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RAKEZ corporate tax seminar: Report

Recently, Ras Al Khaimah Economic Zone (RAKEZ) companies gathered in Ras Al Khaimah at Movenpick Resort Al Marjan Island for a seminar on UAE corporate tax awareness. Alaa Farahat, a seasoned tax partner of Farahat & Co, was one of the event’s key panelists who addressed the audience’s questions on corporate tax related tax queries.

Among the corporate tax highlights discussed, the implementation of tax registration, tax return filing, tax payments, and tax refunds was explained. Taxable persons were urged to commence formal auditing, accounting and record keeping procedures to establish their financial credentials for tax calculation and filing tax returns. Further, it was indicated that for each tax period, taxable persons would be liable to prepare and submit one corporate tax return, together with necessary supporting records.

To address key corporate tax questions, the UAE corporate tax was defined as a form of direct tax levied on the taxable income of businesses incorporated in the UAE and others subject to exemptions mentioned in the corporate tax statute. To add on, it was established that the corporate tax’s rate is set at a headline rate of 9 per cent on taxable income exceeding Dh375,000 and for taxable Income below AED 375,000 will be subject to a zero per cent rate of corporate tax.

Subsequently, a resident person was explained as any of the following persons:

a)An entity established in the UAE, including a free zone person.

b)A foreign entity that is effectively managed and controlled in the state.

c)A natural person who conducts a business or business activity in the UAE.

d)Any other person as may be determined in a decision issued by the Cabinet.

Apart from the afore-discussed, the tax experts hinted that free zone persons will fall within the scope of the UAE tax regime and will be subject to compliance obligations and subsequently, a ‘qualifying free zone person’ can benefit from zero per cent rate on qualifying income.

It was further expressed that the following income and related expenditure shall not be taken into account in determining the taxable income:

i.Dividends and other profit distributions received from a juridical person that is a resident person.

ii.Dividends and other profit distributions received from a participating interest in a foreign juridical person.

In summation, UAE taxable persons were advised to start planning for corporate tax. The corporate tax law comes into effect on June 1 and now is the time to prepare. For further information please contact a tax consultant.