Corporate Tax in the UAE — what's new?

The UAE Ministry of Finance has published Federal Decree-Law No. 60 of 2023, which amends some provisions of Federal Decree-Law No. 47 of 2022 (Corporate Tax Law).

As previously reported, the changes are being made in preparation for introducing the Pillar 2 global minimum tax.

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This includes the addition of two new definitions to the Corporate Tax Act:

· Tax on account replenishment

Capital replenishment tax levied on multinational corporations. This Decree-Law and the rules and controls to be determined by the Cabinet of Ministers by Art. (3) of this Decree-Law (Law on Corporate Income Tax) for the second-level rules issued by the Organization for Economic Cooperation and Development.

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· Multinational enterprise

An entity and one or more of its constituent enterprises are located in a state or a foreign jurisdiction, as specified in a decision to be issued by the Cabinet of Ministers on the Minister's proposal.

In addition to the new definitions, Art. 3 A new paragraph 3 is added to the Income Tax Act, which concerns the income tax rate. Paragraph 3 provides that the Cabinet of Ministers, at the request of the Minister, issues a decision regulating all cases, provisions, conditions, rules, controls, and procedures for collecting and exempting income tax from multinational corporations in such a way that the total percentage of effective Tax levied on them is 15%

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The amendments also include changes to Art. Sixty-five of the Corporate Income Tax Act, providing that income from corporate income tax and supplementary capital tax, as well as administrative fines levied under the Decree-Law, are to be distributed between the federal government and local authorities by the provisions of the Act federal law in force in this area.

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In conclusion, Decree Law No. 60 provides that the provisions on the Tax on additional financing come into force from the date specified in the decision adopted by the Cabinet of Ministers on the proposal of the Minister, and such decision should be published in the "Official Gazette."