law, containing many comprehensive revisions, became effective on February 2, 2022. Federal Decree-Law No. 33 of 2021 on the Regulation of Labour Relations and Cabinet Resolution No. 1 of 2022 Concerning the Executive Regulations (hereinafter the “New Law”), replaced Federal Law No. 8 of 1980. This “Alert” highlights certain key changes which are implemented under the New Law. Your company should be aware of these changes and the fines that may be imposed by the New Law for failure to comply.

IMPORTANT NOTE

Before February 1, 2023, all employers in the private sector must replace their current employment contracts with contracts which comply with the New Law.

KEY CHANGES:

•  Abolition of Unlimited Contracts

Unlimited employment contracts (with an indefinite term) must be converted into fixed-term employment contracts before February 1, 2023. The fixed-term employment contracts cannot exceed 3 years, which may be extended for the same or a lesser period.

• Work Models

The New Law recognizes multiple “work models” of employment, including full-time, part-time, temporary, flexible, remote and job sharing models.

•  Termination During Probation Period

 (a) Termination by Employer

Employers may terminate employment during the probationary period (maximum remains 6 months) by giving no less than 14 days’ written notice.

 (b) Termination by Employee

If the employee is joining another employer in the UAE – the employee must provide a minimum notice of 30 days, and the new employer in the UAE must compensate the former employer for the recruitment costs incurred by the employer in relation to the employee; or

If the employee is leaving the UAE - the employee must provide a minimum notice of 14 days, with no obligation in relation to recruitment costs. However, if the employee returns to the UAE for purposes of employment within 3 months after his/her departure, the new employer must compensate the former employer for the recruitment costs incurred by the employer in relation to the employee.

•  Notice Period for Termination of Current Unlimited Employment Contracts before February 1, 2023

Either party may terminate the employment contract by giving the other a notice in writing, provided that the notice period is not less than 30 days and not in excess of 90 days.

•  Reasons for Termination of Employment Contracts

The New Law expanded the reasons for termination of employment contracts.

•  Summary Dismissal

The New Law specifically requires an investigation with written fundings and 2 written warnings to be given to an employee before dismissing the employee for failure to perform the employee’s duties.

•  Severance Pay Calculation for Full-Time Model of Work

Severance pay will vary depending on the nationality of the employee and work model of employment.

•  Payment of Worker Entitlements at the Termination of the Employment Contract

The employer shall pay the employee all his/her wage and other entitlements within 14 days after the termination of the employment contract.

•  Fines

Fines of up to AED 1,000,000 may be imposed for breaches by the employer of the New Law, which may be multiplied in cases where numerous employees are affected.

Please be informed that the above list and description of significant revisions is not exhaustive. There are other changes under the New Law related to non-compete restrictions, retention of employment records, resignation without notice, employee entitlements such as annual leave and other types of leaves, etc.

*The legislative regime in the DIFC (save for certain laws such as criminal and immigration) is independent from the UAE. The DIFC has its own laws and regulations which govern commerce within the DIFC supported by its own independent English language common law court system.

*The employer or employee may terminate the indefinite term contract entered into before the entry into force of the New Law for a legal cause by giving the other 30 days’ prior written notice if the period of service is less than 5 years, or 60 sixty days’ prior written notice if the period of service exceeds 5 years, or 90 days’ prior written notice, if the period of service exceeds 10 years.

Disclaimer: This Alert should not be considered as a substitute for professional advice and counseling specifically to your company and taking into account subsequent changes in laws or circumstances.

Council of Ministers: based on

• Constitution;
• Federal Law No. (1) of 1972 "On the Competence of Ministries and the Powers of Ministers" (with amendments and additions);
• Federal Decree-Law No. (13) of 2016 “On the Establishment of the Federal Tax Service” (with amendments and additions);
• Federal Law No. (7) of 2017 "On Tax Procedures" (with amendments and additions);

On the proposal of the Minister of Finance and approval by the Council of Ministers

DECIDED:

Article 1 - Basic concepts

For the purposes of this Regulation, the following terms and concepts are used:

Article (2) Purposes of the regulation

This Regulation establishes the requirements and conditions for determining a person as a tax resident in the Country.

Article (3) Legal entity

A legal entity is considered a tax resident of the Country in any of the following two cases:

• A legal entity has been established, registered or recognized in accordance with the current legislation of the Country, with the exception of a registered branch of a foreign legal entity.
• The legal entity is recognized as a tax resident in accordance with the current tax legislation of the UAE.

Article (4) Individual

An individual is considered a tax resident if one of the following conditions is met:

1. If his main place of residence and the center of his economic and personal interests are located in the Country or meet certain criteria and conditions, which are determined / established by the Minister.
2. If he has been physically in the Country for (183) one hundred and eighty

three days or more within (12) twelve consecutive months.

3.  If he is physically present in the Country for (90) ninety days or

more than, for (12) twelve consecutive months and holds the citizenship of the Country or holds a valid residence permit or holds the citizenship of any of the

Member States of the Cooperation Council for the Arab States of the Gulf and meets any of the following requirements:

a. Has a permanent residence.

b. Has a job or business in the Country.

Article (5) Certificate of Tax Residence

• A person who is a tax resident in accordance with articles (3) and (4) of this Resolution may request a tax resident certificate from the Federal Tax Service.
• An application for a Tax Resident Certificate in accordance with paragraph 1 of this Article shall be submitted in the form and method approved by the Federal Tax Service.
• If the person's application satisfies the requirements of articles (3) and (4) of this Regulation and was submitted in accordance with paragraph 2 of this article, the Federal Tax Service may satisfy the application and issue a tax resident certificate to the person.

Article (6) International agreements

• If the provisions of an international agreement establish other conditions for recognizing a person as a tax resident, then the provisions of the international agreement shall apply.
• The decision of the minister approves the form and procedure for issuing tax residency certificates in accordance with international agreements.

Article (7) Powers of the Federal Tax Service

• The Federal Tax Service for the purposes of this Decree may request any information, data or documents relating to any person from any state body of the Country.
• All state authorities of the Country are required to fully cooperate and cooperate with the Federal Tax Service for the purposes of this Regulation, including the provision of any information, data and documents relating to a person, at the request of the Federal Tax Service.

Article (8) Executive decisions

1. The Minister will determine the conditions, procedures and standards for the application of this Regulation.
2. The Federal Tax Service is empowered to issue clarifications and

instructions on the application of this Regulation.

Article (9) Publication of the regulation and entry into force

This resolution is subject to publication in the Official Gazette and comes into force on March 01, 2023.

Mohammed bin Rashid Al Maktoum 

Prime Minister

Council of Ministers: based on

• Constitution;
• Federal Law No. (1) of 1972 "On the Competence of Ministries and the Powers of Ministers" (with amendments and additions);
• Federal Decree-Law No. (13) of 2016 “On the Establishment of the Federal Tax Service” (with amendments and additions);
• Federal Law No. (7) of 2017 "On Tax Procedures" (with amendments and additions);

On the proposal of the Minister of Finance and approval by the Council of Ministers

DECIDED:

Article 1 - Basic concepts

For the purposes of this Regulation, the following terms and concepts are used:

Article (2) Purposes of the regulation

This Regulation establishes the requirements and conditions for determining a person as a tax resident in the Country.

Article (3) Legal entity

A legal entity is considered a tax resident of the Country in any of the following two cases:

• A legal entity has been established, registered or recognized in accordance with the current legislation of the Country, with the exception of a registered branch of a foreign legal entity.
• The legal entity is recognized as a tax resident in accordance with the current tax legislation of the UAE.

Article (4) Individual

An individual is considered a tax resident if one of the following conditions is met:

1. If his main place of residence and the center of his economic and personal interests are located in the Country or meet certain criteria and conditions, which are determined / established by the Minister.
2. If he has been physically in the Country for (183) one hundred and eighty

three days or more within (12) twelve consecutive months.

3.  If he is physically present in the Country for (90) ninety days or

more than, for (12) twelve consecutive months and holds the citizenship of the Country or holds a valid residence permit or holds the citizenship of any of the

Member States of the Cooperation Council for the Arab States of the Gulf and meets any of the following requirements:

a. Has a permanent residence.

b. Has a job or business in the Country.

Article (5) Certificate of Tax Residence

• A person who is a tax resident in accordance with articles (3) and (4) of this Resolution may request a tax resident certificate from the Federal Tax Service.
• An application for a Tax Resident Certificate in accordance with paragraph 1 of this Article shall be submitted in the form and method approved by the Federal Tax Service.
• If the person's application satisfies the requirements of articles (3) and (4) of this Regulation and was submitted in accordance with paragraph 2 of this article, the Federal Tax Service may satisfy the application and issue a tax resident certificate to the person.

Article (6) International agreements

• If the provisions of an international agreement establish other conditions for recognizing a person as a tax resident, then the provisions of the international agreement shall apply.
• The decision of the minister approves the form and procedure for issuing tax residency certificates in accordance with international agreements.

Article (7) Powers of the Federal Tax Service

• The Federal Tax Service for the purposes of this Decree may request any information, data or documents relating to any person from any state body of the Country.
• All state authorities of the Country are required to fully cooperate and cooperate with the Federal Tax Service for the purposes of this Regulation, including the provision of any information, data and documents relating to a person, at the request of the Federal Tax Service.

Article (8) Executive decisions

1. The Minister will determine the conditions, procedures and standards for the application of this Regulation.
2. The Federal Tax Service is empowered to issue clarifications and instructions on the application of this Regulation.

Article (9) Publication of the regulation and entry into force

This resolution is subject to publication in the Official Gazette and comes into force on March 01, 2023.

Mohammed bin Rashid Al Maktoum 

Prime Minister

Dear Valued Customer, 

We trust this email finds you well.

We would like to remind you that in 2019 the UAE introduced the Economic Substance Regulations (ESR). The ESR requires UAE-registered entities that undertake certain activities (“Relevant Activities”) to notify the UAE Ministry of Finance on an annual basis of such activities and, if required, demonstrate an adequate “economic presence” in the UAE.

For additional clarifications please refer to our Brief and ESR Regulations, as attached, and the Guidelines and Templates available on the Ministry of Finance website. 

Entities undertaking Relevant Activity are required to submit the ESR Notification until 30th June 2023 for the financial year ending December 31, 2022. Notification must be submitted electronically via the Ministry of Finance Portal. 

ALL DDA REGISTERED COMPANIES ARE REQUIRED TO SUBMIT FINANCIAL AUDIT REPORTS MANDATORILY.

HAVE YOU SUBMITED YOUR AUDITED FINANCIALS YET?

WHAT WE DO?

Our areas of expertise include but are not limited to the following:

- Accounting, Bookkeeping & Accounting Review

- Taxation

- Legislative requirements of the country (ESR, UBO filing etc.)

- Financial Audits - External & Internal

- Business Valuation

- Feasibility study

- Company formation

Through the Circular 421 - Submission of Audited Financial Statements in compliance with DDA Private Companies Regulations 2016, the FZ-LLCs and branch offices ("Company") are required to prepare and submit their Audited Financial Statement and Annual Return each financial year (collectively referred to as " The Audited Financial Statements")

The Free Zones that fall under this regulation are:

1. Dubai Industrial City
2. Dubai Studio City
3. Dubai Internet City
4. Dubai Media City
5. Dubai Outsource City
6. Dubai Production City
7. Dubai Knowledge Park
8. Dubai International Academic City
9. Dubai Science Park
10. In5
11. Dubai Quarters
12. Dubai Design District

[email protected]

www.myriadoverseas.ae

As of August 1, 2023, the Ministry of Finance has declared the implementation of Cabinet Decision No. (74) for the year 2023, outlining the Executive Regulations of Federal Decree-Law No. (28) of 2022 concerning tax procedures.

This article discusses requirements for maintaining accounting records.

Keeping Records

a. Records and books relating to the business, containing documentation of payments and receipts, purchases and sales, revenues and expenditures, and any other information as mandated by the Tax Law or any other relevant laws. This includes, but is not limited to:

(1) Balance sheets and profit and loss accounts.

(2) Documentation of wages and salaries.

(3) Records pertaining to fixed assets.

(4) Inventory records and statements, specifying quantities and values at the conclusion of each applicable Tax Period, along with records of stock counts associated with inventory statements.

b. All documentation substantiating the entries in the accounting records and commercial books, encompassing, but not restricted to:

(1) Correspondence, invoices, licenses, and contracts associated with the business.

(2) Documents containing comprehensive information about any choices, assessments, determinations, or calculations made by a taxpayer concerning their business's tax matters, including the underlying basis or method utilized for such assessments, determinations, or calculations.

Apart from the accounting records and commercial books, the Authority reserves the right to seek any additional information necessary to verify a person's tax obligations, including their obligation to register for tax purposes. This verification may involve examining a set of auditable documents.

Period of Record Keeping

The obligation to retain and maintain all accounting records, commercial books, and information lies in a manner that allows the Authority or any authorized employee to verify the tax obligations effectively.

a. Taxable Persons must retain and maintain their accounting records, commercial books, and information for a period of five (5) years from the end of the Tax Period to which they pertain.

b. For all individuals and entities other than Taxable Persons, the obligation to retain and maintain relevant documents extends for a period of five (5) years from the end of the calendar year in which the respective document was created.

c. As for real estate records, the retention and maintenance period required is seven (7) years from the end of the calendar year in which the particular document was created.

In addition to the timeframes mentioned previously, the Person must retain books and records for the following additional periods, depending on specific situations:

a. In the case of a dispute between the Person and the Authority concerning the Person's Tax obligations, the records must be retained for an extra period of (4) four years or until the dispute is finally settled, whichever is later.

b. If the Person is currently undergoing an ongoing Tax Audit, an additional period of (4) four years must be added to the retention period.

c. If the Authority has notified the Person of its intention to conduct a Tax Audit, the Person should retain the records for an additional period of (4) four years.

d. If a Taxable Person submits a Voluntary Disclosure in the fifth year after the relevant Tax Period, an additional period of (1) one year starting from the date of submission of the disclosure is required for retaining the records.

The Legal Representative is responsible for retaining the books and records of the represented Person for a period of (1) one year from the date when the legal representation ceases to be in effect.

Methods of keeping Accounting Records & Commercial Books.

The requirement to maintain accounting records and commercial books can be fulfilled through either of the following methods:

a. Creating a record and preserving the original documents that substantiate the entries in the record.

b. Creating a record and retaining the information from the original documents, provided that the following conditions are met:

(1) The information contained in the record exactly matches the data in the original document, and it remains accessible during a Tax audit by the authority.

(2) The information is retained or stored as either photocopies or electronic copies, ensuring that an easily readable copy can be reproduced if requested by the Authority within the time period specified.

(3) The information is retained or stored in a manner that allows the Authority to verify the Person's Tax obligations.

Furthermore, the Authority reserves the right to define the guidelines for maintaining the information present in accounting records and commercial books, and may impose reasonable requirements to ensure that the information remains available as if the original records themselves were preserved.

Language

The Authority has the option to acknowledge data, information, records, and any other documents pertaining to any Tax, even if they are submitted in English. However, the Authority reserves the right to request the Person to translate some or all of these materials into Arabic at its discretion.

When translating any Tax Return, data, information, records, documents, or other books into Arabic, the translation must be carried out in accordance with the regulations governing translation in the State. The approved translation should be submitted to the Authority within the timeframe specified by the Authority.

How can Myriad Group help?

Utilizing outsourced accounting service is a highly beneficial approach that enables companies to reduce expenses, enhance productivity, tap into specialized expertise, expand their operations, and focus on core strengths. By partnering with reputable accounting firms such as Myriad Group, businesses can ensure the effectiveness, efficiency, and adherence to local laws and regulations in their financial management processes. Contact our team of seasoned finance and Tax professionals who can assist to maintain your books of accounts seamlessly.

[email protected]

www.myriadoverseas.ae

According to the Commercial Companies Federal Law, No.32 of 2021, all mainland UAE companies must undergo financial account audits. Additionally, companies in the UAE must retain their financial records for a minimum of five years to adhere to regulatory obligations.

In contrast, free zone companies do not always require audits or mandated audit report submissions. However, specific entities within free zones, like free zone companies (FZCO) and free zone establishments (FZE), may be subject to compulsory audits.

Even if a free zone entity is not obligated to submit an audit report, it's prudent for the company to prepare one for internal use. This is because immigration authorities may request the audit report in the future for verification purposes. Therefore, it's advisable for free zone companies to maintain organized financial records, prepared for potential inspection by relevant authorities.

Certain free zone companies, including Dubai Multi Commodities Centre (DMCC), Dubai World Central (DWC), Dubai Airport Free Zone (DAFZA), Jebel Ali Free Zone (JAFZA), Dubai Silicon Oasis (DSO), and Dubai International Financial Center (DIFC), must submit audited financial statements to respective authorities.

Foreign companies operating in the UAE are obligated to annually submit audit reports and audited financial statements for their registered branches in the country.

Companies undergoing liquidation must furnish audited financial statements for the liquidator's audit report preparation.

Additionally, several government authorities, including ministerial departments, municipalities, and insurance authorities, may require companies to provide audited financial statements.

Under the Corporate Tax (CT) Law, the Federal Tax Authority (FTA) may request taxpayers to submit financial statements, which are used to calculate taxable income. Taxpayers are generally expected to prepare and maintain financial statements. Decision No. 82 stipulates that taxpayers with revenue exceeding AED 50 million during the tax period and benefiting from a zero-rate free zone regime (Qualifying Free Zone Persons) must have their financial statements audited by external auditors.

If a taxpayer belongs to a tax group comprising two or more UAE tax resident companies, the parent company is responsible for consolidating the financial statements of each subsidiary company and eliminating transactions between group companies. All subsidiary companies should have the same financial year and adhere to accepted accounting standards in the UAE, typically using International Financial Reporting Standards (IFRS).

Taxpayers typically prepare financial statements for a 12-month period, aligning with the usual tax period (e.g., from 1 January to 31 December). However, a shorter or longer tax period may be used based on specific circumstances. The accrual basis of accounting is generally employed to determine taxable income, except for specific categories of individual entrepreneurs and small businesses that qualify to use the cash basis of accounting.

The CT Law mandates that taxpayers retain all documents and records supporting the information in the CT return, including financial statements, for at least seven years following the end of the relevant tax period.

While the audit of financial statements was previously required only in certain free zones, an increasing number of free-zone authorities issuing trade licenses now make annual external audits a standard requirement. With the implementation of corporate tax in the UAE, more companies may need to consider conducting an annual external audit of their financial statements.

Companies should also consider preparing and maintaining audited financial statements for the financial year before the corporate tax comes into effect. This will allow them to have a formal review of their opening balance sheet for corporate tax purposes, ensuring compliance with the new tax regulations.

At Myriad group, we offer hassle-free auditing services and have served clients in various industries with diverse operations. Contact us today for your auditing, accounting, or tax consultancy needs.

[email protected]

www.myriadoverseas.ae

On January 31, 2022, the UAE announced the introduction of Corporate Tax effective for new financial years

commencing on or after June 1, 2023.

What is Corporate Tax?

Corporate Tax is a direct tax levied on the net income or profit of corporations and other businesses.

Registration for CT purposes

All UAE registered entities (with certain exceptions) must register for CIT, maintain proper accounting records, and file tax returns, including free zone companies.

Effective March 1, 2024, the application for registration for Corporate Tax purposes must be submitted to the Federal Tax Authority (FTA) in accordance with the deadlines listed below. The Tax Authorities announced that failure to submit the registration application timely will lead to penalties of AED 10’000.

Corporate Tax Registration Timelines

1. Resident and non-Resident Companies

• The prescribed deadlines for resident companies incorporated or otherwise established or recognised in the UAE prior to March 1, 2024, are based on the month their license was issued:

Month of license issuance,                                 Deadline for submitting a Corporate 

application irrespective of                                  Tax registration

year of issuance                             

January 1 – February 28/29                                May 31,2024

March 1 – April 30                                                 June 30, 2024

May                                                                            July 31, 2024

June                                                                           August 31,2024

July                                                                             September 30, 2024

August 1 – September 30                                      October 31, 2024

October 1 – November 30                                      November 30, 2024

December                                                                   December 31, 2024

Where a juridical person has                                 Within 3 (three) months

applied for a license, but it                                    from March 1, 2024

does not have a license by March 1, 2024                              

• The prescribed deadlines for resident and non-resident companies incorporated or otherwise established or recognised in the UAE on or after March 1, 2024, shall be determined as follows:

❖ A UAE Company that is incorporated or established in the UAE on or after March 1, 2024, shall submit the

application for CT registration within 3 months from the date of incorporation, establishment, or recognition.

❖ Where a UAE Company holds multiple licenses, it must use the License with the earliest date, as a reference for determining the deadline for submitting the CT registration application.

❖ Companies that are incorporated or established under the laws of a foreign jurisdiction on or after March 1, 2024, but are effectively managed and controlled in the UAE shall submit the application for CT registration within 3 months from the end of respective financial year of the foreign Company.

❖ Companies that are incorporated or established under the laws of a foreign jurisdiction and registered a branch in the UAE on or after March 1, 2024, shall submit the application for CT registration within 9 months from the existence of the branch.

❖ Companies that are incorporated or established under the laws of a foreign jurisdiction and established a nexus (i.e., connection) in the UAE prior to March 1, 2024, shall submit the application for CT registration on or before May 31, 2024.

❖ Companies that are incorporated or established under the laws of a foreign jurisdiction and established a nexus (i.e., connection) in the UAE on or after March 1, 2024, shall submit the application for CT registration within 3 months from the date of such nexus establishment.

2. Resident and non-Resident Natural Persons which conduct a business or business activity in the UAE in excess of AED 1’000’000 during a Gregorian calendar year (as distinguished from a financial year) (2024 onwards)

The prescribed deadlines for submitting an application for CT registration to the FTA, are as follows:

➢ UAE Residents: on or before March 31 of the subsequent Gregorian calendar year (i.e., March 31, 2025, for the Gregorian calendar year 2024).

➢ Non-UAE residents: within 3 months from the date the individual became a UAE taxpayer (i.e., within 3 months from the date the turnover from a business or business activity conducted in the UAE exceeds AED 1’000’000).

Disclaimer

This document does not constitute legal or tax advice and should not be used as a substitute for consultation with professional legal or tax advisors.

Qualifying Group Relief

Corporate Tax Guide | CTGQGR1

April 2024

Link for the full version of Corporate Tax Guide from FTA

- UAE ESR Background

In 2019 the UAE introduced the Economic Substance Regulations (ESR) to honour its commitment as a member of the OECD Inclusive Framework on Base Erosion and Profit Shifting (BEPS), and in response to a review of the UAE tax framework by the European Union (EU) which resulted in the UAE being included on the EU list of non-cooperative jurisdictions for tax purposes.

The UAE Cabinet of Ministers issued Cabinet Resolution No. (31) of 2019 concerning Economic Substance Regulations (the “Resolution (31)”). On 10 August 2020 amendments were introduced to Resolution (31) by the Cabinet of Ministers by Resolution No. (57) of 2020 which repealed and replaced Resolution (31) (the “Regulations”).

The Regulations require UAE entities that undertake certain activities to maintain an adequate “economic presence” in the UAE and demonstrate that they have effective substance in the UAE jurisdiction. UAE Authorities wish to ensure that the jurisdiction does “not facilitate structures or arrangements aimed at attracting profits which do not reflect real economic activity in the jurisdiction”.

 - Relevant Activities

The ESR Regulations apply to all UAE mainland and Free Zone companies carrying out and deriving income1 from 9 relevant activities (the “Relevant Activities”) listed in the Regulation:

✓ Banking Business

✓ Shipping Business

✓ Insurance Business

✓ Holding Company Business

✓ Investment Fund Management Business

✓ Intellectual Property Business

✓ Lease-Finance Business

✓ Distribution and Service Centre Business

✓ Headquarters Business

Entities are expected to use a ‘substance over form’ approach to determine whether or not they undertake a Relevant Activity and as a result will be considered Licensees for the purposes of the ESR Regulations, irrespective of whether such Relevant Activity is included in the trade license or permit of the entity. Any form of passive income from a Relevant Activity would bring the entity within scope of the ESR Regulations.

Entities undertaking Relevant Activities are required to submit notifications (the “Notification”) each year, meet ESR test (the “ESR Test”) and file ESR Report (the “Report”).

 - Key Aspects

➢ Licensee is defined as a juridical person or an unincorporated partnership, registered in the UAE, carrying out a Relevant Activity. Hence, natural persons, sole proprietors, trusts and foundations are not within the scope of the Regulations anymore and don’t need to comply with it;

➢ A branch of a foreign entity registered in the UAE that carries out a Relevant Activity, is required to comply with the ESR Regulations, unless the relevant income of such branch is subject to tax in a jurisdiction outside the UAE;

➢ The Regulations exclude certain forms of entities2 from the requirement to meet the ESR Test:

o an Investment Fund;

o an entity that is tax resident in a jurisdiction other than the UAE;

o an entity wholly owned by the UAE residents, provided that entity is not part of a multinational enterprise group and entity carries activities only in the UAE;

o branch of a foreign entity the relevant income of which is subject to tax in a jurisdiction other than the UAE. It should be noted that any entity that pays withholding tax in a foreign jurisdiction will not be considered as tax resident in a foreign jurisdiction other than the UAE solely on that basis.

1 All income of the entity generated from a relevant activity for which the Licensee needs to demonstrate economic substance in the UAE, including accrued income and income generated by the Licensee outside of the UAE.

2 Government entities are no longer exempted under the Regulations.

➢ Connected person is an entity that is part of the same group as the licensee. Group is a two or more entities related through ownership or control such that they are required to prepare consolidated financial statements for financial reporting purposes under the accounting standards applicable thereto.

➢ Licensee is considered to be engaged in a Distribution and Service Centre Business if it:

o Purchases goods from a foreign group company and resells those goods; or

o Provides services to foreign connected persons.

➢ Where an entity carries out a Relevant Activity during the course of a liquidation or winding up process, the entity, its liquidators (or equivalent) must ensure that the entity continues to satisfy all its obligations under the ESR Regulations.

➢ Although a business may determine that it does not carry on a Relevant Activity and is therefore not within scope of the ESR Regulations, the Regulatory Authority may request information from the business to demonstrate that position.

➢ All licensees are required to file a notification electronically on the Ministry of Finance (the “MOF”) portal within six months from the financial year end.

➢ The Federal Tax Authority (the “FTA”) has been appointed as the National Assessing Authority is authorized to undertake assessments on ESR Test, impose penalties, hear appeals, etc.

- ESR Test

In order to comply with the ESR requirements, the following ESR Test criteria must be met:

✓ conduct income generating activity in the UAE (CIGA);

✓ be “directed and managed” in the UAE - frequent meetings of board of qualified directors recorded in written minutes which shall be kept in the UAE;

✓ have adequate number of qualified full-time employees, who are physically present in the UAE - depending on the activity, company needs to demonstrate sufficient number of employees for operations of the company;

✓ have adequate level of expenditure in the UAE;

✓ have adequate operating expenditure in the UAE;

✓ have physical assets (e.g. business premises leased or owned) in the UAE.

In order to meet “directed and managed” test, Board of Directors shall meet in the UAE with adequate frequency and quorum physically present. Additionally, all strategic decisions and minutes of meeting must be recorded and kept in the UAE. Determination as to whether an adequate number of meetings are held and attended in the UAE will be dependent on the level of Relevant Activity being carried out by the company.

The Guidance further clarifies that “it is not intention of the Economic Substance Regulations to impose requirements on businesses to engage more employees than is actually required by the business or incur expenditures beyond its needs, or beyond any existing requirements in relation to employees, provided that the business is engaged in genuine business activity and carrying out a core income generating activity in the UAE with the employees, expenditures and premises it has.”

Holding companies shall satisfy Economic Substance requirements if they submit documents, records or information when requested by the authorities and have adequate employees and premises for holding and managing the company.

A High-Risk IP entity must comply with increased reporting requirements and higher evidentiary threshold of the ESR Test.

Company can outsource or delegate the core income generating activity to related parties or to third party service providers as long as the outsourced activities are performed in the UAE and the company retains the ability to control the outsourced activities. Effectively, this means that a company can use UAE based (i) employees and (ii) physical assets (including premises) of third parties to satisfy the Economic Substance Test. Activities that are not CIGAs (e.g. back office functions) can be outsourced to third party service providers that are outside the UAE without adversely impacting the economic substance of the company in the UAE.

- Reporting Requirements

Only companies that earn income from a Relevant Activity during the relevant financial period and that are not exempt from the Regulations are required to demonstrate economic substance in the UAE and file an Economic Substance Report.

The Report shall include the following information and documents:

1. The type of Relevant Activity conducted by it;

2. The amount and type of the income from the Relevant Activity;

3. The amount and type of operating expenses and assets in respect of the Relevant Activity;

4. The location of the place of its business and, if applicable, plant, property or equipment used for the Relevant Activity in the UAE;

5. The number of full-time employees with qualifications and the number of personnel who are responsible for carrying on its Relevant Activity;

6. The Core Income-Generating Activity in respect of the Relevant Activity being carried out by it;

7. Financial statements of the Company;

8. A Declaration as to whether or not it satisfied the ESR Test;

9. In the case of a Relevant Activity being an Intellectual Property Business, a declaration as to whether or not it is a High-Risk IP licensee.

- Penalties and implications of non-compliance

The FTA may impose various administrative penalties for non-compliance:

Failure to submit Notification - AED 20’000

Failure to submit ESR Report - AED 50’000

Failure to meet ESR Test - AED 50’000 and exchange of information with the

relevant foreign authorities

Provision of inaccurate information - AED 50’000

Failure to meet ESR Test for the second reporting year - AED 400’000 and exchange of information with the relevant foreign authorities.

In case the economic substance requirements have not been met, the UAE competent authority, pursuant to the international agreements, will provide information relating to the company to the country in which the parent company, the ultimate parent company and the ultimate beneficial owner reside.

The UAE Ministry of Finance will exchange information with relevant Foreign Competent Authorities pursuant international agreement, treaty or arrangement in the following circumstances:

- Entity fails to meet ESR Test;

- Entity is a High-Risk IP Business;

- Entity claims to be a tax resident in a jurisdiction outside the UAE;

- UAE Branch of a foreign entity that claims to be subject to tax in a jurisdiction outside the UAE.

 - What are the next steps?

Licensees (including exempted) are required to submit a Notification in accordance with the provisions of the ESR Regulations on the Ministry of Finance Portal until June 30, 2024.

Licensees that fall within the scope of the Regulations, shall start preparing information and documents for satisfying the ESR Test for the financial year ended December 31, 2023.

Companies registered in the UAE and conducting Relevant Activities should review their level of economic substance in order to be compliant with the substance requirements. Companies that undertake the Relevant Activities, but are managed remotely, shall reassess their operations in order to be compliant with the economic substance requirements.

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On January 31, 2022, the UAE announced the introduction of Corporate Tax effective for new financial years commencing on or after June 1, 2023.

I. What is Corporate Tax?

Corporate Tax is a direct tax levied on the net income or profit of corporations and other businesses.

II. Applicability

All UAE registered entities (with certain exceptions) must register for CIT, maintain proper accounting records, and file tax returns, including free zone companies.

III. Corporate Tax Rates

 0%: applied on net income of AED 375’000 or below.

 9%: applied on net income above AED 375’000.

 A top-up tax rate of at least 15% will be applied to MNEs (multinational corporations that operate in more than one country through foreign subsidiaries, branches, or other forms of presence/registration) that have consolidated global revenues more than EUR 750M (AED 3.15B).

IV. Analysis of business acvity “Investment in Commercial Enterprises”” for CT purposes

UAE Companies which are engaged in the holding activity shall be subject to corporate tax at the rate of either 9% or 0% Free Zone rate, depending on whether the company is established in a free zone or in mainland UAE.

However, dividends and capital gains earned from domestic and foreign shareholdings would generally be exempt from corporate tax, subject to certain conditions.

Disclaimer

This document does not constitute legal or tax advice and should not be used as a substitute for consultation with professional legal or tax advisors.

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On January 31, 2022, the UAE announced the introduction of Corporate Tax effective for new financial years commencing on or after June 1, 2023.

What is Corporate Tax?

Corporate Tax is a direct tax levied on the net income or profit of corporations and other businesses.

Registration for CT purposes

All UAE registered entities (with certain exceptions) must register for CIT, maintain proper accountig records, and file tax returns, including free zone companies.

Effective March 1, 2024, the application for registration for Corporate Tax purposes must be submitted to the Federal Tax Authority (FTA) in accordance with the deadlines listed below. The Tax Authorities announced that failure to submit the registration application timely will lead to penalties of AED 10’000.

Corporate Tax Registration Timelines

1. Resident and non-Resident Companies

• The prescribed deadlines for resident companies incorporated or otherwise established or recognised in the

UAE prior to March 1, 2024, are based on the month their license was issued:

• The prescribed deadlines for resident and non-resident companies incorporated or otherwise established or recognised in the UAE on or after March 1, 2024, shall be determined as follows:

 A UAE Company that is incorporated or established in the UAE on or after March 1, 2024, shall submit the application for CT registration within 3 months from the date of incorporation, establishment, or recognition.

 Where a UAE Company holds multiple licenses, it must use the License with the earliest date, as a reference for determining the deadline for submitting the CT registration application.

 Companies that are incorporated or established under the laws of a foreign jurisdiction on or after March 1, 2024, but are effectively managed and controlled in the UAE shall submit the application for CT registration within 3 months from the end of respective financial year of the foreign Company.

 Companies that are incorporated or established under the laws of a foreign jurisdiction and registered a branch in the UAE on or after March 1, 2024, shall submit the application for CT registration within 9 months from the existence of the branch.

 Companies that are incorporated or established under the laws of a foreign jurisdiction and established a nexus (i.e., connection) in the UAE prior to March 1, 2024, shall submit the application for CT registration on or before May 31, 2024.

 Companies that are incorporated or established under the laws of a foreign jurisdiction and established a nexus (i.e., connection) in the UAE on or after March 1, 2024, shall submit the application for CT registration within 3 months from the date of such nexus establishment.

2. Resident and non-Resident Natural Persons which conduct a business or business activity in the UAE in excess of AED 1’000’000 during a Gregorian calendar year (as distinguished from a financial year) (2024 onwards)

The prescribed deadlines for submitting an application for CT registration to the FTA, are as follows:

 UAE Residents: on or before March 31 of the subsequent Gregorian calendar year (i.e., March 31, 2025, for the Gregorian calendar year 2024).

 Non-UAE residents: within 3 months from the date the individual became a UAE taxpayer (i.e., within 3 months from the date the turnover from a business or business activity conducted in the UAE exceeds AED 1’000’000).

Disclaimer

This document does not constute legal or tax advice and should not be used as a substute for consultaon with professional legal or tax advisors.

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Russia and the UAE have signed an intergovernmental agreement on the elimination of double taxation with respect to taxes on income and capital and the prevention of tax avoidance and evasion.

The signing took place in Abu Dhabi as part of the first meeting of the Russian-UAE financial dialogue with the participation of Russian Finance Minister Anton Siluanov and UAE Minister of State for Finance Mohammed bin Hadi Al Husseini.

After ratification by both parties, the agreement will enter into force on January 1, 2026.

The provisions of the agreement apply to income and corporate taxes in the UAE, as well as profit tax, personal income tax, property tax of organizations; property tax of individuals in the Russian Federation. In general, the provisions of the agreement correspond to the standard approaches to international tax treaties that Russia adheres to at the present stage.

Thus, the profit of a company from one country is taxed only in that country, unless it conducts business in another country through a permanent establishment. If the company operates in another country, then only that part of the profit that is related to this establishment may be taxed. When determining the profit of a permanent establishment, a deduction is allowed for expenses incurred for the implementation of business activities, including management and general administrative expenses.

Dividends paid by a company from one country to a resident of another country may be taxed in the recipient's country. However, these dividends may also be taxed in the country where the issuing company is located. In this case, if the recipient of dividends is a resident of another country, the tax should not exceed 10% of the amount of dividends. These rules do not affect taxes on the profit of the company from which the dividends are paid.

Dividends arising in one of the countries participating in the agreement are exempt from tax in another country if they are paid to the state or its financial and investment institutions. On the Russian side, this applies in particular to the Russian government, regional authorities, the Bank of Russia, the Pension and Social Insurance Fund, the Russian Direct Investment Fund, VEB.RF, Rostec, Rusnano, Rosatom, Roscosmos and any organization that is wholly or indirectly owned by the Russian government or a constituent entity of the Russian Federation.

If a company receives profit or income from another state of which it is not a resident, then that state cannot levy any taxes on dividends paid by this company, except in cases where they are paid to a resident of that state.

Interest and royalties will also be taxed at a rate of 10% and will be exempt from tax if they are paid to another state or its financial and investment institutions.

Wages, salaries and other similar remuneration are taxable only in the country of which the recipient is a resident, unless the employment is carried out in another country participating in the agreement, in which case it may be taxed in the second state. However, this does not apply to cases where the recipient is present in another state for no more than 183 days in any 12-month period commencing or ending in the relevant tax year, the remuneration is paid by or on behalf of an employer who is not a resident of that state, and the remuneration is not borne by a permanent establishment.

If a UAE resident receives income or owns capital from Russia, he can deduct Russian tax from his tax. However, the deduction should not exceed the portion of the tax calculated on this income or capital in the UAE.

Similarly, a Russian resident who receives income or capital that is taxed in the UAE can deduct the amount of this tax from his Russian tax. However, this deduction cannot exceed the amount of tax that he must pay in the Russian Federation.

There is an agreement between the Russian Federation and the UAE on taxation of investment income concluded in 2011. It was signed due to the fact that state investment funds and banks in the UAE showed interest in investing in the Russian economy, but the almost complete absence of taxation of corporate profits and personal income in the country made it impossible to conclude a standard agreement on the avoidance of double taxation. The UAE introduced corporate profit tax in June 2023.

The 2011 agreement will cease to be in effect upon entry into force of the new agreement on the avoidance of double taxation.

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The Government of the Russian Federation and the Government of the United Arab Emirates, desiring to further develop their economic relations and strengthen cooperation in tax matters, intending to conclude an Agreement for the elimination of double taxation with respect to taxes on income and on capital and the prevention of tax avoidance and evasion, without creating opportunities for non-taxation or reduced taxation through tax avoidance or evasion (including through the use of schemes aimed at indirectly obtaining by residents of third jurisdictions the benefits provided for in this Agreement),

AGREEMENT between the Government of the Russian Federation and the Government of the United Arab Emirates for the elimination of double taxation with respect to have agreed as follows:

Chapter I

Scope of the Agreement

Article 1

Persons to whom the Agreement applies

1. This Agreement shall apply to persons who are residents of one or both of the Contracting States.

2. For the purposes of this Agreement, income derived by or through an entity or by means of an arrangement that is treated as wholly or partially tax transparent under the tax laws of either Contracting State shall be deemed to be the income of a resident of a Contracting State but only to the extent that such income is deemed to be the income of a resident of that State.

of a Contracting State for tax purposes in that Contracting State. In no case shall the provisions of this paragraph be construed as limiting the right of a Contracting State to tax residents of that

Contracting State.

3. This Agreement shall not affect the taxation

by a Contracting State on its residents,

except in respect of reliefs which are provided under paragraph 2 of Article 9,

paragraph 3 of Article 16, paragraph 2 of Article 17 and Articles 18, 19, 20, 23, 24, 25 and 28 of this Agreement.

Article 2

Taxes Covered by the Agreement

.1 This Agreement shall apply to taxes on income and capital imposed on behalf of a Contracting State, its political subdivisions or local authorities, regardless of the manner in which they are levied.

2. Taxes on income and capital shall mean all taxes levied on the total amount of income or on the total capital or on separate elements of income or capital, including taxes on income from the alienation of movable or immovable property, taxes on the total amount of wages paid by enterprises, and taxes on capital gains.

.3 The existing taxes to which this Agreement applies are, inter alia:

a) in the United Arab Emirates:

i) income tax;

ii) corporate tax

(hereinafter referred to as "United Arab Emirates tax"); b) in the Russian Federation:

i) corporate profit tax;

ii) personal income tax;

iii) corporate property tax; and

iv) personal property tax

(hereinafter referred to as "Russian tax").

4. This Agreement shall apply to all identical or substantially similar taxes imposed after the date of signature of this Agreement in addition to or in place of existing taxes. The competent authorities of the Contracting

States shall notify each other of any significant changes made in their tax laws within a reasonable time after such changes are made.

Chapter I Definitions

Article 3 General Definitions

1. For the purposes of this Agreement, unless the context otherwise requires:

a) the term "United Arab Emirates" means the territory of the United Arab Emirates and the air space above it, as well as areas beyond the territorial sea and the submarine space over which the United Arab Emirates exercises, in accordance with international law

and the law of the United Arab Emirates, sovereign rights or jurisdiction with respect to the exploration and exploitation of natural resources; b) the term "Russia" means the Russian Federation, when used in a geographical sense means the entire territory of the Russian Federation, as well as its exclusive economic zone

and continental shelf, as defined in accordance with the United Nations Convention on the Law of the Sea 1982;

c) the terms "a Contracting State" and "the other Contracting State" mean, depending on the context,

the Russian Federation or the United Arab Emirates; d) the term "person" includes an individual,

a company

and any other body of persons;

e) the term "company" means any body corporate

or any entity treated as a body corporate

for tax purposes;

1) the term "enterprise" applies to the carrying on of any

business activity;

g) the terms "enterprise of a Contracting State"

and "enterprise of the other Contracting State" mean respectively an enterprise carried on by a resident of a Contracting State and an enterprise carried on by a resident of the other Contracting State;

h) the term "international traffic" means any transport by a ship or aircraft operated by an enterprise of a Contracting State, except when the ship or aircraft is operated solely between places in the other Contracting State;

i) the term "competent authority" means:

i) in the case of the United Arab Emirates, the Ministry of Finance of the United Arab Emirates or its authorized representative;

i) in the case of the Russian Federation, the Ministry of Finance of the Russian Federation or its authorized representative; j) the term "national" in the case of a Contracting

State means:

i) any individual possessing the nationality

of a Contracting State; and

ii) any legal person,

partnership

or association deriving such status

from

the laws of a Contracting State;

k) the term "business" includes the performance of professional services and other activities of an independent character;

1) the term "recognized pension fund" means any

entity or arrangement established in that Contracting State which is treated as a separate person under the tax laws of that Contracting State,

or an arrangement which is not treated as a separate person under the tax laws of that Contracting State but which is separately identifiable for regulatory and accounting purposes, and:

i) which is established to carry on activity

primarily for the purpose of administering or providing retirement and other supplementary benefits to individuals and benefits of a similar nature and which is regulated as such by a Contracting State or one of its political subdivisions or local authorities; or

b) in the case of the Russian Federation, any person who, in accordance with the laws of the Russian Federation, is liable to tax therein by reason of his domicile, residence, place of management, location of his head or principal office, place of registration or establishment or any other criterion of a similar nature, and also includes the Russian Federation, its political subdivisions or local authorities. However, this term does not include any person who is liable to tax in the Russian Federation solely in respect of income from sources in the Russian Federation.

2. Where by reason of the provisions of paragraph 1 of this Article an individual is a resident of both Contracting States, his status shall be determined as follows:

a) an individual shall be deemed to be a resident only of the Contracting State in which he has a permanent home available to him; if he has a permanent home available to him in both Contracting States, such an individual shall be deemed to be a resident only of the Contracting State with which his personal and economic ties (centre of vital interests) are closer;

b) where the Contracting State in which the individual has his centre of vital interests cannot be determined, or if the individual does not have a permanent home available to him in either Contracting State, he shall be deemed to be a resident only of the Contracting State in which he has an habitual abode;

c) if he has an habitual abode in both Contracting

States or is not a resident of either of them, he shall be deemed to be a resident only of the Contracting

State of which he is a national;

d) if he is a national of both Contracting

States or is a national of neither of them, the competent authorities of the Contracting

States shall settle the question by mutual agreement.

3. Where by virtue of the provisions of paragraph 1 of this Article a person other than an individual is a resident of both Contracting States, the competent authorities of the Contracting States shall endeavour by mutual agreement to determine the Contracting State of which such person shall be deemed to be a resident for the purposes of this Agreement, having regard to the location of his head or principal office, his place of effective management, his place of incorporation or formation and any other relevant factors. In the absence of such agreement, such person shall not be entitled to any relief or exemption from taxation provided for in this Agreement unless the competent authorities of the Contracting States agree to what extent and in what manner.

Article 5 Permanent Establishment

1. For the purposes of this Agreement, the term "permanent establishment" means a fixed place of business through which the business of an enterprise is wholly or partly carried on.

2. The term "permanent establishment" includes especially:

a) a place of management;

b) a branch;

c) an office;

d) a factory;

e) a workshop; and

+) a mine, an oil or gas well, a quarry or any other place of exploration for, extraction or exploitation of natural resources or any activities connected therewith, including an offshore drilling rig.

.3 The term "permanent establishment" also includes:

a) a building site or a construction or assembly or installation project or supervisory activities connected therewith, but only where such site or project or activities exist for more than 12 months;

b) the furnishing of services, including consultancy services, by the enterprise through employees or other personnel engaged by the enterprise for such purposes, but only where activities of this kind continue (for the same or a connected enterprise) in the territory of a Contracting State for a period or periods exceeding in the aggregate 6 months in any 12-month period.

4. Notwithstanding the preceding provisions of this Article, the term "permanent establishment" shall be deemed not to include:

1. the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise;
2. b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of or delivery;
3. of goods, storage, or display
4. c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;
5. d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or collecting information for the enterprise;
6. e) the maintenance of a fixed place of business solely for carrying out for the enterprise any activity not mentioned in sub-paragraphs (a) to (d) of this paragraph, provided that these activities are of a preparatory or auxiliary character; or
7. f) the maintenance of a fixed place of business solely for any combination of the activities mentioned in sub-paragraphs (a) to (e) of this paragraph, provided that the overall
8. activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character.
9. 5. Paragraph 4 of this Article shall not apply to a fixed place of business used or maintained by an enterprise if the same enterprise or a closely related enterprise carries on business at the same place or at another place in the same Contracting State and:
10. a) that place or other place constitutes a permanent establishment for the enterprise or the closely related enterprise in accordance with the provisions of this Article; or
11. b) the overall activities resulting from the combination of activities carried on by the two enterprises at the same place or by the same enterprise or closely related enterprises at the two places
12. are not of a preparatory or auxiliary character,
13. provided that the business
14. activities carried on by the two enterprises at the same place or by the same
15. enterprise or closely related enterprises at the two places constitute complementary functions which are part of a single business process.
16. 6. Notwithstanding the provisions of paragraphs 1 and 2 of this Article, but subject to the provisions of paragraph 8 of this Article, where a person acts in a Contracting State on behalf of an enterprise and, so acting, habitually concludes contracts or habitually plays a major role leading to the conclusion of contracts which are regularly concluded by the enterprise without substantial modification, and such contracts:
17. a) are made in the name of the enterprise; or
18. b) involve an obligation to transfer ownership of, or a right to use, property owned or to be used by, such enterprise; or
19. c) involve an obligation to render services by such enterprise, then such enterprise shall be deemed to have a permanent establishment in that Contracting State in respect of
20. any activities which that person undertakes for the enterprise, except where the activities of such person are limited to
21. activities referred to in paragraph 4 of this Article which, even if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that paragraph.
22. 7. Notwithstanding the preceding provisions of this Article, but subject to the provisions of paragraph 8 of this Article, an enterprise of a
23. Contracting State carrying on business other than that of reinsurance shall be deemed to have a permanent establishment in the other Contracting State if it, through a person, collects premiums or insures risks in the territory of the other Contracting State.
24. if
25. 8. Paragraphs 6 and 7 of this Article do not apply,
26. a person acting in a Contracting State
27. on behalf of an enterprise of the other Contracting State
28. carries on business in the first-mentioned
29. Contracting State as an independent agent
30. and is acting for that enterprise in the ordinary course of its business.
31. Where, however, the person acts exclusively or almost exclusively on behalf of one or more enterprises with which he is
32. closely connected, such person shall not be deemed to be an independent agent for the purposes of this paragraph in respect of any such enterprise.

9. The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or carries on business in that other Contracting State (whether through a permanent establishment or otherwise), shall not of itself constitute an establishment of the other.

• permanent

10. For the purposes of this Article, a person or enterprise is closely related to an enterprise if, based on all the relevant facts and circumstances, one person exercises control over the other or both are controlled by the same persons or enterprises. In any case, a person or enterprise shall be deemed to be closely connected with the enterprise if the person's interest in the other person, directly or indirectly, amounts to more than 50 per cent (or in the case of a

company, more than 50 per cent of the aggregate vote and value of the shares (interests) of the company or 50 per cent of the share capital of the company) or if the interest of another person or enterprise in both the person and the enterprise or in both enterprises, directly or indirectly, amounts to more than 50 per cent (or in the case of a company, more than 50 per cent of the aggregate vote and value of the shares (interests) of the company or more than 50 per cent of the share capital of the company).

Chapter III Taxation of Income

Article 6

Income from Immovable Property

.1 Income derived by a resident of a Contracting State from immovable property (including income from agriculture or forestry) situated in the other

Contracting State may be taxed in that other Contracting State.

.2 The term "immovable property" shall have the meaning which it has under the law of the Contracting State in which the property in question is situated. This term shall in any case include property accessory to immovable property, livestock and equipment used in agriculture (including livestock raising and pisciculture) and forestry, rights to which the provisions of the law respecting landed property apply, rights known as usufruct of immovable property and rights to variable or fixed payments as compensation for the working of, or the right to work, mineral deposits, sources and other natural resources. Ships and aircraft shall not be regarded as immovable property.

3. The provisions of paragraph 1 of this Article shall apply to income derived from the direct use, letting or use in any other form of immovable property.

4. The provisions of paragraph 1 of this Article shall also apply to income derived through real estate trusts, real estate unit trusts or similar collective investment vehicles established primarily for investment in real estate.

Article 7

Business Profits

1. The profits of an enterprise of a Contracting State

shall be taxable only in that

Contracting State unless the enterprise

carries on business in the other

Contracting State through a permanent establishment situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise may be taxed in that other Contracting State but only so much of them as is attributable to that permanent establishment.

.2 Subject to the provisions of paragraph 3 of this Article, where an enterprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein,

there shall in each Contracting State be attributed to that permanent establishment the profits which it might be expected to make if it were a distinct and separate enterprise engaged in the same or similar activities under the same or similar conditions and dealing wholly independently with the enterprise of which it is a permanent establishment.

3. In determining the profits of a permanent establishment, there shall be allowed as deductions expenses which are incurred for the purpose of carrying on the business of the permanent establishment, including executive and general administrative expenses so incurred, whether such expenses are incurred in the Contracting State in which the permanent establishment is situated or elsewhere, provided that such deductions are consistent with the provisions of the taxation laws of that Contracting State and take into account the limitations imposed by the taxation laws of that Contracting State.

4. Where in a Contracting State the determination of the profits to be attributed to a permanent establishment is normally effected by apportioning the total profits of the enterprise

among its various parts, nothing in paragraph 2 of this Article shall prevent that Contracting State from determining the taxable profits by such apportionment in the usual manner. The method of apportionment adopted shall, however, be such as to produce results in conformity with the principles embodied in this Article. 5. No profits shall be attributed to a permanent establishment by reason of the mere purchase by the permanent establishment of goods or merchandise for the enterprise.

6. For the purposes of the preceding paragraphs of this Article, the profits to be attributed to the permanent establishment shall be determined by the same method year by year unless there is good and sufficient reason

to change the method.

7. Where the profits include items of income which are dealt with separately

in other Articles of this Agreement, the provisions of those Articles shall not be affected by the provisions of this Article.

Article 8

Ships and Air Transport

1. The profits of an enterprise of a Contracting State from the operation of ships or aircraft in international traffic shall be taxable only in that Contracting State.

2. The provisions of paragraph 1 of this Article shall also apply to profits derived from:

a) the international carriage by air or sea of passengers, livestock, mail, parcels, equipment or goods;

b) participation in a pool, joint venture or international organization for the operation of transport facilities;

c) the sale of tickets on behalf of another enterprise, provided that such income is incidental to the income

from the operation of aircraft;

d) the furnishing of engineering services to others, provided that such income is incidental to the income

from the operation of aircraft;

e) bank accounts, bonds, shares and other obligations directly connected with the operation of aircraft in international traffic.

3. For the purposes of this Article, profits from the operation of ships or aircraft shall include in particular:

a) income from the leasing of ships or aircraft on a charter basis with crew, complete equipment and on-board stores; and

b) income from the leasing of ships or aircraft without crew,

provided that such use, maintenance or leasing is ancillary to the operation of the ships or aircraft in international traffic.

4. Profits of an enterprise of a Contracting State from the use, maintenance or leasing of containers (including

trailers, barges and related equipment for the transport of containers) shall be taxable only in that

Contracting State, provided that such use, maintenance or leasing is ancillary to the operation of ships or aircraft in international traffic, except where such containers are used for transport solely between places situated in the other Contracting State.

Article 9 Associated Enterprises

1. Where:

(a) an enterprise of a Contracting State participates directly or indirectly in the management,

control or capital of an enterprise of the other Contracting State; or

(b) the same persons participate directly or indirectly in the management,

control or capital of an enterprise of a Contracting

State and an enterprise of the other Contracting State, and in either case conditions are made or imposed between the two enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise

and taxed accordingly.

2. Where a Contracting State, in accordance with the provisions of paragraph 1 of this Article, includes in the profits of an enterprise of that Contracting State, and taxes accordingly, profits on which an enterprise of the other Contracting State has been charged to tax in that other Contracting State, and the profits so included are profits which would have accrued to the enterprise of the first-mentioned Contracting State if the conditions between the two enterprises had been those which would be between independent enterprises, then that other Contracting State shall make an appropriate adjustment to the amount of tax charged therein on those profits. In determining such adjustment, regard shall be had to the other provisions of this Agreement and the competent authorities of the Contracting States shall if necessary consult each other.

Article 10 Dividends

1. Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other Contracting State.

However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that Contracting State, but if the beneficial owner of the dividends is a resident of the other Contracting

State the tax so charged shall not exceed 10 per cent of the gross amount of the dividends.

2. Notwithstanding the provisions of paragraph 1 of this Article, dividends

arising in a Contracting State shall be exempt from tax in that Contracting State provided that they are paid to the other Contracting State or to financial and investment institutions thereof.

3. The provisions of paragraphs 1 and 2 of this Article shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.

4. The term "dividends" as used in this Article

means income from shares, including income from the distribution of additional

paid-up capital and reduction of share capital, or from other

rights, not being debt-claims, participating in profits, as well as other income, including income in the form of

interest, which is subjected to the same taxation treatment as income from shares by the tax laws of the

Contracting State of which the company making the distribution is a resident. This term also means any distributions in respect of units of collective investment vehicles (other than real estate funds or similar collective investment vehicles primarily established for the purpose of investment in immovable property).

5. The provisions of paragraphs 1 and 2 of this Article shall not apply if the beneficial owner of the dividends, being a resident of a Contracting State, carries on business in the other Contracting State of which the company paying the dividends is a resident, through a permanent establishment situated therein and the holding in respect of which the dividends are paid is effectively connected with such permanent establishment. In such case, the provisions of Article 7 of this Agreement shall apply.

6. Where a company which is a resident of a Contracting State derives profits or income from the other Contracting State, that other Contracting State may not impose any tax on the dividends paid by the company, except in so far as such dividends are paid to a resident of that other Contracting State

or in so far as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment situated in that other Contracting State, nor may it impose on the company's undistributed profits a tax on the company's undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other Contracting State.

7. The provisions of this Article shall not apply if the main purpose or one of the main purposes of any person concerned in the creation or transfer of the shares or other rights in respect of which the dividends are paid was to obtain the benefits of this Article by such creation or transfer.

Article 1 Interest

1. Interest arising in a Contracting State and beneficially owned by a resident of the other Contracting State may be taxed in that other Contracting State.

However, such interest may also be taxed in the Contracting State in which it arises and according to the laws of that Contracting

State, but if the beneficial owner of the interest is a resident of the other Contracting State the tax so charged shall not exceed 10 per cent of the gross amount of the interest.

2. Notwithstanding the provisions of paragraph 1 of this Article, interest

arising in a Contracting State shall be exempt from tax in that Contracting State provided that it is paid to the other Contracting State

or its financial and investment institutions.

4. The provisions of paragraphs 1 and 2 of this Article shall not apply if the beneficial owner of the royalties, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties arise, through a permanent establishment situated therein and the rights or property in respect of which the royalties are paid are effectively connected with such permanent establishment. In such case, the provisions of Article 7 of this Agreement shall apply. 5. Royalties shall be deemed to arise in a Contracting State when the payer is a resident of such Contracting State. Where, however, the person paying the royalties, whether he is a resident of a Contracting State or not, has in a Contracting State a permanent establishment in connection with which the liability to pay the royalties was incurred, and such royalties are borne by such permanent establishment, then such royalties shall be deemed to arise in the Contracting State in which the permanent establishment is situated. 6. Where, by reason of a special relationship between the payer and the beneficial owner of the royalties or between both of them and some other person, the amount of the royalties, having regard to the use, right or information in respect of which they are paid, exceeds the amount which would have been agreed upon by the payer and the beneficial owner of the royalties in the absence of such relationship, the provisions of this Article shall apply only to the last-mentioned amount of the royalties. In such case, the excess part of the payments shall remain taxable according to the laws of each Contracting State, due regard being had to the other provisions of this Agreement.

7. The provisions of this Article shall not apply if the main purpose or one of the main purposes of any person involved in the creation

or transfer of the rights in respect of which the royalties are paid was to obtain the benefits of this Article by such creation or transfer.

Article 13

Capital Gains

1. Gains derived by a resident of a Contracting

State from the alienation of immovable property referred to in Article 6 of this Agreement and situated in the other

Contracting State, may be taxed in that other Contracting State.

2. Gains from the alienation of movable property forming part of the property of a permanent establishment which an enterprise of a Contracting

State has in the other Contracting State, including such gains from the alienation of

such a permanent establishment (alone or together with the whole

enterprise), may be taxed in that other Contracting State.

3. Income derived by an enterprise of a Contracting State engaged in the operation of ships or aircraft in international traffic from the alienation of such ships or aircraft or movable property pertaining to the operation of such ships or aircraft shall be taxable only in that Contracting State. 4. Gains derived by a resident of a Contracting State from the alienation of shares of a company or similar interests, such as a participation in a partnership, trust or collective investment vehicle, may be taxed in the other Contracting State if, at any time during the 365 days preceding the alienation, at least 50 per cent of the value of such shares or similar interests is represented directly or indirectly by immovable property as defined in Article 6 of this Agreement situated in such other Contracting State, except where such shares or similar interests are traded on a recognized stock exchange and the resident owns in the aggregate 5 per cent or less of such class of shares or similar interests. 5. Gains from the alienation of any property, except property referred to in paragraphs 1, 2, 3 and 4 of this Article, shall be taxable only in the Contracting State of which the person alienating the property is a resident.

Статья 14

This is the first time in the world.

1. I was born between 15 and 17 and 18 years old. More information, more and more information, Read more about this video It's too late, but it's too late. More information, please contact us now. More information about the device.

This is the first time I've ever seen you. More information about this topic этом другом Договаривающемся Государстве.

2. Do not use the phone number 1 time.

More information, more information about this More

It's the first time I've seen it in my life. This is the first time you can read it. More

Договаривающемся Государстве, More:

а) Read more in the video

In this case, there is nothing wrong with it.

183 days in the 12-day period

More More and more

b) More information about And so on

Most of the time, there is nothing wrong with it. And

etc.) More Get started.

3. Don't worry about anything else. More, more information about this There is a lot of information about this type of work. Read more about it

судна. эксплуатируемого in More information, more information about this Read more, see more территории другого Договаривающегося Государства, more Read more in more

Договаривающемся Государстве.

More than 15 minutes

Read more and more information. Read more about this topic члена

совета директоров или аналогичного органа компании, являющейся резидентом другого Договаривающегося Государства, Most of the time In this case, please contact us.

16 days ago and then

1. Don't wait until 14 days.

Also, please contact us for more information.

In the middle of the day, the next day, the next day, the next day. Most of the time, it's too late to see what's going on. таковой, more More information, more

Most of the time in the world. Государстве.

2. If you have any problems, please contact us.

It is worth noting that there is a lot of damage to the skin, but it is better to eat it артисту

It's too late, but it's too late, too. More than 14 days old

In the video In this case, there is a lot of information in the picture. And so on.

3. Then, if you want to go to your home, More and more information, more Most of the time in the middle of the day, more It's time for the rest of the day to come to you.

Article 17 Pensions

1. Subject to the provisions of paragraph 2 of Article 18 of this Agreement,

pensions and other similar remuneration paid to a resident of a

Contracting State in consideration of his past employment shall be taxable only in that Contracting

State.

2. Notwithstanding the provisions of the preceding paragraph of this Article,

pensions paid

and other payments made under a government scheme which is part of the social security system of a Contracting State shall be taxable only in that Contracting State.

Article 18 Government Service

.1 a) Salaries, wages and other similar remuneration, other than a pension, paid by a Contracting State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that Contracting State or political subdivision or local authority shall be taxable only in that Contracting State.

b) However, such salaries, wages and other similar

remuneration shall be taxable only in a Contracting

State if the services are rendered in that other Contracting

State and the individual is a resident of that other Contracting

State and:

i) is a national of that other Contracting State; or

i1) did not become a resident of that other Contracting

State solely for the purpose of rendering the services.

2. a) Notwithstanding the provisions of paragraph 1 of this Article, pensions and other similar remuneration paid by, or out of funds created or contributed to by, a Contracting

State or a political subdivision or a local authority thereof to an individual in respect of services rendered for that Contracting

State or subdivision or local authority thereof, shall be taxable only in that Contracting

State. b) However, such pensions and other similar remuneration shall be taxable only in the other Contracting State if the individual is a resident of and a national of that other Contracting State.

3. The provisions of Articles 14, 15, 16 and 17 of this Agreement

shall apply to wages, salaries, pensions and other similar remuneration paid in respect of services rendered in connection with a business carried on by a Contracting State or a political subdivision or a local authority thereof.

Article 19 Teachers and Researchers

1. An individual who is a resident of a Contracting State immediately before visiting the other Contracting State who, at the invitation of a university, college, school or other similar educational institution or research institute licensed under the laws of the other Contracting State, stays in that other Contracting State for a period not exceeding two years from the date of his arrival in that other Contracting State solely for the purpose of teaching or conducting research or both at such educational or research institution, shall be exempt from tax in that other Contracting State on any remuneration received for such teaching or research.

2. This Article shall not apply to income derived from scientific research if such research is carried out primarily in the private interest of a particular person or persons.

Article 20 Students and trainees

A student or trainee who is a resident of a Contracting

State or was immediately before visiting the other Contracting State a resident of the first-mentioned Contracting State and who is present in that other Contracting State solely for the purpose of his education or training, shall be exempt from tax in that other Contracting State

in respect of:

a) payments received from persons situated outside that

other Contracting State for the purpose of his maintenance, education or training; and

b) remuneration from employment in that other Contracting State, provided that such employment

is directly related to his studies or is carried on for the purpose of his maintenance but the period of such employment does not exceed two years.

Article 21 Other Income

Items of income of a resident of a Contracting State derived from sources in the other Contracting State, not dealt with in the foregoing Articles of this Agreement, shall be taxable in that other Contracting State.

1. Capital referred to in

Chapter IV Taxation of Capital

Article 22 Capital

represented by immovable Article 6 of this Agreement,

property owned by a resident of a Contracting State and situated in the other Contracting State, shall be taxable in that

other Contracting State.

2. Capital represented by movable property forming part of the property of a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall be taxable in that other Contracting State.

3. Capital

of an enterprise of a Contracting State operating ships or aircraft in international

traffic, represented by such ships or aircraft or by movable property pertaining to the operation of such ships or aircraft, shall be taxable only in that

Contracting State.

4. Any other elements of capital of a resident of a

Contracting State shall be taxable only in that Contracting State.

Chapter V

Methods of Elimination of Double Taxation

Article 23

Elimination of Double Taxation

1. In the United Arab Emirates, the elimination of double taxation shall be effected as follows:

Where a resident of the United Arab Emirates derives income or owns capital which, in accordance with the provisions of this Agreement, may be taxed in the Russian Federation, the amount of tax on such income or capital payable in the Russian Federation shall be allowed by the United Arab Emirates:

a) as a deduction from the tax on the income of that resident in an amount equal to the tax on income paid in the Russian Federation;

b) as a deduction from the tax on capital of that resident in an amount equal to the tax on capital paid in the Russian Federation.

However, the amount of such deduction shall not in any case exceed that part of the tax on income or the tax on capital, as calculated before such deduction is given, which is attributable, as the case may be, to the income or capital which may be taxed in the Russian Federation.

2 In the Russian Federation, the elimination of double taxation is carried out as follows:

where a resident of the Russian Federation derives income or owns capital which, in accordance with the provisions of this Agreement, is subject to taxation in the United Arab Emirates, the amount of tax on such income or capital payable in the United Arab Emirates shall be deducted from the Russian tax levied on such resident. However, the amount of the deduction shall not exceed the amount of Russian tax on this income or capital calculated in accordance with the tax legislation of the Russian Federation.

Chapter VI Special Provisions

Article 24 Non-Discrimination

1. Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith, which is other or more burdensome than the taxation and connected requirements, in particular with respect to residence, to which nationals of that other Contracting State in the same circumstances are or may be subjected. The provisions of this paragraph shall, notwithstanding the provisions of Article 1 of this Agreement, also apply to persons who are not residents of one or both of the Contracting States.

2. The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favourable in that other Contracting State than the taxation levied on enterprises of that other Contracting State carrying on the same activities. The provisions of this paragraph shall not be construed as obliging a Contracting State to grant to residents of the other Contracting State any personal allowances, reliefs and deductions

for tax purposes which it grants to its residents by reason of their civil status or family responsibilities.

Article 27 Right to Benefits

Notwithstanding any other provision of this Agreement, a benefit under this Agreement shall not be granted in respect of an item of income if, taking into account all the relevant facts and circumstances, it is reasonable to believe that obtaining such benefit was one of the main purposes of any arrangement or transaction that directly or indirectly gave rise to the benefit, unless it has been established that the granting of such benefit in these circumstances would be consistent with the object and purpose of the relevant provisions of this Agreement.

Article 28

Members of Diplomatic Missions and Consular Posts

The provisions of this Agreement shall not affect the fiscal privileges of members of diplomatic missions or consular posts granted under the rules of general international law or under the provisions of special agreements.

Article 29 Protocol

The annexed Protocol shall form an integral part of this Agreement.

Article 30

Hydrocarbon Revenue

Notwithstanding any other provisions of this Agreement, nothing shall affect the right of any Contracting State, any local government or local authority to apply its national laws and regulations concerning the taxation of income and profits derived from hydrocarbons and related activities carried out in the territory of the relevant Contracting State, as the case may be.

Chapter VI Final Provisions

Article 31 Entry into Force

1. Each Contracting State shall notify the other Contracting State in writing through diplomatic channels of the completion of the procedures provided by its laws for the entry into force of this Agreement. This Agreement shall enter into force on the date of receipt of the last such notification and shall apply:

a) with respect to taxes withheld at source on amounts paid or accrued on or after 1 January

of the calendar year following the year in which this Agreement enters into force and for subsequent years, and

b) with respect to other taxes on income for taxable periods

beginning on or after 1 January of the calendar year following the year in which this Agreement enters into force and for subsequent years.

2. The provisions of the Agreement between the Government of the Russian

Federation and the Government of the United Arab Emirates

on taxation of income from investments of the Contracting States

and their financial and investment institutions, signed

on 7 December 2011, shall cease to have effect from the date of application of this Agreement in accordance with the provisions of paragraph 1 of this Article.

Article 32 Termination

This Agreement shall remain in force until terminated by one of the Contracting States. Either Contracting State may terminate this Agreement by giving, through diplomatic channels, written notice of its intention to terminate it not less than six months before the end of any calendar year following the expiration of five years from the date on which this Agreement enters into force. In such event, this Agreement shall cease to have effect:

a) with respect to taxes withheld at source, for amounts paid or credited on or after the first day of January

of the calendar year next following the year in which the notice is given, and

b) with respect to other taxes on income, for any taxable period beginning on or after the first day of January

of the calendar year next following the year in which the notice is given.

In witness whereof the undersigned, being duly authorized by their Governments for that purpose, have signed this Agreement.

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Dear Customers, we are kindly informing you that the Federal Tax Authority (FTA) announced that a new Cabinet decision has been issued to support businesses in efficiently meeting their tax obligations, to update information held in their tax records for the period from 1 January 2024 to 31 March 2025.

This is to give the opportunity to make the necessary adjustments and avoid penalties for failing to notify the FTA of any cases that require changes to their tax records.

This includes the name, address, email, activity listed in the commercial license, legal form, partnership agreement for joint ventures, and articles of association, along with any changes in the nature of registrant's business or address from which they conduct any of their business activities.

Failure to amend or update their tax records may result in additional penalties.

For further details on how Myriad can assist you, please contact our colleagues: [email protected]

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