January 2024

La Corte di Giustizia Europea, con sede in Lussemburgo, ha revocato la restrizione all'acquisto di terreni agricoli in Bulgaria da parte di cittadini dell'UE. Le restrizioni avrebbero dovuto essere rimosse nel 2014 tuttavia, con le modifiche alla legge sulla proprietà e l'uso dei terreni agricoli (ALUAA) e in violazione del diritto dell'UE, la Bulgaria ha posto divieti legali artificiali che hanno portato a un procedimento penale da parte della Commissione Europea.

Ora, la decisione della Corte di giustizia europea entra in vigore immediatamente e non c'è più alcun ostacolo per i cittadini dell'UE ad acquistare terreni nel Paese.

The Ministry of Finance (MOF) released on December 29, 2023 the Import and Export Tariffs of the People's Republic of China (2024 Version), which will take effect on January 1, 2024. It is clarified that laws and regulations that stipulate otherwise on the import and export tax items and rates will prevail.

Import tariffs include the table of tax items and rates, the general classification rules, notes to the categories, notes to chapters, notes to subitems, and notes to domestic subitems. The table of tax items and rates includes columns for serial number, tariff codes, goods names, most-favored-nation tax rates, agreed tax rates, preferential tax rates and general tax rates. It has integrated the adjustments made by the Customs Tariff Commission of the State Council on tariff items, most-favored-nation tax rates, agreed tax rates, preferential tax rates, general tax rates and relevant provisional tax rates, as well as the notes to domestic subitems in its No.10 (2023) Announcement.

Shanghai Municipal People's Government released on January 10, 2024 the Several Measures on Promoting the High-quality Development of the Equity Investment Sector in Shanghai, which will take effect on February 1, 2024 and remain effective until January 31, 2029.

The document rolls out 32 measures in nine aspects. The document calls for implementing favorable fiscal and tax policies. They include putting in place favorable tax policy in venture capital investment sector, aligning with and implementing preferential tax policy for the accounting of a single investment fund of a partnership venture capital enterprise, and implementing preferential corporate income tax policy for corporate venture capital enterprises in Pudong New Area. For an income derived from transfer of equity held for over three years, the corporate income tax for the year would be halved as per the proportion of shares held by individual investors at the end of the year if the income represents more than 50 percent of the total income derived from equity transfer in the year. The tax would be waived for transfer of equity held for more than five years.

The Ministry of Finance, General Administration of Customs and State Taxation Administration jointly released on January 3, 2024 the Circular on the Tax Policies for Entry and Exit of Goods in the Guangdong-Macao In-Depth Cooperation Zone in Hengqin (Hengqin Cooperation Zone) and the Circular on the Tax Policies for Personal Baggage and Delivery Items in the Guangdong-Macao In-Depth Cooperation Zone in Hengqin.

According to the documents, there would be a "first line" created between the Hengqin Cooperation Zone and the Macao Special Administrative Region, and the "second line" between the Hengqin Cooperation Zone and the territory of the mainland China. For qualified goods entering into the Hengqin Cooperation Zone through the "first line", the tax would be exempted, while goods falling under other circumstances would be subject to the bonded policies. For goods produced by an enterprise in the Hengqin Cooperation Zone that contain imported materials or parts and create added value of 30 percent or above after being processed in the Zone, their entry into the mainland through the "second line" would be waived from the import duties, but the import value added tax and consumption would be levied as required. Goods entering into the Hengqin Cooperation Zone from the mainland through the "second line" would be regarded as exports and are eligible for refunds of value added tax and consumption tax according to rules. The document also calls for tightening the supervision.

Source: Announcement of the State Taxation Administration

The Tariff Law (Draft) is under public comment during the period from December 29, 2023 to January 27, 2024, according to a statement made on the website of the National People's Congress (NPC).

The draft law has 70 articles in seven chapters, which include General Provisions, Tax Items and Rates, Tax Payable, Tax Incentives and Tariffs under Special Situations, Collection Management, Legal Responsibilities, and Supplementary Provisions. It also includes the Import and Export Tariffs of the People's Republic of China as an annex.

It clarifies that there are seven categories of imports and exports and inbound articles that are legally exempted from tariffs. They are goods in a single consignment within the quota of exemption as stipulated by the State Council, advertisements and samples with no commercial value, necessary fuel, materials and catering supplies that are carried by inbound and outbound means of transport, goods and inbound articles damaged or lost before customs release, materials donated by foreign governments and international organizations, and goods and inbound articles exempted from tariffs under international treaties and agreements concluded or jointly participated in by China.

$4 billion Agreement for green hydrogen project in the Suez Canal Economic Zone has been signed between Egypt and Saudi Arabia's ACWA Power. This project's first phase is projected to have a production capacity of 60,000 tonnes of green ammonia and further aims to expand to the second phase, which is estimated to have a production capacity of 2 million tonnes of ammonia yearly. (Daily News Egypt) 115 MW Additional generational capacity in 15 African countries expected after International Finance Corporation (IFC) signed a financing package for the Facility for Energy Inclusion to boost clean and reliable energy in the continent. The $80 million financing package comprises a loan of $30 million from IFC; a loan of $20 million mobilised from the Managed Co-Lending Portfolio Program (MCPP), which will enable longer-term financing that is not readily available in the market; and up to $30 million in blended finance. (Africa Business Communities)

1st Large-scale mining licence in Uganda was awarded to Australia's Ioninc Rare Earths for its project in the East African country, making it one of the world's largest and most advanced development-ready heavy rare earth element assets. The Stage 1 mining licence covers approximately 44 square kilometers at the Makuutu Rare Earths Project. (Mining.com)

$222.5 million Raised by a diverse group of African institutional investors for Africa50’s Infrastructure Acceleration Fund that will catalyse development and economic growth in the region. The funds will be deployed into a pipeline of transformative projects spanning power and energy, transportation and logistics, water and sanitation and digital and social infrastructure. (Africa Market Trends) 90 million litres Of milk produced in Zimbabwe in 2023 after government-initiated and private sector-led interventions to support and change the dairy sector. The increase in milk production from 2022’s 86 million litres moves the country closer to bridging the gap between local demand and supply in line with import substitution efforts. Zimbabwe aims to grow the sector by 15 per cent and be milk self-sufficient by 2025 with a surplus for export. (The Herald)

257 MW The expected capacity of 3 new storage facilities to be constructed in South Africa by a partnership between Électricité de France (EDF) and Mulilo Energy Holdings. The duo plans to invest US$375 million dollars and for construction to begin in mid-2024. (Afrik21)

$1 billion Innovation fund has been launched by the United Nations Development Programme (UNDP) to support startups in Africa and boost development. This initiative, dubbed Timbuktoo Africa Innovation Fund, aims to transform 100 million lives and create 10 million new jobs even as it aims to fill critical gaps experienced in the startup ecosystem. (The Guardian Nigeria)

1100 MW Electricity capacity to be produced after a wind megaproject agreement was signed between Saudi Arabia's ACWA Power and Egyptian authorities that will run for 25 years. This wind farm will reduce carbon dioxide emissions by 2.4 million tonnes annually and supply electricity to over a million Egyptian homes. (Afrik21)

5 Public sugar factories in Kenya to be leased to private companies for 20 years in a fresh bid to revive the industry. The East African country is aiming to woo private companies to inject fresh capital into the millers by not only growing their capacities but also maximising production. (Business Daily)

US$8.3 billion Value invested in Nigeria's health sector by the United States, with the investment spanning initiatives related to prevention, care and treatment and strengthening the West African country's public health system. The collaboration between the US and Nigeria aims to foster advancements in public health and contribute to the greater Nigerian population. (Nairametrics) 500 million Vaccine doses to be produced annually in Kenya following Moderna's new deal to establish a manufacturing facility in the East African country. Moderna will operate under a Special Economic Zone status even as the Kenyan government aims to attract foreign direct investment (FDI) into the pharmaceutical sector and position itself as the regional drug-making hub. (Daily Nation)

11% Growth in the number of African deals closed in 2023 owing to more activity happening at the early stage. According to a Briter Bridges report, the 2023 deal value, which included debt, equity and acquisitions, was US $4.1 billion, a 21% drop from the previous year. (Techcrunch)

The Finance Law 2024 specifies the selected sectors where the electronic invoice tracking system applies as well as the scope of application of electronic certificates. This system will be used by the tax administration to monitor expenses deductibility, VAT, withholding taxes and automobile stamp duties.

The other tax administration measures include the following:

• introduction of the possibility for the Minister of Finance to authorize certain entities to collect excise duties on minerals and income tax from companies engaged in semi artisanal mining;
• introduction of an automatic transmission to the tax administration of internal audit reports and inventories listed at court registries;
• digitalization of tax clearance certificates and reinforcement of their scope;
• extending transfer pricing documentation to add the list of beneficial owners of intangible assets and strengthening the penalties for failure to declare;
• introduction of automatic exchange of financial information as well as identification of beneficial owners of bank accounts;
• adjustment of the deadline for filing of annual financial statements and payment of income tax balance from 15 March to:
  • 15 April for taxpayers registered with the Medium-Sized Taxpayers Department and other Specialized Tax Departments; and
  • 15 May for taxpayers registered with the Small Taxpayers Department;
• introduction of partial tax collection during audits, where the taxpayer has already acknowledged liability. An additional tax collection notice is issued at the end of the audit procedure;
• reduction of the time limit for the procedure for suspension of payment before forceful tax recovery from 15 days to 8 days after notification of the decision or, where no decision has been issued, after expiry of the time limit by the tax administration;
• introduction of a transaction procedure for settling tax claims issued before 31 December 2022, subject to deposits;
• strengthening penalties relative to failure to declare, failure to exchange information and failure to issue electronic invoices for companies subject to this obligation; and
• exemption from penalties for voluntary disclosure concerning taxpayers' assets located or income derived outside of Cameroon.

Source: IBFD Tax Research Platform news

The Government launched on December 21 a consultation exercise to gather views on the implementation details of the global minimum tax under Pillar Two of the international tax reform proposals drawn up by the Organisation for Economic Co-operation and Development (OECD) to address base erosion and profit shifting risks arising from the digitalisation of the economy (commonly known as BEPS 2.0).

The Secretary for Financial Services and the Treasury, Mr Christopher Hui, said, "As an international financial centre and a responsible member of the international community, Hong Kong has all along been supportive of international efforts to enhance tax transparency and combat tax evasion. To fulfil our obligation as a cooperative player in international tax cooperation and safeguard Hong Kong's taxing rights, Hong Kong is fully committed to implementing Pillar Two of BEPS 2.0 in accordance with international consensus."

The BEPS 2.0 package was promulgated by the OECD in October 2021. The goal of the global anti-base erosion (GloBE) rules under Pillar Two of the package is to ensure that large multinational enterprise (MNE) groups with consolidated annual revenue of at least 750 million euros pay a global minimum tax of at least 15 per cent on income derived by their constituent entities in every jurisdiction where they operate, thereby putting a floor on competition over corporate income tax. The implementation of the global minimum tax will reduce the latitude for jurisdictions to introduce tax exemption or extremely low preferential tax rate as a means to enhance their tax competitiveness in future, thus creating a more level playing field in terms of taxation. In 2021, Hong Kong joined more than 130 jurisdictions in committing to implementing BEPS 2.0. As announced by the Financial Secretary in the 2023-24 Budget, Hong Kong will apply the global minimum effective tax rate of 15 per cent on in-scope MNE groups starting from 2025 onwards. Only in-scope large MNE groups will be subject to the global minimum tax. The vast majority of corporate taxpayers, including local small and medium enterprises, will not be affected.

Under the global minimum tax, if the effective tax rate of an in-scope MNE group in Hong Kong is lower than 15 per cent, other relevant jurisdictions have the right to collect top-up tax in respect of the low-taxed Hong Kong MNE entities concerned. To preserve Hong Kong's taxing rights with respect to such entities instead of ceding them to other jurisdictions, Hong Kong will apply the Hong Kong minimum top-up tax (HKMTT) to in-scope MNE groups starting from 2025 onwards so that the effective tax rate of these entities will be brought up to 15 per cent. By introducing the HKMTT, in-scope MNE groups will be spared the need to pay top-up tax in every jurisdiction where they operate. This will help reduce their compliance burden. "It would be in Hong Kong's best interest to implement the HKMTT to fulfil Hong Kong's international tax commitment and preserve its taxing rights," Mr Hui said. Hong Kong will need to amend the Inland Revenue Ordinance (Cap. 112) to implement the global minimum tax and the HKMTT. To take forward the legislative exercise, a consultation exercise will be launched. A consultation paper has been published today to explain the concepts of the GloBE rules, which will be strictly followed by Hong Kong and other jurisdictions, and the HKMTT, and seek views on specific implementation issues. Such issues include:

• the Government's proposed approach with respect to certain areas relating to the implementation of the GloBE rules;
• the design and implementation of the HKMTT; and
• the tax compliance and administration framework.

"In formulating the legislative proposal, the Government will strive to maintain Hong Kong's tax competitiveness by upholding Hong Kong's simple, certain and low tax regime. Insofar as the implementation of the global minimum tax and the HKMTT is concerned, emphasis is laid on minimising tax compliance burden of in-scope MNE groups and maintaining the simplicity of the tax regime," Mr Hui added. To reduce compliance burden and enhance tax certainty, the Government has proposed business-friendly features in the overall framework of the implementation of the global minimum tax and the HKMTT. These include:

• aligning the design of the HKMTT, including the scope and tax rate, with that of the global minimum tax to ensure simplicity of the regime;
• allowing an in-scope MNE group to decide on how the HKMTT payable is allocated among its Hong Kong entities to provide for flexibility;
• providing for safe harbours in the framework to relieve compliance burden and enhance tax certainty; and
• requiring an in-scope MNE group to only furnish a single top-up tax return for the purpose of both the global minimum tax and the HKMTT to minimise compliance burden.

The three-month consultation will end on March 20, 2024.

Subject to the outcome of the consultation exercise, the Government targets to introduce the legislative amendments into the Legislative Council in the second half of 2024.

Source: info.gov.hk

The Central Board of Direct Taxes (CBDT) has issued a circular clarifying certain aspects when deducting withholding tax (WHT) in e-commerce transactions under section 194-O of the Income-tax Act, 1961. The clarifications are set out below.

• Where multiple e-commerce operators (ECOs) are involved in a single transaction of sale of goods or services or both through an e-commerce platform and where:
  • the seller-side ECO is not the actual seller of the said goods or services - WHT compliance is the responsibility of the seller-side ECO who finally makes the payment to the seller; and
  • the seller-side ECO itself is the actual seller of the said goods or services - WHT compliance is the responsibility of the ECO who finally makes the payment to the actual seller of goods or services.
• Commissions, convenience fees, logistic charges and delivery fees must be included in the "gross amount" for the calculation of WHT.
• WHT will be deducted from the amount credited without including GST and other taxes levied on the sale of goods or services, provided the GST and other taxes are clearly mentioned in the invoice.
• Seller discounts (not including discounts by a buyer-side ECO or seller-side ECO) must be deducted when calculating the gross amount of the products sold or services provided.
• In cases of purchase returns, if the WHT has already been deducted before the purchase return, the WHT can be adjusted against the next transaction with the same seller in the same tax year. No adjustment is required if the purchase return is replaced with goods.

Section 194-O provides that, where the sale of goods or provision of services of an e-commerce participant is facilitated by an ECO through its digital or electronic facility or platform, such ECO must deduct WHT at 1% of the gross amount of such sales or services or both. WHT must be deducted at the time of credit of amount of sale or services or both to the account of an e-commerce participant or at the time of payment thereof to such e-commerce participant by any mode, whichever is earlier.

The full text of Circular No. 20/2023 dated 28 December 2023 is available here.

Source: IBFD Tax Research Platform news

As announced in Minister of Finance’s Budget 2022, the GST rate will increase from 8% to 9% on 1 January 2024. The rate change affects any GST-registered business that sells or purchases goods or services that are subject to the standard rate of GST. To ensure a smooth transition, businesses must follow some transactional rules to be prepared for the rate adjustment.

Update Price Display

All price displays with effect from 1 Jan 2024 must be inclusive of GST at 9%. This necessitates updating prices across all sales channels. Businesses have the option to present two prices:

• One applicable before 1 Jan 2024 showing prices inclusive of GST at 8%; and
• One applicable from 1 Jan 2024 showing prices inclusive of GST at 9%.

If prices remain unchanged, businesses are not required to revise displayed prices, but they must still account for GST (9/109) on sales from January 1, 2024, onwards. Update Accounting and Billing Systems 

To comply with the substantial changes associated with the GST rate adjustment, businesses should prepare the invoicing systems to accurately calculate taxes, issue invoices, and file GST returns in accordance with the new requirements.

Reverse Charge Business

GST-registered businesses subject to reverse charge (“RC business”), must account for GST at 9% on the services you procure from overseas suppliers (“imported services”) on or after 1 Jan 2024.

Diacron Assistance for a smooth Transition

Failure to account for GST on your supplies at the correct rate may attract penalties. Being prepared for GST rate change will help you avoid such increases to your business and compliance costs.

Diacron expertise can help you understand the implications and guide you through an efficient and effortless update to the new GST requirements, ensuring compliance.

For further information and assistance please contact us at info@diacrongroup.com

Since 1 January this year, Switzerland is no longer charging import duties on industrial goods of any origin. Building on a decade of groundwork, this is a significant trade policy measure with an estimated total welfare gain of over CHF 860 million a year for the Swiss economy. Lifting industrial tariffs improves Switzerland's standing as a business and industrial hub by easing the financial and administrative burden on both companies and consumers. It makes it easier for Swiss industry to procure competitive inputs and to diversify. In turn, this will raise Swiss companies' productivity at home and abroad, increase their competitive standing and streamline trade relations overall. Tariffs lifted on consumer goods and manufacturing inputs Industrial products in Switzerland cover intermediate inputs for manufacturing processes, such as capital goods, raw materials, salt, semi-finished products and machinery, as well as consumer goods, such as bicycles, household appliances, clothing and shoes. However, agricultural products (including live animals and plants, foodstuffs and luxury foods, processed agricultural products, seeds and animal feed) and fishery products are not classified as industrial products. Customs duties will therefore still apply when importing agricultural products to Switzerland. Reduced administrative burden for companies Alongside the removal of industrial tariffs, a number of changes have also been made to simplify Swiss customs tariffs and the rules on proof of origin, which will help to reduce the administrative burden on Swiss companies. In a competitive environment, consumers also stand to benefit from the cost savings. The federal government will review the impact on the prices of the products concerned in a monitoring programme. The removal of industrial tariffs does not change the customs clearance process itself: importers are still required to make an import declaration and pay other fees and charges incurred on import, including VAT. The decision to abolish industrial tariffs was taken by Parliament on 1 October 2021 by amending the Customs Tariff Act. At its meeting on 2 February 2022, the Federal Council scheduled the measure to come into effect on 1 January 2024. By removing customs barriers, Switzerland – as a small, highly integrated economy – is sending a clear signal in favour of maintaining and expanding unhindered trade flows in an increasingly protectionist global trading environment.

Source: admin.ch

According to a press release of 24 January 2024, published by the Department of Trade Negotiations of Thailand, an eighth round of negotiations for a free trade agreement (FTA) between the EFTA states (Iceland, Liechtenstein, Norway and Switzerland) and Thailand is scheduled to take place in Bangkok from 30 January to 2 February 2024.

Source: IBFD tax research platform news.

The Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses (generally referred to as the “Corporate Tax Law”) issued by the United Arab Emirates on 09 December 2022 marks a milestone in the UAE legislation: it provides the legislative basis for the introduction and implementation of a Federal Corporate Tax in the country.

Corporate Tax in the UAE is effective for financial years starting on or after 1 June 2023.

The new law covers all business activities in the UAE except for government entities and certain businesses engaged in extractive and non-extractive natural resources; in general, Corporate Tax applies to:

• Juridical persons incorporated or registered at the UAE mainland and free zones in the UAE.
• Natural persons conducting business activities in the UAE.
• Non-resident juridical persons, depending on certain conditions.

The corporate tax is set at a rate of 9% of annual taxable income, making it one of the lowest in the world. This deliberate choice reflects the government's commitment to maintaining a competitive business environment while simultaneously generating revenue for public investment.

Moreover, the tax shall be levied at the rate of 9% only on annual taxable income exceeding AED 375,000 ($100,000) while the annual taxable income below this threshold shall be subject to a 0% corporate tax rate to support small businesses and startups.

A different tax rate (not yet specified) is applied to large multinationals that meet specific criteria set with reference to 'Pillar two' of the OECD Base Erosion and Profit Shifting Project.

Below are a few key points of the Corporate Tax Law which may be of interest to our readers:

Free Zone

The UAE Corporate Tax regime will continue to honor the tax incentives currently being offered to free zone persons; but only under certain conditions that would allow the free zone person to be considered as a “Qualifying Free Zone Person” and thus be eligible for the preferential 0% corporate tax rate on its “Qualifying Income” (as defined under Corporate Tax Law).

The conditions to be considered as a Qualifying Free Zone Person are: maintaining adequate substance in the UAE, preparing audited financial statements, not having elected to be subject to Corporate Tax at the standard rates, complying with the transfer pricing requirements (under the Corporate Tax Law), satisfying the “de minimis” requirement (as specified in Cabinet Decision 100 of 2023) and the business must derive “Qualifying Income” (as defined and enumerated in Cabinet Decision 100 of 2023).

Once verified that the entity can be considered a Qualifying Free Zone Person, the preferential Corporate Tax rate of 0% can be applied to the “Qualifying Income” falling in the list published in Cabinet Decision No. 100 of 2023.

If the free zone person fails to meet the conditions of a Qualifying Free Zone Person in a given tax period, it shall no longer be considered as a Qualifying Free Zone Person from the beginning of that tax period and the subsequent four (4) tax periods.

Natural Persons

The corporate tax shall be applicable to natural persons - including sole establishments and individual partners in unincorporated partnerships - who are engaged in business activities (including professional/service activities) in the UAE and whose revenue from business activities exceeds AED 1,000,000 in a Gregorian Calendar Year.

However, corporate tax does not apply to the income of a natural person arising from employment, personal investments, and real estate investments.

It should be noted that in the case of natural persons, residence does not refer to the place where the natural person resides or is domiciled but instead refers to the business connection in the UAE. A natural person is considered a resident under corporate tax regardless of their nationality, whether or not they have a residency visa, or how much time they may physically spend in the UAE.

Therefore, the question of residency or non-residency for natural persons under the corporate tax law deviates from those in other tax jurisdictions; wherein tax residency is typically determined by the jurisdiction where the natural person resides or if the natural person physically stays in the said jurisdiction for 180 days or more within a given tax period.

Non-Resident Juridical Persons

A non-resident juridical person shall be subject to corporate tax if they are either: having a permanent establishment in the UAE, derive UAE sourced income or earn income from immovable property located in the UAE.

In cases wherein the non-resident juridical persons earn UAE sourced income only and the income is not attributable to a permanent establishment in the UAE, the income shall be subject to 0% withholding tax.

Small Business Relief

Recognizing the importance of supporting small and medium-sized enterprises (SMEs), the backbone of the economy, the government has implemented administrative and tax relief measures aimed at alleviating the impact of corporate tax on small businesses, which is referred in the regulations as “Small Business Relief”.

The taxable Person may elect for Small Business Relief and as a result it will be treated as not having derived any Taxable Income for a Tax Period. The business will also benefit from simplified corporate tax return filing and record keeping requirements.

The conditions to apply for Small Business Relief are the following: the business must be resident in the UAE (either juridical or natural person), annual revenues should be below or equal to AED 3,000,000 for each Tax Period (including all previous and subsequent tax periods) and the Taxable Person should not be part of a Multinational Enterprise Group (as defined in the UAE’s Country-by Country Reporting legislation) or be a Qualifying Free Zone Person.

The Small Business Relief is available for eligible taxable persons up to tax periods that end on or before 31^st December 2026. In practical terms, it means that the tax authorities have provided a three (3) year period starting from the enforcement of the corporate tax law on 1^st June 2023 till 31^st December 2026 wherein the Small Business relief is available as a tax relief.

Transfer pricing

Transfer pricing rules have also been introduced by the corporate tax law, applicable to both cross-border and domestic transactions carried out by natural and juridical persons.

Businesses must apply the arms’ length principle when entering into transactions or arrangements between Related Parties and Connected Persons (such as owners or officers of a company).

In support of the arms’ length principle, companies must maintain documentation that justifies the transfer price of transactions between related parties and connected persons. This documentation should demonstrate that the prices charged in transactions and arrangements with related parties and connected persons are consistent with those that would be charged between unrelated independent parties under similar circumstances.

The authorities can require a taxable person to provide information regarding their transactions and documentation supporting the arrangements with their related parties and connected persons together with the corporate tax return of the taxable person.

In addition to the above general disclosure requirements, taxable persons who are part of a Multinational Enterprise (MNE) Group with total consolidated group revenue equal to or more than AED 3.15 billion in the relevant tax period or taxable persons whose revenue in the tax period is AED 200 million or more, shall be required to maintain a master file and local file in support of its’ transfer pricing policy.

Administration

All taxable persons within the scope of Corporate Tax should apply for a tax registration number for Corporate Tax. The tax registration number for corporate tax purposes is a separate application from the tax registration number for VAT purposes.

Non-resident persons that do not have a permanent establishment in the UAE and only earn UAE sourced income can choose to not register for Corporate Tax.

Financial statements will need to be maintained by taxable persons as it shall be the starting point in calculating taxable income. Financial statements must be prepared in accordance with IFRS, however, taxable persons that earn revenue not exceeding AED 50 million may apply IFRS for SMEs.

Audited financial statements are required to be maintained for taxable persons deriving revenue in excess of AED 50 million in a tax period and from taxable persons who are Qualifying Free Zone Persons.

Taxable persons should file their corporate tax return and pay corporate tax within nine (9) months from the end of each relevant tax period. Since majority of taxable persons in the UAE follow the Gregorian calendar year (ending every 31^st December) as their financial period, then the first corporate tax period for these taxable persons shall be starting 1^st January 2024 and ending 31^st December 2024, with the corporate tax return filed and any corporate tax due to be paid on or before 30^th September 2025.

Transitional Rules

The opening balance sheet for corporate tax purposes (and thus the closing balance sheet of the financial year prior to being subject to corporate tax) should be prepared taking into consideration the arms’ length principle.

Certain adjustments in the financial statements can also be made by a taxable person to its’ intangible assets, immovable property and financial assets & financial liabilities which were owned by the taxable person before it becomes subject to corporate tax.

If no books of accounts were prepared for the previous financial year (prior to being subject to corporate tax) a closing balance sheet will have to be prepared under an appropriate accounting standard.

Implications

Businesses should evaluate the impact of Corporate Tax, determine whether they need to register for corporate tax and understand if steps should be taken to align their accounting operations with the corporate tax requirements to be compliant and take advantage of tax benefits whereas available.

Corporate tax does not only mean corporate tax registration, filing and payment of the due tax; but it also implies understanding if any tax reliefs can be applied and requested, keeping accounting records and documents within the requirements of the corporate tax law, putting in place transfer pricing policies if required to do so and applying transitional rules which may be applicable to the business.

Being aware and prepared will be essential for businesses navigating the new corporate tax landscape in the UAE.

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Diacron provides support in assessing the impact of Corporate Tax, offering dedicated consultancy to ensure full compliance and meet related regulatory requirements. For any inquiry or to discuss your specific needs, please do not hesitate to contact us at tax.uae@diacrongroup.com

   

The government announced a package of measures that supports its ambition to simplify and modernise the tax system, using the efficiencies of digital service to drive public sector productivity and exploring further opportunities to make the tax system simpler and fairer.

Enhancing the non-reimbursed expenses service

Each year, HMRC receives 1.1 million claims for tax relief from employees on their expenses. These claims are submitted through existing online services, or via digital or paper forms, resulting in some claims being manually processed.

To simplify the process for many employees claiming tax relief on their expenses, and for HMRC to automatically process claims, the government is designing a new, online service for employees to claim tax relief on all of their expenses in one place, meaning employees will get relief sooner.

HMRC will provide further details in later this year.

Mandating the payrolling of benefits in kind

The government will mandate the reporting and paying of Income Tax and Class 1A National Insurance Contributions (NICs) on benefits in kind via payroll software from April 2026, building on the progress already made on the government’s ambition to fully digitalise the reporting of benefits in kind. Mandation will simplify the tax affairs of 3 million people and reduce the need for them to contact HMRC.

This measure will reduce administrative burdens for thousands of employers and HMRC by simplifying and digitising the process of reporting and paying tax on all employment benefits. It will remove the need for 4 million end of year returns to be submitted to HMRC.

HMRC will engage with stakeholders to discuss our proposals to inform design and delivery decisions and draft legislation will be published later in the year as part of the usual tax legislation process. HMRC will also work with industry experts to produce guidance, which will be made available in advance of 2026.

Further information will be published via usual communication routes, such as through employer bulletins.

Amending the parents’ National Insurance Credit (Child Benefit)

As announced on 27 April 2023, the government will legislate to introduce a route for people to apply for National Insurance Credits for parents and carers for tax years where they have not claimed Child Benefit, to ensure that people do not miss out on their State Pension entitlement. The credit will add qualifying years of National Insurance where eligible which will support future State Pension eligibility.

Individuals will be able to claim this Credit from April 2026. The eligibility for the Credit will be closely based on Child Benefit eligibility criteria. Transitional arrangements will ensure those affected since 2013 are still able to claim.

Going forward, applications will be available for 6 years following the relevant tax year. The government will bring forward secondary legislation as soon as possible.

Tax Simplification for alternative finance

The government has published a consultation proposing changes to the Capital Gains Tax (CGT) rules that apply to alternative finance arrangements.

The proposed changes seek to amend those rules so that where property is used as collateral for the purposes of raising finance, the CGT outcome is the same whether alternative finance or conventional finance is used. The consultation also asks whether there are any implications for capital allowances.

The consultation will be open to responses for 12 weeks, closing on 9 April 2024.

Source: gov.uk