Transcript for:
Corporate Tax Workshop in Abu Dhabi

[Music] your excellencies ladies and gentlemen good morning and welcome to today's Workshop in the UAE Capital Abu Dhabi this Workshop marks the launch of a new phase of the fte's comprehensive corporate tax aess program I would like to begin by expressing my great pleasure to see you and thank you for attending with us this Workshop today my name is Roa dehi and I will be your Master of Ceremonies during today's Workshop in 2023 the federal tax Authority launched the first phase of its corporate tax awareness program comprised a total of 48 awareness Workshop including nine inperson workshops held across the seven Emirates and focused on explaining the Gen principles of taxation of Corporation and businesses in addition to 39 virtual webinars which focused on clarifying the requirements and process for corporate tax registration today's Workshop in Abu Dhabi marks the start of the 2024 corporate tax awareness campaign to introduce the general principles on taxation on Corporation and businesses for small and mediumsized inter Enterprises today's session will include an introdu sorry an introduction to corporate tax basic elements of corporate tax law Provisions relevant to small and medium businesses calculation of taxable income compliance requirements private clarification and answer and qu question and answer session at the end ladies and gentlemen I would like to invite his Excellency KH albani director general of the federal tax authority to deliver his welcome speech please welcome him to the [Applause] stage Sal uh which distinguished guests ladies and gentlemen first of all I would like to thank you today for joining us in this session and the purpose of it is to have an awareness for an important segment in our economy which which is small to medium Enterprises so in fda's new phase of awareness sessions we are focusing more on the small to medium Enterprises because of their weight and their contribution to the National economy first of all I would like to extend our thanks to our strategic Partners Abu Dhabi Chamber of Commerce and Industry Khalifa fund for Enterprise development aarati entrepreneurship Association for their support in the FDA and organizing this event and to promote the tax awareness in the business community distinguished guests following to the implementation of the corporate tax and the fairs of June 2023 FDA have been playing a critical role in ensuring taxpayers and various business sectors understand their obligation under the corporate tax we have worked closely with all relevant stakeholders to design and Implement workshops webinars and several educational activities to help taxpayers meet with their corporate tax obligations in 2023 the fairis phase program compromised of 48 awareness workshops including nine inperson workshops held across the UAE and focus explaining the general principles of taxation of corporate and businesses in addition to 39 webinars which focus in clarifying the requirements and process for corporate tax registration we had impr impressive turnabout for more than 13,600 participants including taxpayers from various business sectors and benefit which benefiting from these awareness sessions and FDA assure you we will continue with this effort in the coming future since 19 since 2017 introduction of the excise tax and 2018 of introducing the vat thee witness a fast progress in introducing taxation in its economy the purpose of Taxation as we all know is the financial sustainability to support Economic Development supporting infrastructure and providing the best services to the citizens in the uee as FDA commitment which is uh as it's part of their obligation we will continue and support taxpayers with providing them with information awareness sessions uh publishing the latest uh resolutions on our website so I do invite invite you all to to benefit from visiting our website and follow up the latest updates which provide you with all the guides and all the latest resolutions I would like to explain here today that the corporate tax regime have been designed based on International best practices and resolve to put principal fairness in the Forefront 0% % tax rate for startups and small businesses in the UE economy which is below profit below 375,000 the law provides additional relief to small businesses which incentivize these businesses to to establish and explain their activities in the U today our experts will explain to you in more details on these areas it's important for us and the FDA with the business Community to work as partners this is a journey we're working together on and time is important so as we progress in the corporate tax businesses need to prepare themselves for the tax so I would like to seek your support number one and register Ing and the corporate tax FDA provides Mr Tax platform which is uh Real Time online for the registration of the tax we design the registration to be simple for companies with already registration in the vat they will be a an export of the data to the ca to the corporate t tax and and businesses when they register for the corporate tax they need to update their information because we notice that a lot of businesses they don't update their information so it is important to update the information and to continue to do that so registering in the vat it will be a simple process a you companies who don't have not registered in the vat they need to register in the C and again the platform is very easy designed to help the taxpayers to use the system uh easily and we have user guides that help them how to use the uh the portal and to make it easier for them is our priority with to work with the business comp Community to comply because the oue uh and the FDA look forward to the Strategic partnership between the private sector and the federal tax Authority for voluntary compliance and complying with the laws there is a lot of learning to be done in the coming future so therefore businesses need to uh learn more about the tax and the most important challenge that I see preparing their books and accounts for the corporate tax there are requirements there according to National standards according to the best practices we want the businesses to ensure to start now because we're running out of time the year have started and already the law started in 23 in June so depending on the financial year and my colleagues will explain when do you have to file and the law made sure that to give taxpayers enough time for filing but at the end of the day it's the businesses need to prepare quickly for the tax not to leave it to the last minute I cannot stress enough the importance of early registration because our experience in the vat people left their registration to the last minute and this is where they had challenges regarding approval of the registration so I seek your support to start registering now because we have time to review your applications and approve them and not to leave them to the last night before filing so this will be a big challenge for everybody so I would like to invite you today to listen to our experts and to have all the questions and all the clarifications and I promise you in the future we are committed to support you because it's a partnership and the success of the tax system depends on our partnership and working together I'd like to thank you all for listening and forward to you uh discussion with our team thank you very [Applause] much thank you your Excellency for your insightful words now please let me introduce to you r hamzawi tax policy senior expert zuir chadri tax policy specialist Juliana candido tax policy expert to present to Us corporate tax principle for smmes part one please welcome them to the [Applause] stage thank you uh excellencies uh thanks also to uh all the uh attendees for your time and for uh your dedication to attend this uh awareness event uh today our uh corporate tax awareness session will focus mainly on uh small businesses with uh corporate tax aspects that are related to small businesses uh mainly um the small business relief and also the taxation of uh natural person because in most of the cases natural person are uh basically uh their business does not exceed a certain threshold there is a certain uh certain rules applicable to uh also natural person uh a threshold that is applicable based on cabinet decision uh 49 certain types of income for natural person that are not considered uh to be in the scope of the uh corporate tax so basically we will talk about today mainly uh the basic element of the corporate tax as I said uh the small business relief uh the calculation of taxable income compliance requirement FDA also um opened the portal already for uh private clarifications so we will talk about private clarifications and what are the key uh requirement when submitting uh private clarifications and then we will end with a question and answer uh session uh but just to set the stage for our um you know presentation I think it's um important to talk about the key policy drivers for the introduction of the corporate tax law in the uh UA uh basically the most important element and reason for the um you know or cornerstones for the introduction of corporate tax law they revolve around these element the first one is the introduction of a competitive corporate tax regime UA has a very competitive corporate tax regime for many reasons first of all of course the tax rate secondly the existence of several um uh exemption exemption for specific person exemption also for specific types of income also the availability of many reliefs under the uh corporate tax law one of them is a small business relief we have also other uh reliefs the uh business restructuring relief the trans transfer of uh tax losses the transfer within qualifying group Etc there are also other regimes that are meant for larger businesses like the uh Tax Group regime so article 40 to 42 of the corporate tax law and these kind of feature they create a competitive uh corporate tax regime uh and the second kind of Corner Stone is the fact that the corporate tax regime is meant to uh strengthen and consolidate the position of the UA as a regional and uh also a global investment uh and business Hub the uh third element is of course the acceleration of the UA developments and transformation and also the uh diversification of the sources of uh you know of uh income of Revenue uh mobilization for the government the most important element is uh the fourth element and basically it has to do with the confirmation of the commitment of the UA uh government towards uh International standards towards the standards related to uh fighting harmful tax practices and transparency standards if we talk about the role of the FDA as mentioned by his Excellency uh FDA has a critical role in the uh implementation of the corporate tax regime in the UA basically uh this role revolves also around four elements so basically supporting the compliance of taxpayer and the uua uh in the UA the federal tax Authority uh is providing guidance uh for corporate tax already 13 uh corporate tax guides have been published the last one is the tax group guide and uh in English and also the uh natural person uh taxation of natural person also in Arabic the um guidance public clarification they provide uh you know uh clarification on how to understand and how to ENT interpret the corporate tax rules also the FDA provides technical support through the uh private uh clarification mechanism and the private clarification allows to enhance the certainty for taxpayers um and I think my colleagues uh they will talk to you about the private clarification portal and how to submit private clarifications FDA also is responsible of conducting tax audit and um checking whether taxpayer are complying with the corporate tax rules and then finally the FDA is in charge of the collection of the uh relevant taxes uh in our case the uh uh corporate taxes and then of course this will uh take place with respect to the registration and then at the later stage also with respect to the uh filing of the corporate tax return just to set the legal framework for the uh corporate tax uh law in the UA or the corporate tax legislation so we have a federal decree law which is issued by the president of the uie the federal decree law refer to many cabinet decisions and uh there are multiple cabinet decisions which are uh issued by the UA uh cabinet the federal decree law also refers in many instances to ministerial decisions uh issued by the Minister of Finance to set the condition for certain uh requirement under the corporate tax law we have also FTA decisions so the corporate tax law referred also to uh the FTA to uh specify certain conditions and then the FDA issued many decision related to the corporate tax law and the FDA decision are issued by the chairman of the board of directors and then as I mentioned we have the uh gu guidance and the uh guides published by the FTA so for corporate tax purposes already 13 guides have been uh publish it and uh many guides are yet to be uh issued in the next few uh in the next few weeks the corporate tax timeline also I think it's very important to set the stage for our presentation basically the corporate tax LW was announced and the corporate tax regime was announced on in January 20 22 the federal decree law on corporate tax was issued in uh October 2022 then the FDA opened the portal for the registration for public joint stock companies and private companies uh by mid May 2023 and then 1st of June 2023 marks the uh the starting of the corporate tax regime and it marks also the first tax perod for uh businesses or person uh with a financial year starting from 1st of June and ending on uh 31st of May 1st of January 2024 is for most of the uh taxable person it marks the first uh tax period for taxable person with a uh Financial year corresponding to the uh calendar year and then 31st of May 2024 uh corresponds to the end of the first city uh period for taxpayer uh who uh started their financial year on the 1st of June December uh 31st December 2024 is the end of the city period for most of taxpayer of course with a uh uh Financial year corresponding to the calendar year and then for the filing uh deadlines so the filing will be on Deadline would be uh on the 28th of February 2025 for taxpayer with a tax period starting from 1st of May and ending on 31st 1st of June and ending on 31st of May and then for most taxpayer with uh Financial year corresponding to the calendar year uh Gregorian calendar year the deadline for filing will be uh around end of September 20 uh 25 I think it's a slide that is extremely important to set the stage for the uh for the uh president presentation and then before handing over to um uh my colleague Juliana who will talk to you about uh mainly about the taxation of uh natural person and the feature of the taxation of natural person let me uh um highlight again and uh focus on the importance of corporate tax registration the registration for corporate tax is the first step in terms of compliance there are many advantages for corporate tax registration the first one is the possibility to get certainty from the FTA through private clarifications now private clarification they are available for taxpayer who are already registered for corporate tax purposes unless your clarification uh is uh considered only with respect to registration itself unless your question is related to whether you should register or not any other question if you need to submit an application uh for the FDA um then you need need to be already registered and the FDA will require from you your uh corporate tax registration number otherwise uh if you are not registered then you will get a request to provide your corporate tax registration and then you will need to register so if you want to submit a private clarification please first go and register I think the the the FDA is making sure that the registration process is a seamless process we are here to support you if you have a question related to regist we have uh we are here to uh support you to answer your question we have also a large team here that is uh available and that could support you in terms of uh registration thank you and I hand over to uh Juliana to talk to you about a taxable person and mainly a natural person [Applause] good morning everyone my name is Juliana kidu and now I'll talk you through the basics elements of corporate tax law H in this part of the presentation I would like to better explain to you who is subject to corporate tax in the UAE who we call taxable persons so we have natural persons in certain circumstances that I'll will talk to you in further detail as well as judical resident persons as well as juridical non-resident persons depending on the circumstances and also I'm going to explain what is the corporate tax rate applicable in the UAE and the different thresholds as well as guide you through the tax period applicable so first point I would like to detail who is considerable a tax person in the UAE for corporate tax person purposes so the first step H the basis is the article 11 of the corporate tax law and the way that the corporate tax law is structured is that there are different rules in case of natural persons so natural persons will be considered as a taxable person only if they reach a certain threshold of turnover per year whereas resident persons that are juridical persons are covered in more Broad L manner because here we're talking about H the taxes on the corporations as well as non-resident persons will be covered in certain situations so when a natural person will be subject to corporate taxes the first point you have to look when you are a natural person is to assess whether you conducted business or business activities in the UAE so what do we mean when we talk about business when we talk about business we are talking talking about when you are exerc an activity with the intention of generating profits and this could be either if it's a continuous activity or even if it's within a specific period if you have the intention of generating profits then these will be subject to corporate taxes but the idea to give some relief to Natural persons H the way that the corporate tax regime works is that we going to assess the turnover within a calendar year so for natural persons we are always talking about January to December so the gorian calendar year to in order to be tax h under the corporate tax and the idea is that in order to provide further relief to Natural persons certain categories of income are excluded for this turnover so we're going to see in further detail which amounts of income are excluded when doing this calculation so when we are calculating the turnover for the calendar year of reaching the 1 million threshold we are going to exclude certain categories of turnover so salaries and wages are excluded and this is a question you might H received a lot in practice there was this concern whether the corporate tax would apply for salaries and wages but the idea is not to tax these amounts of income as well as personal investment income and real estate investment income because the idea here is you are not running a business so you are not with the intention of generating profits so this shouldn't be taxed by corporate tax so the way the registration works is that ER now registration is open but for natural persons you are only required to register if you are exerc a business activity and only when you reach this annual turnover of a million per year and here I would like to guide you with further detail when we are talking about the exclusions of corporate taxes so this was decided in cabinet decision 49 and here uh I want to give you some explanation what is considered salaries and wages for the purpose of corporate tax law so we are talking about any compensation or benefit received whether in cash or in kind by an employee from its employer so the idea is that wherever it's in the contract and is considered as a compensation or benefit by its work it was going to be considered as a salary and it's going to be excluded from this turnover this annual turnover and similarly when we have the personal investment income we are talking about any investment activity that a natural person conducts by their personal account without a license or without being required to have a license from a licens Authority so the idea here behind once again is we are only taxing business activities so if you have your own personal investment income the idea is not to give you extra burden and tax your personal invesment income so therefore we exclude this from the calculation of the turnover and similarly for real estate investment income this was a policy decision to not a burden real estate investment related activities so whenever a natural person has and perceives income from investment whether they're sailing property or they are renting leing or sub leasing if they are not required to have a license so they are doing this for their own personal investment this won't be taxed so here just to make it more clear I would like to guide you through a few practical example H in the first one we have a case of a natural person we're going to call him Mr M that is based on the UAE and owns residential apartments and they this person perceives an annual rental income of 2.5 million Zam per year and Mr M decided to appoint a company C to manage the properties just because he is not available to H manage the properties this is not his main business and he appointed this company to collect the rentals and to deal with the tenants for a fee so in this case the companies only manage the properties that belong to Mr M they are part of his personal investment so the money received from company C from the rentals H collected and perceived um and they are just H managed by company C they won't be taxed because they're considered as part of the real estate investment of Mr [Music] M and moving next H we can also have situations where a natural person for instance Mr M owns Apartments together with his wife and children and the family perceives an annual income of 2,000 million zans per year and in this case Mr X decided to set up his own company and owns 100% of the shares together with his family to manage the properties and collects through his own personal company the rentals for a fee and the idea is that the company here again will manage the properties and collect the rents for Mr MX and his family through this separate legal entity so the idea here once again the money is going to be considered as real estate investment income and as Mr X Own 100% of the shares of company AG the fees charg by company H will need to be at the arms blend price so this is another principle of the corporate tax law when you have a payment um withing related parties you have to charge an arms land price what would be reasonable according to the market or according to an average moving next H we can also have in practice case of self-owned immovable properties so for example an natur person Mr P owns several real estate properties both in Abu Dhabi and Dubai and conducts no other business so his income derives from this real estate property he owns and he created a solar proprietorships to manage self-owned properties and in this case since H Mr P holds a license to manage his real estate the rental com will not be classified as real estate investment come and while that because for establishing the soil proprietorship he holds a license to manage the activity so that's the difference from the previous examples and in this case he will be subject to corporate tax at a rate of 9% if he exceeds the 1 million turnover from this activity and in this case as well as soon as he would reach the 1 million threshold he would be required to register for corporate tax purposes and here we can have another practical situation where Mrs an she's based in the UAE she owns several properties that she rents for a mill total of 1.2 million deance that she perceived in the last calendar year in this case h miss an she has a license but it's a license related to her bakery business and the question would be the fact that she holds this license would lead for her to be considered as having a license for the purpose of rental income so here the idea is that as long as the license is not required for the real estate activity this won't impact on the fact that we'll consider the real estate investment as personal investment so in this case h we won't consider H for the purpose of the turnover This 1.2 million perceived per year and we're only going to text her under the bakery business activity if she reaches a threshold of 1 million Dam so now Rita will guide you through the resident persons in case of jural persons thank you go thank you uh very much Juliana so basically uh for Resident person um we uh have certain rules related to judical person so Juliana she talked about natural person who is a taxable consider as a taxable person in the case of natural person I will talk on uh when a juridical person so a company or a legal person is considered as taxable person under the uh corporate tax law so for Resident uh for judical person they are considered as resident person in two situations the first situation is where the judical person is incorporated as established or recognized under the UA law so Incorporated means like uh created under the uh various um Emirates kind of law or under the uh one of the uh licensing authorities uh legislation or established by a decree or any other legal uh instrument we have also the second situation is related to judical person that are Incorporated in a foreign jurisdiction but they are effectively managed and controlled in the United Arab Emirates so an entity for example that is Incorporated in Bahrain in Oman in Saudi Arabia but the effective management and control is taking place in the UA and in that case that person even though it is incorporated outside the UAE and it deres its legal status from uh a legal system outside the UAE because of the effective management and control it will be considered as resident in the UA what does it mean effectively managed and uh controlled in the UA basically the key element is that the Strategic decision related to the management related to the commercial and business decision they are mainly prepared and made in the United Arab Emirates so if we take a situation of an example of an entity uh a parent company that is Incorporated in the UA in year 2025 this parent company it has uh 90% owned subsidiary called subsidiary C which is Incorporated in a foreign jurisdiction if we have these elements gathered together so all the key management and strateg IC decision related to uh subsidiary Coe they are made in substance in the UAE all the board meeting related to subsidiary C they are held in the UAE all the board member of subsidiary Coe they are also resident in the UA very likely in that situation uh subsidiary C even though it is Incorporated in foreign jurisdiction it will be considered as a effectively managed and controlled in the UA and it will need to register for corporate tax purposes and uh file and comply with its tax uh obligation I think this is a common situation for many uh groups for many businesses in the UAE especially with subsidiaries uh in uh other GCC countries now the uh Noble question that is um kind of triggered by this situation is if subsidiary CP is considered as resident in the UAE very likely also in the foreign jurisdiction where it is incorporated because of the incorporation Criterion it also be it will be also considered as resident in the foreign jurisdiction so in that case we have a dual residence situation and dual residence is in general solved through double taxation agreement so we will look at the tax treaty between the uie and the foreign jurisdiction and usually we have an article four there in article four we have a criteria we have a paragraph dealing with situation where a company or a judical person is considered as resident in two jurisdiction and then the uh criteria relied upon is referred to as a tiebreaker rule usually we it is referred to the place of effective management and control so basically if this company is um dual resident it will be considered as resident in the UA because the place of effective management control is uh based in the UA otherwise many uh treaties also refer to what we what we call as mutual agreement procedure between both tax authorities so the tax authority of the uh the competent authority of the foreign jurisdiction and competent authority of the UA will need to decide where this will be considered as resident so basically if you have a dual resident situation the solving the uh dual residents will happen uh based on the rules available under tax treaties article four the last paragraph of each uh tax treaty and tax treaties in the UA you know that UA has an extensive network of tax treaties more than uh I think around 118 uh double taxation agreement which are effective and around 40 or 145 have been already uh signed in total and then the solving D the doal residence will be based on the provision of the double taxation agreement so um what is the corporate tax base for um resident juridical person so basically juridical person they are subject to tax on their uh worldwide income which means income derived from the uie and also income derived from foreign sources from outside the UA and basically uh judical person resid the U they will be required of course to uh register for corporate tax purposes if uh resident compan is deriving income from a foreign uh country very likely this income it has been also subject to tax in the foreign country by way of withholding tax then in that case if you are a resident person you can also benefit from the foreign tax credit if the income that you get from a foreign country has been subject to uh foreign Source Taxation and then article 47 of the corporate tax law allows you to benefit from the uh foreign tax credit if certain conditions are met and one of the condition is that the foreign Source income is subject to tax in the UA and also the amount or the level of Taxation should uh of the foreign tax credit should not exceed the level of Taxation that is applicable in the uh UA again I referred uh and his Excellency referred also to the corporate tax guide uh FTA also published at the guide on foreign Source income and in this guide there are a lot of example on how to uh compute and how to determine the foreign tax credit based on article 47 of the uh corporate tax law now we talked about Resident person what about nonresident person and here we are talking mainly um about um nonresident uh judical person but the rule also could be applicable for non-resident natural person so a non-resident person for corporate tax purposes is a person who is not a resident person and he meets one of the following conditions so to be considered for as a non-resident for corporate tax purposes one of these three situation should be met at least so the first time the first one is that you should have a permanent establishment in the UA the second one is is that you derive UA sourced income and the third one is that you have a Nexus in the UA and you will be considered to have an Nexus in the UA when you have an immovable property uh from which you generate income in the UA so you have a piece of land or a warehouse that you are renting or an apartment or any property but the Nexus Criterion based on cabinet decision 56 it is a able only to nonresident judical person it does not apply to non-resident natural person now what about the first uh Criterion so having a permanent establishment in the UA so perit establishment is international tax concept you find it in almost all uh tax treaties and under the corporate tax law there are two types of permit establishment we have the fix Place permit establishment or fixed PE and then we have the agency uh PE or the dependent agent PE so the fixed place of business PE is a place through which uh you know Core Business activity are conducted with certain degree of permanency permanency uh Geographic permanency and also uh permanency in time and then we have a dependent agent PE and a dependent agent is a person that habitually concludes contract or negotiate contract to the nonresident person and this dependent agent will very likely if certain conditions are met create uh an agency permanent establishment for the principal who is a nonresident person it's typically someone who is available in the UA for a non-resident person who goes to meet client shows the product discuss the product shows the um you know the various specific technical specificities of the product discuss modalities of payments guarantees um you know uh all the features of the uh sales and then he send these elements to the non-resident principal and then the principal in that case he will issue the invoice directly to the client in the UA this kind of situation could trigger and this person will be considered as a dependent agent and he will be considered to trigger uh agenty permanent establishment for the non-resident person in the UAE and then all these sales derived through that agent they will be attributable to that uh agency permanent establishment in the UA of course the uh non-resident rules the permit establishment rules they need to be read in conjunction with the uh relevant applicable tax treaties so you need to read the provision of the corporate tax law in uh you know in coordination and in conjunction with the applicable tax treaties also the FDA published a guide on taxation of non-resident uh the guide is quite extensive and it talks about the various perent establishment uh situation so what is the uh corporate tax base for a non-resident person basically in in the case of a permit establishment we have all the income attributable to that permit establishment so basically we attribute income gross income and also expenses to that permit establishment and we will determine the taxable income of the perit establishment if we uh a non-resident judical person has a Nexus in the UAE then all the income arising from the uh immovable property in the uie which is referred to as a Nexus uh will be taxable in the UA and then also we have the situation of State Source income and state Source income they are uh you know defined under article uh 13 of the corporate tax law and basically if you have a state Source income that is not attributable to a permanent establishment uh it will be taxable in the UAE subject to it will be subject to withholding tax but currently under article 45 of the corporate tax flow the withholding tax rate is uh 0o uh% so in in the first situation the non-resident uh person will be required to register in the uie in the second situation so you have a PE you need to register in the UA as a non-resident you have an exess in the UAE as a non-resident judical person not natural person non-resident judical person so non-resident company or legal entity you have an access you need also to register if you are only deriving State Source income you are not required to register for uh corporate tax and this has been clarified by ministerial decision 43 related to the exception from uh tax uh registration in the UA for corporate tax purposes if you look at the uh ministerial decision 43 of 2023 you will see the category of taxpayer who are not required to register for corporate tax purposes and non-resident deriving only state Source income they are listed under uh this uh ministerial decision what are the corporate tax rate applicable to the taxable person in the UA so we have for natural person if they are subject to tax if they meet the criteria that have been mentioned by my colleague Juliana so they have a turnover exceeding 1 million diram in the Gregorian calendar year then they will need to determine uh you know their taxable income they need to register for corporate tax and they need to determine also your their tax liability based on the rates of 0% up to 375,000 and 0 9% above 375,000 for Resident judical person the same also uh you know uh tax rates are applicable 0% up up to 375,000 and 9% above 375,000 and these rates they are app to the net income these rates are applicable to the net income which is the taxable income um and the taxable income as we will see later is the accounting income adjusted based on the uh rules that are available under the corporate tax law so we will basically remove exempt income we will add back uh non-deductible expenses and we will make certain adjustment in order to determine the taxable income based on the accounting income for uh nonresident also with a permanent establishment the UA or with uh a Nexus in the uh uie and as I said the Nexus is only applicable to non-resident judical person the same rates are uh applicable so 0% up to 375,000 and uh 9% above the 375,000 Dirham of uh taxable income for non-resident only with UA State Source income currently the withholding tax rate as I mentioned in the UAE is 0% based on article uh 45 of the corporate tax law now what about the tax period so the tax period has been clarified in uh articles 57 and 58 of the corporate tax law the tax period is for a tax person is um you know the period with respect of which the person is required to file his tax return uh so you need to file your tax return uh basically uh for each uh corporate tax period and the tax period is usually the financial year or part of the financial year for which you prepare your uh tax uh return the uh Financial year the principle the default situation is that it's the Gregorian calendar year or the 12 month period for which the financial statement are prepared and uh a taxable person they may apply to the FDA to uh use a different tax period or to change their uh tax period and this tax period could go up to uh 18 months and then subsequently uh 6 to uh 12 months so the maximum period for when you change your tax period could go to up to 18 months for the first period and then the the the minimum would be between six and uh 12 months and this will be of course for the uh for the first uh tax period or the last one if you are uh you know ceasing to conduct business uh and business activities so if we look at the um you know uh how the tax peray is set from practical standpoint so basically for the financial year which stretches from 1st June till 30 1 of May and some taxpayer some taxable person they they start they have the financial year starting 1st of June and ending 31st of May so the first CT period will be on the 1st of June 2023 it will end on 31st of May 2024 and then the filing will need to uh take place at the latest by 28th of February 20 uh 25 if you have a Gregorian calendar year uh or a financial year corresponding to the calendar year your first city period will be 1st of January 2024 and then it will end on 31st December 2024 and then the filing should take place before 30 September at the latest by 30 September 20 uh 25 if you have uh Financial year stretching from 1 of April till 31st of March many uh subsidiaries of foreign companies they have a financial year uh based on stretching from 1 of April till 31st of March then your first CT period will be uh stretching from 1st of April 2024 until 31st of March 2025 and then you will be required to file your city return at the latest by 31st December 20 uh 25 now for natural person and based on cabinet decision 49 the financial year will be always the Gregorian calendar year because the uh natural person the threshold of 1 million needs to be determined based on the Gregorian calendar year so for natural person the uh first C period will be from 1st of January 2024 until 31st of December 2024 and the file will need to take place 9 months after 31st of December 2024 and uh this correspond to 30 September 2025 so as it is mentioned here and this has been clarified in the guide related to the taxation of natural person natural person will always have a tax period following the Gregorian calendar year and the first CT period for natural person will be the gorian calendar year 2024 so if a natural person started activity for example before 2024 what is before what has been derived before 1 of January 2024 will not be considered if you have as a natural person a business since 2020 or 2015 up to 31st December 2023 this will not be considered for City purposes first corporate tax period for natural person is the Gregorian calendar year 2024 and I think it is important to look at the corporate tax tax guide published by the FDA as I said 13 guides have been published uh in English we published also many guides in Arabic the last one published in Arabic is related to the taxation of natural person and you have much more details and examples on these rules so let's take an example so Mr Y is a UA resident natural person that has conducted business and business activities since 2014 in the Gregorian calendar year 2024 uh Mr y total turnover exceeded the 1 million so 2024 will be the first tax period for corporate tax purposes and Mr why he would need to Reg register for corporate tax purposes and file his tax return and pay any tax due before 30 September or by 30 September 2025 and of course having a turnover of uh 1 million does not mean that you have a taxable income uh that is positive that is like an a profit you can have a turnover 1 million you can have also losses but the determination of whether you need to register is based on the turnover and not on the uh taxable income so if you see the 1 million as explained by uh Juliana and you apply the uh exclusion you take into consideration types of income which are excluded for the sake of determining the uh 1 million turnover if that th threshold is exceeded then you will need to register for corporate tax purposes and you need to file uh a tax return thank you and uh I hand over to uh my colleague Zu to talk to you about the uh small business relief under the uh corporate tax [Applause] LW thank you thank you very much rther good a good morning everyone my name is chowri and I will be talking to you today about small business relief which is a very beneficial relief available to small Enterprises so let's start with an overview what is small business relief well small business relief is found in article 21 of the corporate tax law and ministerial decision 73 of 2023 but let's take a step back why do we have small business relief in our corporate tax law well small business relief is provided to small businesses resident for corporate tax in the UAE to ease the implementation of corporate tax for them small business relief is intended to reduce the compliance burden the compliance obligations faced by small businesses in the first few years of corporate tax tax primarily by alleviating the need for them having to calculate and pay any corporate tax as a result of claiming small business relief other reliefs or deductions may not be applicable to those small businesses and this means for elgible taxable persons that have elected for small business relief they will benefit from the administrative Rel relief so they don't have to calculate their taxable income their recordkeeping obligations will be slightly different and also they will have tax relief they will not have to pay any corporate tax if they claim if they are elgible and they claim for small business relief and so in summary they can be treated to elect as if they had no corporate tax due for those years in which they claimed the Rel so who can claim the relief well any elgible Resident person who's a natural person or a juridical person can claim small business relief and this also includes a free zone person I'll come back to this in just a moment with the distinction between a qualifying free zone person now turning to the conditions an election is required in each period in which someone wishes to claim small business relief and that will be made in the tax return at the time of filing which as rther has just mentioned will be 9 months after the tax period ends and for each period And The crucial point is this the revenue must be equal or less than 3 million durhams in that tax period And every previous tax per period that is the primary test if you're eligible for small business relief and the 3 million Duram threshold applies irrespective of how long your tax period is so rther just mention there are other instances in where a tax period may be different or longer or shorter to 12 months the 3 million Durham threshold will apply in all instances when is the relief available it will be available for all tax periods starting on or after the 1st of June 2023 up to and including the 31st periods ending on the 31st of December 2026 so who cannot elect for small business relief well qualifying free zone persons cannot elect and whilst we're not going to do a deep dive into free zones today we appreciate there are small businesses which operate in free zones and if they wish to benefit from small business relief they can opt out of being a qualifying free zone person and Avail the benefit if they meet the other conditions to be to to be eligible for small business relief secondly members of multinational groups where the Consolidated revenue is over 3.15 billion durhams will not be elgible for small business relief and finally if there is artificial separation and this was clarified by the ministerial decision 73 if there is artificial separation which is intended to be mischievous to claim the small business relief then this also will not be allowable and small business relief in these instances will not be allowable to these taxable persons so as I just mentioned the most important part and the most important condition is the revenue calculation the revenue for any taxable period will be 3 million durhams and that will be calculated as per the accounting standards and that will be IFRS or IFR for SME in addition to to these two you can also opt to calculate your Revenue with the cash basis of accounting so IFRS would ordinarily be calculated on the acrs basis and the corporate tax law also allows if your revenue is under 3 million durs to calculate on the cash basis there's also uh an important point on the bottom of the slide here which is in terms of calculating the revenue it needs to be calculated on an arms length basis so what does this mean well if a person is interacting with a related party or a connected person the revenue they record must be on an arms length basis which may differ to the amount that they actually pay to that related party or the connected person however documentation for transfer pricing is not required the requirement here is simply to ensure that the arms length standard is followed in deriving the revenue for that tax period so what does revenue include well Revenue will include all the income from sale of goods or the provision of services in a tax period it can also include the sale of assets so if plant or Machinery or any of the fixed Assets in the business are sold that will also contribute to the revenue for that tax period if there are non-cash receipts received so this may be Bara transactions asset for asset transactions if any assets are received rather than cash payments then the market value of those items will be considered to form part of the revenue for that tax period what does revenue not include so there's two important elements here the first of which is vat charged if there is any vat charged as that is remitted to the FTA that is not considered be included in the 3 million Durham threshold and secondly loans or advances received so if you take a or taxable person takes a loan out in a specific year they don't need to worry that that will push them over the threshold of 3 million dur so let's put this into practice and go through a couple of examples here so we have company a who is a UAE resident person and we are told here that they have sales of 1.5 million durhams they also received dividends of 1 million dram and we're also told there's operating expenses of 2 million dram so what does this mean the total revenue will be 2.5 million durhams so the 1 1.5 million from the sales and the 1. 1 million sorry from the dividends which totals 2.5 million we're told because of the operating expenses of 2 million that their profit will be 500,000 dham but we are not concerned with the profit for small business relief this is not relevant what's relevant is the revenue threshold and the revenue for company a is 2.5 million Durham and and as such company a will qualify for small business relief one of the important features to pick up from this example is that the dividends of 1 million although exempt because it's from a UA company it's still included in the th in the calculation of Revenue moving to a second example so we have Mr y who is operating a business and the reason for this example is to illustrate that Revenue as mentioned is not just relevant for the current tax period but also relevant for all of the previous tax periods so in the period ending the 31st of December 2026 Mr y has derived revenue of 1.9 million durhams now that is under the 3 million million Durham threshold however we also need to take into account the revenue which was earned in the previous tax periods and we are told here that in the period ending the 31st of December 2025 the revenue earned was 4.3 million Durham which exceeds the 3 million Durham threshold as a result Mr y will not be able to claim small business relief in 2026 we'll now go through a summary of a number of points which are relevant for small business relief and the interaction with other areas of the corporate tax law um so firstly registration requirement if you're claiming small business relief will you have to register absolutely whether you make an mention a lot a taxable person will always have to register for corporate tax law as mentioned by my colleagues earlier will you be required to file a full tax return no the tax return if you are claiming small business relief is a simplified tax return and that's one of the benefits of claiming small business relief the compliance burden is lessened are you required to calculate taxable income again no there is no taxable income due there is no corporate tax due the test for small business relief is simply on Revenue if that test is met there is no calculation needed and no CT payable for those periods now interactions with other reliefs ryther mentioned qualifying group relief business restructuring relief and the interactions with those other areas you got tax losses Tax Group those aren't allowable if you're claiming small business relief tax groups can have small business relief but that's something which we appreciate is not perhaps relevant for small businesses in this instance in terms of tax losses for the specific year can they be acred or utilized in the year no they cannot and the same also applies for excess interest EXP expenditure on the specific interest deduction limitation rules that we have in the CT law can they be used in the year or ACR no they cannot if you are claiming small business relief they are not applicable however the one point or distinction to make is if these have been accured in previous years can they be carried forward to later tax periods and the answer to that question is yes they can as I've just mentioned reliefs for qualifying group or business restructuring transactions will not be applicable if a small business relief claim is made in terms of transfer pricing as I mentioned and stress when calculating Revenue the arms length standard must be followed but there is no requirement to maintain transfer pricing documentation if you are claiming small business release the revenue threshold which as mentioned must be relevant for the current tax period and the previous tax periods is 3 million Duram or less an election has to be made in each tax return it is not an automatic relief and as per the last point it is required to be self assessed if your revenue is lower than 3 million there are many reasons you may not choose to adopt small business relief perhaps you have losses in that year which you wish to ACR or other reasons if you wish to engage with other parts of the corporate tax law other reliefs other exemptions and so this is a relief that you will have to self assess in each taxable period the deductible expenditure rules which we will go on to in part four after the break are not relevant again for the same reason as mentioned before there is no calculation required for the corporate tax and as such there is no need to make deductions given that there is no corporate tax payable thank you very much I will pass back to Ruther thank you and Juliana for the valuable information before inviting you all to take a short break I would like to clarify that the authority has allocated an information desk in the main hall you can contact them and they will be more than willing to answer your inquiries and assist you with any issues related to tax and registration in the corporate tax system we will see you back after 30 minutes welcome back ladies and gentlemen with the continuation of the upcoming presentation we move on to the second part of our workshop for today as we reinvite one more time our expert R hamzawi zuir chadri and Juliana candido please join me again in welcoming them okay thank you very much again for your time I think in uh the second part of the session we'll talk about the calculation of the taxable income for corporate tax purposes I think we try to summarize the uh the various features related to the computation of taxable income in one slide basically we start always from the accounting income whether it is a profit or loss and this is based on the uh financial statement prepared on a cruel basis and financial statement as we will see at a later stage that will need to be audited in specific circumstances mainly if the taxable person is a qualifying free zone person or uh if the taxable person is is having a revenue for the tax period exceeding equal to or exceeding 50 million uh Dirham and of course for qualifying free zone person the requirement to have audited financial statement is applicable irrespective of the revenue of the qualifying free zone person so basically the slid shows the adjustment that needs to be uh made to determine the taxable income so basically we will look at unrealized gains or losses and this will depend on whether you have made an election to uh for unrealized uh you know of the uh capital gains uh based on realization or not based on article 20 Clause 3 of the corporate tax law and then you will need to make an adjustment in that case and we'll give an example also on that you need to also adjust based on whether you have an exempt income or loss so if you have a dividend for example derived from a resident company you need to deduct that to uh from your uh accounting income you need to look at the reliefs the various reliefs that are available um under the corporate tax law if you transferred an assets for example to a member of a qualifying group uh the gain will not be recognized if you meet the requirement for the uh transfer within qualifying group if you realize the gain also under business restructuring article 27 of the corporate tax law you meet the requirement for the business restructuring the gain also will not be uh realiz uh recognized then you look at the non-deductible expenditure and non-deductible expenditure they will be added back to the uh taxable uh income you need also to consider the uh transfer pricing adjustment which needs to be done for all non- arms length transaction uh with related parties so basically you need to look at the uh you know prepare your transfer pricing documentation and support the pricings that has been applied for transaction with related parties or connected person and you have articles defining what is uh of course uh related party and who is a connected person you have also finally the adjustment specified in ministerial decision number uh 134 and we will talk about them then you have the taxable income before the tax loss relief then in that case you need to check whether you have tax losses that you are carrying forward from a previous corporate tax period and then you can offset those losses up to 75% of the taxable income of that specific year the Year for which you are determining your uh taxable income and of course pre C losses you cannot uh offset them and you cannot carry them forward so the uh losses that could could be carried forward should be uh incurred you know during a period where CT is applicable so if your first uh tax period for a company under uh the corporate tax law is 1st of January till 31st of December 2024 the losses that you incurred in 2023 you cannot carry this forward to 20 uh 24 to your first corpor for a tax period then once you have determined your taxable income then you need to apply the uh corporate tax rate and then you will determine your corporate tax liability of course these are the standard corporate tax rate and then um if for example you have incurred some foreign taxes for example on certain items of income you received interest from a foreign country you have been subject to withholding tax in that foreign country this interest income has been subject to tax at the rate of 9% in the uie you can claim a foreign tax credit based on article 47 of the corporate tax LW up to the uh maximum amount of the CT the corporate tax liability applicable on that foreign uh Source uh interest income if you receive the dividend from a foreign company the dividend is not subject to tax because it is eligible for the participation exemption and we will see in a nutshell the requirement for the participation exemption then of course you will not be eligible to the foreign tax credit because that dividend is not subject to tax in the uie as explained by my colleague zuar if the small business relief is applicable when you have uh Revenue uh equal to or less than kind of 3 million this Revenue needs to be determined by based on the arms length uh principle and then if you elect for the small business relief you will be deemed not to realize any taxable income and then you will not have any uh City uh liability as per the condition as I said explained by uh my colleague zuir so if you elect for the small business relief under article 21 and ministerial decision 73 then you will be deemed not to realize any taxable income so realization basis basically um the realized gains are or losses are the actual gains or losses that occur on completion of a transaction unrealized gains or losses relate to a notional change in the value of an assets or liability without actual disposal or transfer included in the financial statement when acral basis is uh adopted in principle based on the acral you will need to recognize the increase in the fair market value but if you op for the realization basis then any increase in the fair market value will not be uh considered and basically a taxable person following the acral basis of accounting he can elect to consider gains and losses on realization basis for calculating the taxable income either in relation to all the assets on liability subject to fair value or impairment uh accounting or or only to the assets classified as capital assets so you have two uh ways to make this election and this is basically explained under article 20 close 3 of the corporate tax law so article 20 close three the election for the realization basis it needs to be done in the first corporate tax period when you file your corporate tax return so when you file your corporate tax return for the first tax period you need to make the election for the realization basis and this election is irrevocable and of course you understand why it is irrevocable because um I think there is something in accounting called the permanency of the methods of the accounting man methods used we cannot switch from one year to the other uh from realization to um to um unrealized and there will be leakage in the uh corporate tax base an example for the realization basis companies see during the financial year ending on the 31st December 2025 recognize revaluation gain on land in his financial statement of 2 million measured at fair value the original cost of the land was 5 million and following the revaluation the net Book value of the land is 7 million the land was not sold at the end of the tax period and therefore the revolution gain is considered unrealized because there is no uh transfer of the Land There is no exchange of the Land There is no uh contribution in kind of the land so the land still is still with company held by and owned by company C in the situation where no election is made for realization basis company C would be subject to tax on the unrealized gain of 2 million in relation to the tax period Ending by December 2025 if the election is made for the realization basis then uh company C can elect to apply the realization basis respect of all assets and liability that are subject to fair value or impairment uh accounting for the company and then in that situation the company will not include the uh revaluation gain of 2 million when Computing its taxable income then because this these 2 million have been already included in the the accounting income when determining the taxable income you need to uh reduce the amount of the uh 2 million because of the election for the realization basis and this is also uh I think it's a very important feature an attractive feature of the corporate tax uh system in the UA because it allows you to uh manage your treasury your cash because from economic standpoint it's not good to pay tax on a gain that is a potential gain that has not been uh realized yet what about exempt income so here we're talking about article 22 and article 23 of the corporate tax low so we are talking about dividends and other profits distribution so dividends received from UA company are exempt from corporate tax without any condition so a uie company that is paying a dividend to another uie company at the level of the recipient entity the Dividends are exempt from tax without any condition and here we are in a domestic a pure domestic situation if a uie company is receiving dividends from a foreign judical person those dividends that will be also exempt be exempt from tax subject to meeting the requirement under article 23 close to of the corporate tax law meaning meaning the participation exemption requirement if the participation exemption requirement are met then and foreign dividends will be exempt from tax in the UA and those dividends they will not be taxable under the corporate tax law so in the first situation we are talking about a domestic situation uie company paying a dividend to another uie company this is a domestic situation and at the level of the recipient company of the dividend there is an exemption without any condition because it's domestic situation and the dividend is paid between two resident judical person if we are in a crossborder situation whereby a uie resident company is receiving dividend from a foreign entity those dividends could be exempt from tax if the participation exemption requirement are met and the uh part participating interest requirement mainly it means a 5% or greater ownership interest in a judical person held or intended to be held for an an interrupted period of 12 months or if the historical acquisition cost of the ownership interest is at least 4 million uh Durham so you need to have either 5% % of the share capital of the participating interest of the subsidiary or if you don't have the 5% in the share Capital you need to have uh a minimum of 4 million of acquisition costs so basically because we consider that 4 million is a substantial amount so we uh we uh uh uh also apply the participation exemption if you have those requirement and these requirement are more detailed under um article uh 23 two of the corporate tax law and also under the ministerial decision 116 related to the participation exemption then uh the following types of income they are not taxable or they are exempt from tax so either are not taxable or not also deductible so dividend and other profits distribution gains and losses from the disposal of the shares and also foreign exchange gains and losses and impairment gains and losses these types of income they will be they will not be considered for corporate tax uh purposes and of course the provision of the exempt income when we are in situation where uh the small business relief is uh elected this condition they would not apply because the entity applying for the small business relief or the person applying for the small business relief is already deemed not to realize any taxable income so it's not useful to uh opt for these um to to claim this exemption because you are deemed already not to realize any uh tax income in general also the expenditure that is related to an exempt income other than interest is not deductible so if you incur some expenditure to get a taxable income this expenditure is in general deductible if you incur expenditure for the purpose of realizing an income that is exempt from tax we treat this kind of in equal Manner and we will deny the deduction of the uh expenditure because the income generated uh from this expenditure is also not taxable because it is exempt from tax so if we kind of summarize the participation exemption and in previous session we had a lot of slides on participation exemption but it's quite I would say sophisticated so we wanted to summarize it and simp try to simplify it a little bit so the parent um company in a UA hold a participation of 10% in another uh company a subsidiary called participation C the income in that situation is exempt without the need to meet any condition and here we are talking only about a dividend the dividend is is exempt without uh irres of any condition between two resident companies the same thing if we are in a domestic scenario but in that case parent coup is realizing capital gains on participation cool in that specific situation because we are dealing with capital gains and not with a dividend so basically partici parent Co will transfer the um participation in uh participation Co and then realize some capital gains in that case the capital gain will be exempt from tax if the participation exemption requirement are met so in a domestic scenario between two resident companies dividends exempt without any condition capital gains they are subject to the participation exemption rules in order to meet the exemption requirement this is for a domestic scenario if we are in a crossborder scenario then the dividends or the capital gains both of them they will be exempt from tax at the level of the parent company which is resident in the UA if the participation exemption requirement are met whether we are talking about dividends or capital gains this is a point that is extremely important under article 22 and article um 23 of the corporate tax law and also it has been clarified under the corporate tax guide related to the participation exemption the FDA published uh an extensive guide on the the application of the participation exemption rules and I think you will find much more details there uh with example on each of the requirement need to be met that need to be met in order to claim the participation exemption but we try to summarize these in these two slides okay the requirement related to the holding the participation for 12 months or uh the intention to hold the participation for 12 months is a sort of an anti-abuse uh close because we don't want a situation where you have less than 5% of the share capital of the subsidiary or you have less than 4 million in value of participation and then just before the distribution of the dividends you will try to go and buy more of the in the share Capital just to meet the requirement of the 5% or the 4 million at the time of distribution and then you claim the participation exemption and then you sell back this participation so this is kind of the um kind of the abusive scheme why the uh intention to uh hold the uh participation or the requirement to hold the participation for 12 months was introduced in the law and it's based on uh International standards based on it's one of the rules that were introduced under the uh BS uh Bas erosion and profit shifting uh reports of the uh project of the oecd and this requirement at the end also um it was also introduced under the oecd model in 200 uh 17 based on the uh BS Report on action six related to treaty abuse so they had the requirement that in order to get reduced withholding tax rate on dividends you need to hold the participation for 365 days which is 12 months we have other reliefs available under the corporate tax law the transfer within uh qualifying groups so basically uh this is a corporate tax relief that is available where an assets or liability is transferred at a net Book value between member of the same qualifying Group which allows to transfer the transfer to take place without giving rise to a corporate tax liability if certain conditions are met you transfer an asset to the same a member of the same qualifying group then you can transfer this asset at net Book value and then no capital gains will be uh realized there is another regime also another relief that is available under article 27 of the corporate tax law which is the business restructuring relief and of course what is meant by business restructuring is typically uh merger uh spin-off and then we have the condition under article 27 if those conditions are met basically uh the uh transfer and the restructuring will be considered to trigger no gains or uh losses so where entire business or independent part of a business is transferred in exchange for shares or other ownership interest uh business restructuring relief May apply to eliminate the corporate tax impact of these transaction and of course this uh article is meant to encourage uh corporate um you know uh restructuring which is very important feature in a uh a corporate tax system and more guidance will be uh provided on these uh two regimes in the future and as mentioned by my colleague Zu if you um you know uh you claim or you you elect for the small business relief the uh transfer within qualifying group and the business structuring relief they will not be available because again under the small business relief uh election you will be deemed to uh not to realize any taxable income now what about the deductible uh and non-deductible expenses so the general rule is that for deductibility of expenses which is applicable across the board to all kind of uh expenses is that the deductible expenses should be incurred exclusively for the sake of the business if an expense is incurred for more than one purpose the portion determined to be uh incurred for business purposes only this portion will be uh deductible expenses generally will not be uh considered as deductible if they are not incurred for business purposes if a company will spend on the holidays for example of the owner this is not a expense that is considered for as incurred for business purposes then this will be it will not be considered as deductible if the expense is related to uh you know an element that is capital in nature so it's a it's a that the expense should be capitalized uh and you know for the purpose of creating or developing and and assets if the expense also is incurred for the purpose of deriving an exempt income also it will not be uh deductible uh also losses which are not connected or arising out of the uh business also those losses they will not be uh considered as uh deductible there are specific rules that are related to the uh interest expenses and these the deductibility of Interest expenses is subject to the general interest deduction limitation rule uh and basically here again the law uh uses another element that has been um stated by the um oecd base ER option and profit shifting uh project which is the AA uh you know um Criterion and then the amount of uh the maximum interest deduction will be kept at 30% of the uh AA and there is also a ministerial decision that specified the uh condition for the application of the uh deductibility of interest uh expenses the AA rule of course we have a sort of a DI Minimus requirement the AA rule will be applicable uh if the net interest expenditure exceeds the 12 million uh Dirham over the specific tax period and the net interest expenditure is the difference between interest incurred by the business and interest received by the business or generated by the business so we look at the net interest expenditure and we apply the a beta rule uh and the 12 million threshold for the net interest expenditure and not only for the gross amount of interest that are incurred by the business we need always to look whether uh the business has also received interest and the determine always the net interest expenditure for the entertainment expenses 50% of the entertainment expenses only will be deductible and this will include uh meals accommodation and transportation 50% the other 50% needs to be added to the uh taxable uh to the accounting income for the sake of determining the taxable income for donations and gifts so only donation paid to qualifying public benefit entities will be uh deductible donation paid to any other person they will not be considered as deductible expenses and they will not be uh considered as uh deductible for corporate tax purposes qualifying public benefit entities the list of these entities have been has been published by cabinet decision 37 of 20 uh 23 a very important element also that was mentioned by my colleagues is related also to transfer pricing so when we talk about an u a deductible expense we are talking about an arms length EXP expense so if this expense if this expenditure is charged by a related party the amount of the expenditure should meet the uh transfer pricing requirement and it should meet also the arms length principle and then for example this would apply to uh interest um expenditure so if you are incurring interest because those interest have been charged to your company by a related party or um so related uh you know company parent company or any person that is fits into the definition of related party then you need to consider that this should correspond to an arms length amount and then of course you apply the uh the caps for the interest limitation based on the AA and the 12 million uh the Minimus rule so expenses um that are deductible or non-deductible based on certain situation we took some example of uh specific expenses so fine and penalties so basically if you incur fines or penalties for the compensation or you pay them for to damage to compensate the damage or breach of a contract these will be uh deductible any other fines or penalties uh for the infraction of the law they will not be considered as deductible uh expenses bribes illicit payment uh they are non-deductible dividends and other profit distribution paid of the to the owner of the taxable person they are not considered as deductible amounts that are withdrawn from a business by a natural person who conducts business in the UA or a partner in an unincorporated partnership also so they are considered as uh also non-deductible expenses by expressly by the black letter of the law the corporate tax itself is a non-deductible also expense and input vat for example the irre IR recoverable input V8 is considered as a deductible expense what you uh recover as input vat will consider it as uh non deductible and of course again if you elect for the small business relief because of the revenue of a maximum of 3 million these rule they will not apply because you will be deemed not to realize any taxable income so you see to which extent the small business relief is a very kind of beneficial and attractive regime because it simplifies the uh compliance uh requirement it simplifies also it relieves you from any corporate tax uh burden transfer pricing rules so basically the transfer pricing rules that they are meant to ensure that the pricing of transaction uh is not affected by the nature of the relation that you have uh between the parties that are involved in that transaction and the feature or the condition for the transaction between related party it should be consistent with those carried between independent person or nonrelated person the FDA it has the right to adjust the price of non- arms length transaction and if you look at the uh slide on on the tax return you will see on the determination of taxable income you'll see that there is um also a statement related to adjustment for uh AR non-armed lens transaction and this is also reflected in article 20 of the uh corporate tax law related to the determination of taxable income so basically for the sake of of determining the uh arms length uh price to meeting the U arms length price specific methods they are uh applicable according to the facts and circumstances of the taxpayer according to his activity the uh FTA published a comprehensive guide on transfer pricing um I think it was published four or five months ago one of the first corporate tax uh guides and I I think uh of course for uh a business that elect for the small business relief you are not not required to transfer with with to comply with transfer pricing documentation but you need to comply with the arms lens principle so for example if you have an entity The Entity is conducting transaction mainly with a related party and you kind of um adjust the price for that entity um in order to remain below the 3 million threshold the FDA if they see that your transaction with related party they should be priced at a higher uh that should be charged higher price should be charged they can uh assess reassess the pricing based on the transfer pricing rules and determine that your revenue is exceeding uh the 3 I threshold and then you will not be eligible for the small business relief and this is why my colleague Zu referred when describing the condition or determining talking about the condition for the small business relief to the 3 million the 3 million should be an arms length threshold and not just a figure of uh gross revenues derived by the taxable person claiming the small business relief there is a very important provision in article 34 of the corporate tax law also which is related to corresponding adjustment so what is the corresponding adjustment uh basically that is made to the taxable income of uh based on the The Adjustment made to the uh taxable income of a related party or another related party you have two types of corresponding adjustment uh domestic corresponding adjustment and and a a crossborder corresponding adjustment so domestic corresponding adjustment basically if you have conduct You are conducting transaction between two related parties both of them are resident in the UAE and one of these parties has been subject to a transfer pricing audit transfer pricing adjustment by the FDA and the FDA decided that the price should be adjusted uh increased or decreased based on the uh arms length principle the other party to the transaction should also be eligible to a corresponding adjustment if there was an increase on one side there should be a decrease on the other side and this is meant to avoid what we refer to as economic double taxation the second situation for uh corresponding adjustment is a crossb situation so the same adjustment is happening so a taxpayer in a foreign country You are conducting related party transaction with that taxpayer which is based in a foreign jurisdiction and then this taxpayer has been subject to a tax audit in that foreign jurisdiction which is affecting the overall tax burden on the transaction in that case the corporate tax FLW allows you to claim a corresponding adjustment but in that case it will be subject to an application in the first situation in domestic situation it is uh a systematic corresponding adjustment because both taxpayer are based in the uie both of them are uie corporate taxpayer in the second situation is a crossb situation so the taxpayer that is based in the UAE can come uh apply to the FTA for a corresponding adjustment based on the adjustment that happened in the foreign jurisdiction and also the corresponding adjustment again to mention that it's a a provision that is available also under most of uh double taxation agreement of the uie you will see it under article 9 close two of the uh most of tax treaties and article 9 close2 article 9 itself it refer to Associated Enterprises so this rule also is available under tax treaties or taxation agreement uh what does it mean a connected person basically a connected person I think the definition is available under article um 35 of the corporate tax law so it's a natural person who directly or indirectly has an ownership interest in or controls the taxable person could be also director or officer of the taxable person uh related party to the owner director or officer of the taxable person also partner in an unincorporated partnership they will be considered as uh also connected person payment or benefit provided to Connected person are deductible to the extent they correspond to the market value and that they are incurred wholly and exclusively for business uh purposes and the condition that the expense is is incurred wholly and exclusively for business purposes is a general condition that is applicable to all uh expenses before even reaching whether the uh transaction or the expense is uh charged at arms length or not and then the control it means the ability of one person to influence another person uh including 50% or more voting right 50% or more composition of board members or receiving 50% or more of the profit or influencing the conduct of the business and its Affair and the last point it will be based on facts and circumstances and the um the specifics of each uh situation the definition of related parties so you can see the definition so basically it includes two or more natural person related within the fourth degree of kin ship it includes also natural person judical person where the natural person directly or indirectly uh controls or owns 50% or more of the share in that judical person so if you have a person that owns um with his related p with his wife for example and children uh more than 50% of a company uh of a judical person or a company then all the transaction between that person and that company should be subject to the arms length principle you have also other situation where one judical person directly or indirectly controls or owns 50% or more of the share of another judical person or where a third juridical person controls directly or indirectly or owns more than 50% of two or more juridical person then these two judical person owned by you know uh more than 50% by a third third person will be considered as also related parties a permanent establishment and uh you know and the head office will be considered as also related party a UA juridical person or a UA person with its foreign perment establishment also they will be considered as a juridical person as a related parties Partners in a up also they are considered as uh related parties and then the meaning of control is somehow the uh the same what is a tax loss relief so this is also it's an important um feature of the corporate tax low so if a taxable person deductible expenditure exceeds the taxable the income that is subject to corporate tax they will have a negative taxable income I.E which means tax loss tax loss can be also carried forward and used to reduce future tax period up to a maximum of 75% of the taxable income of that subsequent tax period unutilized tax losses can be also carried forward uh indefinitely if 50% or higher uh in terms of ownership interest uh is constant from one year to the other or if there is a change in the ownership if the taxable person continue to conduct uh the same or similar business or business activity so basically from one year to the other you can carry forward tax losses is there a time limit for the carry forward of tax losses no there is no time limit usually in many jurisdiction you can carry forward tax losses up to three four 5 years the corporate tax legislation the UA is quite generous it it it allows for an indefinite um timeline in terms of carrying forward tax losses the only condition here is a condition that is related to the amount of the uh losses that you can claim so you can carry forward tax losses up to 75% of the taxable income of the year in respect of which you uh claim of the taxable income of the year in respect of which you claim those those losses also there is a a requirement to maintain the same ownership to maintain 50% at least of the same ownership from one year to the other if not uh if the requirement of maintaining 50% of ownership is not met then still you can still carry forward tax losses if the taxable person has continued to conduct the same or similar business activities and then I think I mentioned this in the past so losses tax losses that I incurred before the commencement of the corporate tax law they are not eligible for Relief you cannot carry them forward losses also that are incurred before a person becomes a taxable person they are also uh not eligible for the carry forward and this is for example a situation where for example 2024 uh tax period a person is an exempt person and then he incurred losses and then in 2025 he does not meet anymore the uh exemption uh requirement then the losses incurred in 2024 he cannot carry them forward for 2025 because in 2024 he was not a taxable person he was an exempt person also assets and activities which generate exempt uh income those uh also uh you cannot you know uh claim losses on those kind of activities and assets let's take an example on the tax loss relief and the and the carry forward of to tax losses so basically you have parent company owning 100% of a subsidiary company and in year one which is a a period in which the corporate tax law is applicable so a subsidiary company has a tax loss of 1,000 in year one and a taxable income of 200 in year two the tax loss relief and carry forward of tax losses uh is Illustrated here so basically in year two you have a taxable income of 200 you can claim you carry forward your tax losses from year one up to 75% of the taxable income of year two which is 200 75% of 200 is 150 and then you can claim up to 150 of these tax losses and then the balance is 50 then you are left from year one you are left with still 850 of tax losses that you you couldn't claim in year two these tax losses they are legible to be carried forward for year three and four Etc subject to the requirement that at least 50% of the ownership in subsidiary company is not changed or if more than 50% has changed you need to maintain the same activity or similar activity so here parent company for example in year two they sold 30% of the participation to another company to a buyer company here we have still the 50% uh you know maintaining the 50% of ownership this Criterion is is is met so the company can uh enjoy the U the carry forward of of losses if the parent company would have sold for example 70% or 80% of the participation and if the company the subsidiary company would have changed completely its activity then those losses the 850 they would not be able they will not be able to carry them forward for the following tax period again the corporate tax regime as I said is quite generous for uh the carry forward of tax losses because there is no limitation the limit in terms of time the limitation they apply only to the amount of losses and they apply also in respect of the condition for the uh for claiming the uh uh uh the tax losses carry forward thank you and I leave the floor to uh my colleague Juliana to talk about compliance uh requirement with respect to the corporate tax law thank you hi everyone H so in this part of the section we would like to briefly guide you through some of the important points after calculating the taxable income so we we are going to see which other kinds of obligation taxpayers need to follow so first with respect to the accounting standards ER the UAE decided to follow a accounting standards that are largely accepted by other countries so the choice was to apply IFRS so the IFRS that are used wide largely across the globe are also applied by the UAE and the exception is that for business H with a revenue less than 50 million d a IFRS for small and medium business can be applied which are quite simplified so it's easier to apply for these cases and in order to calculate the accounting basis ER normally taxable persons have to follow the cruel basis so when the expenses are incurred but as R mentioned H one of the benefits of the corporate tax regime is that an election for realizations basis can be made and this can be helpful for your treasury H another exception is that H business can follow the cash basis of accounting in case of Revenue Less Than 3 million D per tax period and in exceptional cases as well a taxpayers can submit an application to the FTA explaining why they would need to follow a cash based of accounting H another Administration requirement is to register and as his Excellency mentioned H registration is already open and we encourage and we urge you and your clients to register as soon as possible in order to to have a smooth process and the timeline is that you should register before the first filing but we really encourage to register as soon as possible and it's all done online via the Mr Tex portal and as we mentioned we also have a support and a registrations team that can support you in case of specific questions or issues and the idea is that um now H even if you are natural person if you are as mentioned if you are above the 1 million turnover then you would also need to register under the amch so it's important to to have this in mind and as my colleague mentioned afterward zuir H we are open to answer private clarifications but one of the requirements is that you are registered for CT purposes and briefly I'll talk about the D registration it's also made under the Mr Tex portal H and in case a business H needs to D register because for instance they have closed their activities then it's required that the business it's in line with all the administration requirements so it's a requirement that H three months after the cessation of business H you pay all the final corporate tax due and you file all the pending tax returns in order to be there register from the system ER about the tax return so uh we have a timeline of nine months after the relevant tax period to to file the tax return and this is lightly different from the practice from vat that for V purposes you have to calculate and pay the V to do as soon as possible as soon as you you have your computation but for H corporate taxes you have this period of 9 months H in the beginning of the presentation we saw the different tax periods and regardless whether you have a January to December period or a different tax period you have this N9 month periods to do your calculation to find the tax return and then to pay the amount of taxes due and the tax return is going to be completely online and it has to include the the information that is here in in this uh table the first three categories so the text period the name and address text registration number and the date of submission these are prepopulated but for the other points you need to keep your accounting standards and have your accounting calculation and you have to populate this information in the system which is the accounting basis the taxable income for the tax period which you have calculated based on the accounting standards the amount of tax loss relief claimed if applicable the amount of tax loss transferred from or to group members the amount of tax credit claimed if any and the amount of corporate tax payable for the period so applying all the reliefs and all the adjustments that R Di menion that are are available in the calculation then you would reach to the amount of corporate tax payable and in terms of currency we know that here in the UA there are many multinational business or business that have operation in other countries but H for the purpose of the tax returns H you have to submit the amounts in Dean so in case you need to do a conversion H we're going to follow the exchange rate set by the central bank and there are three different types of exchange rates possible we would first aim to apply the spot rate with on the date of the transaction but if it's not practical it would be acceptable an average either the monthly average exchange rate or if it's not possible the average anual exchange rate but always we have to file the text return using D any in terms of documentations normally business have to keep a documentations and the documentations are generally specified under the tax procedure law but it's important to state that the specific requirements for corporate tax purposes follow the corporate tax law so for corporate tax law purposes H business need to maintain financial statements and it's important that in this year before the filing period business are regularizing their a documentation and in casee there's any issues or they were not keeping documentations they have this period before the filing period to to to arrange their documentation and in case as I just mentioned in case h you have a revenue that does not exceed 3 million zans per year it can be used the cash based of accounting whereas in the case of large business multinational business that H the revenue exceeds 50 million Deans audited financial statements are required so the scrutinies are in these cases and they need to prepare audited financial statements and of course um when the taxpayer is filing the tax return it doesn't have to submit the financial statements but if the FTA requires so in the course of an audit or in case of additional questions business need to be ready to to show their financial statements and another obligation in terms of the documentation relates to transfer pricing and as R mention transfer pricing is applicable in the UA under certain circumstances and in these cases the relevant taxpayers need to have the disclosure of the information so the way it's going to work is that in the tax return certain category of business such as qualified freeone persons and large business they will have to to complete a TP disclosure form so certain related Parts transactions will have to be specified in this transfer pricing disclosure form and as well H the FTA may require a additional information an additional super documentation that supports the that the arms land price was applied when there were related part transactions and finally um the record keeping period for C purposes is 7 years and this is important to stress because h under tax procedure law the standard period is five years but for corporate tax purposes H you are required to keep documentation from 7 years after the end of the relevant tax period H in terms of payment H the due date um it's in line with the preparation of the tax return so the corporate tax due needs to be settled after 9 months of the relevant tax period so you have these 9 month periods to submit the tax return and to pay the amount of corporate tax due and with respect to refund ER refund can be available only in two circumstances for corporate tax purposes which is when you have a withholding tax credit available that exceeds the corporate tax paybook but we we don't foresee this in the first few years because as you know for the moment the withholding tax it's rated at 0% but there might be cases as well that the tax payable person has overpaid corporate taxes so they would be eligible to a refund which will be also done via the system and finally I just would like to show you the penalties that are might be UNC in case of the violation of the corporate tax I'll I'll leave you take a picture so here you you have the administrative penalties for instance in case of failure to maintain or submit the necessary data records and documents failure to submit the tax return within the time frame that's why we urge business to register in advance to avoid issues and delays in submitting the tax return also sub mitting an incorrect tax return or failing to submit H the the registration within the applicable time frame that we just saw it's h within 3 months of the end of the activity failure to settle the payable tax within the time frame or failure to submit a voluntary disclosure when there was errors in the tax return or in the tax assessment and finally failure to offer facilitation to the taxt auditor so that's why it's important always to to have the documentation up to date in available in case of audit and any other violations that might be specified in the future and the amount of the penalty would not exceed two times of the amount of tax ER in respect of the assessment issued and now we going to finally guide you through the private clarifications thank you thank you thank you very much Juliana so I'm going to spend just a minute or two talking about private clarifications the private clarification process is something that the uh FDA is allowing and offering to taxpayers taxable persons in the UA and it's very useful if you have any queries as we have seen today even for small small businesses we appreciate corporate tax can be complex and if you have any questions the private clarification is the route to allow for you to gain certainty we appreciate that taxpayers want certainty in the transactions that they are entering in any proposed transactions that they are doing in the next year or or beyond that so what is a private clarification a private clarification is an official response that the FTA provides in relation to a tax query on the tax treatment of specific transactions and there's a few points which uh I'd like to go over which are very important as the clarifications have opened for corporate tax and we have started to receive clarifications and we have encountered some issues so hopefully this slide in the next couple of minutes will provide some insight into avoiding those issues if you are submitting private clarifications so let's start with how do you apply if you have a query if you have a question you want to gain certainty how do you submit a clarification it's done through the Amara tax platform so as an applicant you'll be able to file your private clarification online we do have a user guide which is available online also which can guide you through that process and in the coming year in 2024 we will also be updating the relevant guides for private clarifications so who can submit a private clarification well we are accepting private clarifications from people who are registered for corporate tax as my colleagues have said his Excellency started off this presentation this morning we urge you to please register if you are registered you have access to the private clarification process the only exception to that will be if your clarification is in reference or in relation to whether you need to register or not in that instance then we are able to respond to your private clarification request in regards to sub submitting the the request there must be an interest in the matter for the applicant it can't be about someone else or a third party it has to be about the applicant making the private clarification if there are questions which are about a related party perhaps a spouse perhaps another company which you may have an interest in unless it is about that specific taxable person we will not be able to answer that clarification and that makes me turn to the five final column which is the reasons for rejection so as we have started the private clarification process there are sadly some instances in which we have to reject these private clarifications so the first point is there's no genuine legal uncertainty the whole point of having the private clarification process is to gain that uncertainty if there is no uncertainty to begin with if the point is clear from the legislation from the CT law the decisions and there is nothing for us to add there then this would be rejected in terms of in terms of the process and it's something that we wouldn't be able to provide a clarification on and the next point is the form being incomplete and I can't stress this enough if you are submitting a private clarification request please ensure that the form is complete this will be around details transaction documents everything that is relevant to the private clarification please ensure this is uploaded if we have everything we can respond with the private clarification however if the information is either not there or it's unclear then we may have to reject the request the next point is the technical or legal analysis so when you are submitting a private clarification there's also a point where you enter your position your technical analysis your legal analysis of the matter at hand and that's something that we require this the private clarification process isn't something where we're essentially offering advice we are offering a clarification app a we are clarifying either your point of view or explaining the position from a corporate tax law perspective so please ensure that you are providing the technical and the legal analysis when submitting your private clarifications if we suspect that there is tax avoidance then that is something we are not able to provide a clarification on if that's the fda's perception or point of view the clarification will be rejected and once again if it does not relate to the applicant that's not something that we can answer so please ensure we appreciate that there may be different relations but it must be it's crucial that it has to be the taxable person to which the clarification relates is the one who's making the application and to wrap up how long does it take for our response well we have our internal checks and processes to to do when providing the clarification and to ensure there's consistent consistency across all our messaging we will take 50 business days to respond from the date of receipt or when final or further information is provided by the taxpayer and another brief point to note if there is a matter on tax residency the process for tax residency residency should be gone through the TRC route and not a private clarification if we do receive something in relation to our TRC or to establish residency that's not something that we can accept through the private clarification treatment thank you very very much for listening to me about this I will hand back to Ruther we have concluded for the slides for now but we will have some Q&A I understand thank [Music] you thank you so much uh R we now move to an important part of today's agenda we will be gladly responding to your inquiries and questions about corporate tax when registering for this Workshop many of you asked questions and our team of expert will answer all all the questions raised so join me one more time as I join our tax po policy expert and tackling these questions hello once again uh so first question uh goes to Juliana is corporate tax registration mandatory if you are already registered for V thank you Ruda indeed even if um taxable person is already registered for V purposes it still has to be registered for corporate tax purposes first in Practical terms because the TRN is different so in FTA if you're registered for V purposes you have one TRN and once you registered for coroporate tax purposes you have a different TRN so any judical persons need to register for corporate taxes and natural persons once they reach the turn of of 1 million Jons they also have to register for City purposes thank you Juliana what about how can a so proprietorship register for corporate tax thank you for this yes this is a recurrent question so as soil proprietorship is considered as the natural person behind for corporate tax purposes so in this case once again if this whole preparator ship reaches the 1 million Z threshold it will have to register for City purposes thank you so much uh if a natural person started in 2024 a new business through anlc where he owns 100% of the capital single owner ATC should the natural thir person registered for corporate tax purposes uh this is a very good question it's a recurrent question actually the person who should register in that situation is the LLC the LLC is judical person it should be registered for uh corporate tax purposes irrespective of the level of Revenue because it is considered as uh taxable uh resident uh person juridical person incorporated in the uh UA including a free zone uh company so the person who should register in that case not a natural person but the uh LLC and even though the LLC is 100% owned by one natural person so it's a single owner limited liability company it is considered as a separate juridical person and then the LLC should register the natural person if he's conducting business or business activity exceed 1 million threshold uh 1 million Revenue threshold in a Gregorian calendar year as per cabinet decision 49 then he will be required to register if this uh requirement is not met and the business activity is not conducted then no threshold is crossed over a Gregorian calendar year then he should not register but I think it's an important point because there a lot of for small businesses a lot of confusion between a natural person and the juridical person held especially LLC held 100% fully owned by a natural person so it's a separate judical person and the rical person should register the natural person no in principle unless he meets the requirement of cin a decision 49 thank you so much R fourth question goes to zuir should taxable income be calculated based on audited financial statement only thank you so taxable in in needs to be calculated starting from the accounting income and that is considered from IFRS or IFRS for SME and in certain instances as we've seen today the cash basis now in terms of the audited financial statements that's only applicable once the revenue exceeds 50 million Durham or it's a qualifying free zone person it's one of the requirements to be a qualifying free zone person or one of the conditions I should say is to have audited Finance fincial statements so all persons are required to use accounting income as their starting point adjusted to reach their taxable income as was seen today in part four of the presentation but audited financial statements only for qualifying free zone persons and those who have Revenue exceeding 50 million durhams in a tax period thank you zir uh one more question for you is a nonresident having PE and UAE required to prepare financial statements as per IFRS for corporate tax purposes even if it otherwise follows a different accounting standard so I can take this question so basically if some branches of foreign companies they are preparing their financial statement uh based on an a different accounting standard it's the accounting standard usually of the head office uh jurisdiction in that case despite the fact that they are preparing their financial statement based on another accounting standard for the purpose of the corporate tax in the UA they should prepare the financial statement as based on IFRS uh if they exceed the 50 million uh or IFRS uh for smmes if they are below the 50 million uh and uh basically uh if they are also establishing a free zone they need to uh you know use uh IFRS uh irrespective of the uh of the level of uh revenues and uh the non-resident um person with a PE in the UA is considered as taxable person so the obligation of uh pre using or relying on the accounting standard applicable in the UA is also applicable to them okay okay thank you so much uh what about if a natural person's taxable income does not exceed 1 million Dirhams are they required to register and file a tax return so if a natural person um taxable income does not exceed 1 million uh the uh I think we should be careful here because the requirement or the threshold for natural person is 1 million but it's based on the revenue not on the taxable income uh so if the revenue exceeds the tax the 1 million then in that case they will be required to register and the revenue should be determined and considered over a Gregorian calender year uh so basically we need to look at the revenue and not at the taxable income but in general uh except few situation in general if you have a taxable income of uh 1 million it means in general uh that you have Revenue exceeding uh uh the 1 million but again for natural person we don't look at the taxable income we look at the revenue and for the purpose of determining whether the revenue exceed 1 million or not we consider excluded also activity they should be excluded they should not be considered so the one mentioned by my colleague Juliana uh wages and salaries uh real estate uh income uh private investment income those should not be considered and then if over Gregorian calendar year from January till December you have more than 1 million of Revenue not taxable income then you will be required to register so I think it's a good question and sometimes it's confusing so again the Criterion for natural person is the revenue and not the taxable income thank you so much R uh Juliana can an can an owner of to proprietorship pay themselves a salary and deduct uh deducted as an expense thank you Ruda so the soil proprietorship here will be considered as an natural person and we consider that a natural person cannot remove this amount from the business so the salary will be considered as taking out of the business and it won't be considered as a deduction for the purpose of calculation of corporate taxes thank you so much uh this question goes to zir should taxable income be computed only in Eed thank you yes it should be and when accounts are not prepared in durhams then as Juliana mentioned before they need to be converted into durhams and FDA decision 11 of 2023 stipulates how this should be done so ideally we we would use the spot rate for that specific transaction if that's not practical then you would use the monthly rate if that's not practical you would use the average annual rate now when considering which rate to use use you need to give consideration to what type of business what transactions you are doing so it's not something which you can automatically go to the average annual or the monthly you need to make some considerations and make an effort to do the most accurate transaction conversion possible and the FTA will consider this when when receiving those conversions which are are made in returns so yes and if they're not in durhams then they need to be converted as per FDA decision 11 well noted thank you zuir uh are experts of goods and services subject to corporate tax so exports of goods and services I think the person who ask this question is very much kind of more familiar with vat so for corporate tax purposes the exports of goods and services are in principle subject to corporate tax because the for corporate tax purposes we determine uh what is uh considered as a taxable income is basically the worldwide income income from the UAE and income from outside the UAE now there could be situations where the exports or the proceeds or the income derived from the exports of goods and services is um uh not subject to corporate tax um or subject to a zero rate basically if you elect for the small business relief and then you uh meet the requirement of the small business relief which means that you have um within this 3 million of Revenue uh some uh income that is derived from exports of good of services then you will be deemed not to realize any taxable income if you are a qualifying free zone person and the uh exports of goods and services um are somehow considered as uh qualifying income that is uh eligible for the 0% rate according to article 3 Clause two of the corporate tax law then also in that case the income will not be uh uh subject to tax will be subject to a zero uh% uh corporate tax also if you have a foreign permanent establishment and you are um electing for the foreign PE exemption under the article 24 of the corporate tax law then in that case also some uh income derived from the um exports of the goods and services if they are attributable to that foreign PE you elect for the foreign exemption then also these in these uh proceeds these income derived from these sales also will um will not be subject to corporate tax based on the uh foreign PE exemption thank you so much uh will depreciation of an asset be deductible exp expenditure if yes are there separate depre depreciation rates for corporate tax purposes thank you so basically the depreciation of and uh assets is uh deductible uh expenditure subject to the general uh deductibility rules so the assets should be um you know uh required exclusively and wh for business uh purposes and if the depreciation also is in line with the um IFRS it will be also uh acceptable whether we have depreciation separate depreciation rates so in the UA is slightly different from other jurisdiction many other jurisdiction there are uh cap or maximum rates of depreciation for assets that are provided by the tax legislation we don't have this in the uh corporate tax law in the UA so basically we are aligned on the accounting subject to uh uh of course uh you know applying the uh relevant accounting standards and also subject to the uh General uh condition of deductibility mainly that the asset that you are depreciating is required um you know exclusively and for business uh purposes so if you are depreciating an assets uh based on uh the um IFRS and this asset is not an asset that is used for uh um business purposes it's a private asset of course it will not be uh deductible depreciation will not be deductible thank you so much ra what about individuals are not taxed on their salaries so can a company decide to Grant enormous salary to the managing director who is the owner and avoid to uh profit in its bookkeeping it's a good question so basically in that situation the um the managing director is um uh a related party he's also connected person because he's the director so any transaction between the uh between him and the and the company needs to be subject to the transfer pricing rules and to the arms length principle so the deductibility will be limited to the arms length salary in that case so we cannot pay any uh Sal in order to uh of course reduce the taxable base of the of the company thank you so much last but not least the last question to zir can any company or natural person elect for the small business relief or will the FTE inform them whether they are eligible thank you yes so it's for natural persons or judical persons and they are expected to self assess so the FDA won't inform them it's it's not an automatic relief at the time of filling out the tax return that's when they can claim spr and fill out the simplified tax return but it's something which businesses natural persons or judical persons should be identifying and self assessing themselves thank you so much and thank you for this ladies and gentlemen as we conclude to our last uh session uh we would like to let you scan open your cameras and scan the QR code for the survey so we can hear back from you about today's Workshop thank you so much for participating in the survey as our time ran out and we're approaching the end of the workshop we try to answer as many as question as possible we assure you that the federal tax Authority team will be Keen to answer all remaining questions and when necessary the frequently asked questions section on the fda's website will be updated thank you again for joining us today and I also thank those who shared their important questions and to stay in touch with the FDA please follow us on our official channels on social media platforms to know more about any workshops organized by the FTA in the future you can also visit the fda's website to obtain the latest development and contact us for your other inquiries you can also contact the call center or use the contact us page on fda's website to ask question and inquiries I hope that this awareness Workshop helped answer your inquiries and provided a better understanding of the principles of corporate tax law in the UAE thank you and have a good day [Applause]