Everything you know about how Corporate Tax (CT) applied for Losses, Withholding Tax, Free Zones, Transfer Pricing and Company Administration.
CT FOR LOSSES:
The UAE CT regime will allow a business to use losses incurred to offset taxable income in subsequent financial periods.
- A loss for CT purposes (tax loss) would arise when the total deductions the businesses can claim are greater than the total income for the relevant financial period.
- Excess tax losses may be carried forward and used against taxable income in future years, provided certain conditions are met.
- Tax losses from one group company may be used to offset taxable income of another group company, provided certain conditions are met Further information on the group loss utilisation rules will be provided in due course.
- A UAE group of companies can elect to form a tax group and be treated as a single taxable person, provided certain conditions are met.
CT FOR WITHHOLDING TAX:
- Withholding tax is tax collected at source by the payer on behalf of the recipient of the income.
- Withholding taxes exist in many tax systems and are typically used in respect of dividends, interest, royalties and similar payments.
- UAE withholding tax will not be applicable on domestic and cross-border payments of any nature under the UAE CT regime.
CT FOR TRANSFER PRICING :
- Transfer pricing rules seek to ensure that transactions between related parties are carried out on arm’s length terms (i.e. as if the transaction was carried out between independent parties).
- UAE businesses will need to comply with transfer pricing rules and documentation requirements set with reference to the OECD Transfer Pricing Guidelines.
CT FOR ADMINISTRATION :
- All businesses be required to register for UAE CT.
- Only one CT return will need to be filed per financial period.
- No provisional or advance CT filings will be required. UAE businesses will not be required to make advance UAE CT payments.
Similar to other taxes in the UAE (e.g. VAT), businesses will be subject to penalties for non-compliance with the CT regime. Further information on the UAE CT compliance obligations and applicable penalties will be released in due course.
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