United Arab Emirates
There is a growing trend of tax reforms in the Middle East region, and the United Arab Emirates (UAE) has implemented excise tax, value-added tax (VAT), and economic substance regulations in October 2017, January 2018, and April 2019, respectively. Country-by-country reporting was also implemented in April 2019.
Based on public sources, the United Arab Emirates is studying a federal corporate tax regime for the country. However, there have been no public announcements from the UAE regarding the potential introduction of Federal corporate income tax, beyond references to economic impact studies carried out by the UAE government and general statements from the UAE Government in the media. As a result, there is no firm visibility on whether a Federal corporate income tax regime is proposed to be introduced, the scope of application of any such regime, or on the interaction between a Federal income tax and the existing Emirates tax decrees and free zone tax holidays.
Economic substance regulations
On 30 April 2019, the UAE Ministry of Finance issued economic substance regulations (“Regulations”) which were followed by the amended Regulations on 1 September 2020 introducing a requirement for certain juridical persons (persons with separate legal personality) and unincorporated partnerships that carry on a Relevant Activity in the UAE (“UAE licensees”) to have adequate “economic presence” in the UAE, relative to the activities they undertake.
The introduction of the Regulations in the UAE brings it in line with other jurisdictions that have issued economic substance legislation and affirms the UAE’s commitment to addressing concerns around the shifting of profits derived from certain business activities to 'no or nominal tax jurisdictions' without corresponding local economic activities.
See Economic substance requirements in the Other issues section for more information.