Navigating UAE CIT: FTA Unveils Guide on Natural Person’s Registration

On December 29, 2023, the UAE Federal Tax Authority (FTA) introduced a comprehensive Corporate Tax (CIT) Guide on the Registration of Natural Persons (CTGRNP1) on its portal, providing invaluable assistance to individuals engaging in business activities within the UAE.

This guide serves as a roadmap, meticulously outlining the rules and procedures for tax registration and de-registration for natural persons under the UAE CIT Law (Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses).

 Key Highlights:

1. Registration Essentials: The guide offers clarity on tax registration rules for individuals, emphasizing the necessity for natural persons to register for CIT.

2. Deregistration Process: It details the process for tax deregistration, particularly when a natural person concludes their business or business activities. Deregistration applications should be submitted within three months of cessation.

3. Understanding Taxable and Natural Persons: The guide explains crucial concepts, distinguishing between taxable and natural persons, shedding light on the definition of business activities, and providing insights into various income categories.

4. CIT Deregistration Criteria: Individuals must refrain from filing for deregistration if any business activity continues. Instead, they are required to submit a "nil" tax return. Deregistration hinges on compliance with tax return submissions, and payment of due taxes and penalties, and becomes void if a new business activity commences in the same tax period.

Additional Insights:

• The guide is tailored for natural persons engaged in UAE business activities.

• It should be used in conjunction with the CIT Law and relevant FTA publications.

• Clear distinctions between various income categories and their impact on total turnover are elucidated.

Follow our upcoming posts where we delve into key provisions of this insightful guide published by the FTA.

UAE FTA Unveils Comprehensive Guide on Tax Groups in Corporate Taxation

On January 8, 2024, the UAE Federal Tax Authority (FTA) introduced a Corporate Tax (CIT) Guide on Tax Groups (CTGTGR1) on its portal, providing valuable insights into the treatment of tax groups under the UAE CIT Law (Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses).

The guide serves as a beacon for taxable entities, illuminating the fact that tax groups, comprising two or more juridical resident persons, are treated as a single taxable entity for tax purposes. This mandates consolidated tax calculations and a unified tax return submission.

Key facets covered in the guide include the definition of tax groups, eligibility criteria, processes for formation and dissolution, determination of taxable income, and compliance obligations.

Formation of a tax group in the UAE necessitates the parent company and its subsidiaries to fulfill specific conditions, including juridical status (excluding natural persons) and residency criteria (no cross-border groups allowed). Notably, unincorporated partnerships are excluded from joining a tax group due to their lack of separate legal personality.

To establish a tax group, the parent company must hold a minimum of 95% share capital, voting rights, profits, and net assets of each subsidiary. Exemptions for parent and subsidiary companies, shared financial year, and identical accounting standards further contribute to the eligibility criteria.

These requirements must be consistently met throughout the tax period, allowing no room for partial compliance except in specific scenarios like a change in the parent company. Additionally, a juridical person can only belong to one tax group, and a parent company cannot form multiple groups with different subsidiaries.

Above all, the FTA’s guide incorporates practical examples to facilitate a better understanding of the law's application. While these examples are illustrative, they do not cover all intricacies or interactions with other aspects of the UAE CIT Law.

UAE FTA Facilitates Corporate Income Tax (CIT) Clarity

The Federal Tax Authority (FTA) in the UAE has introduced a streamlined process for clarification requests in Corporate Income Tax (CIT) matters, now accessible through the Emaratax platform.

This structured system, governed by the FTA, serves as a crucial support mechanism for taxpayers navigating the intricacies of tax laws. While emphasizing the significance of clarity, it underscores that clarification requests are exclusive to registered applicants.

The clarification process mandates meticulous documentation. Applicants are required to furnish documentary evidence supporting the factual and legal aspects of their request, encompassing sample invoices, contracts, and other pertinent documents. This documentation forms the cornerstone for the FTA's assessment of the query.

A concise yet comprehensive formal letter detailing facts and specific questions is an integral part of the process. Inclusion of prior tax advice received on the matter is encouraged, indicating the FTA's preference for applicants to seek initial guidance before seeking further clarification.

Submission of a cover letter summarizing the clarification request and related documentation for all applicable taxes in multi-tax queries is also mandatory. The acceptance of various file types reflects the FTA's commitment to standardizing the submission process.

Stringent eligibility criteria require applicants to demonstrate a vested interest, ensuring the query's material impact on their activities. Repetitive queries on matters previously clarified by the FTA are discouraged. For CIT clarification, the focus is exclusively on registration matters.

Notably, registration for VAT or CIT with the FTA is not a prerequisite, expanding the scope of eligible queries. However, ongoing updates may pose restrictions on filing clarification requests if not registered for any taxes on the platform.

Oman-Russia Double Tax Treaty Takes Effect

As of December 28, 2023, the Oman-Russia Income Tax Treaty (2023) has come into force, with its provisions generally applicable from January 1, 2024. This milestone follows the ratification of the agreement on December 12, 2023, by Russia, marked by the signing of Law No. 571-FZ. Oman reciprocated with ratification on December 27, 2023, through Royal Decree No. 89/2023.

Initially signed in 2001, the DTT faced a pause in the ratification process in 2009 due to concerns over low taxes on dividends and interest in Oman. Subsequent negotiations led to a revised version in June 2023, addressing tax rate concerns and resolving issues related to income from international transport.

The comprehensive DTT text outlines applicable taxes, tax payment procedures, criteria for limiting tax benefits, methods for eliminating double taxation, dispute resolution processes, and safeguards against tax discrimination.

The general tax rate on dividends under the DTT is set at 15%, with a reduced rate of 10% applicable if the distributing company holds at least 20% of the capital of the recipient during the preceding 365 days. Interest income and royalties are subject to a 10% tax rate. Special provisions extend benefits to government agencies and state corporations, and exemptions are granted for dividends and interest payments to the government or central bank of Russia and Oman.

The ratification of this DTT signifies a significant stride in the financial and economic ties between Oman and Russia. This agreement, revisited after its initial signing in 2001 and subsequent amendments in 2023, addresses crucial issues related to double taxation and income tax evasion.

Landmark Free Trade Agreement Forged Between GCC and South Korea

On December 28, 2023, the Gulf Cooperation Council (GCC) and South Korea inked a transformative Free Trade Agreement (FTA), marking a significant stride in global trade dynamics between these two influential regions.

The FTA's paramount objective is the dismantling of trade barriers, poised to usher in a substantial upswing in bilateral trade. For South Korea, the GCC represents a lucrative market, particularly for its cutting-edge technological and automotive industries. Concurrently, GCC nations stand to benefit from a diversified trade landscape beyond conventional oil exports.

This freshly sealed FTA has the potential to invigorate sectors such as manufacturing, technology, and services in both regions, fostering innovation and economic diversification. Moreover, the agreement is anticipated to spur foreign investments, creating employment opportunities and propelling economic growth.

Offering a plethora of advantages, the FTA is a catalyst for lowering customs duties, promoting increased trade exchanges, cost reduction, and a broader product array for consumers. It paves the way for enhanced business prospects, economic development, improved market access for local goods and services, and facilitates business expansion.

Beyond economic gains, the FTA ensures the safeguarding of investors' and service providers' rights, coupled with transaction transparency. Crucially, it provides robust protection for intellectual property rights, including patents and trademarks, fostering innovation and securing the fruits of creativity for businesses and individuals.

Despite the abundant opportunities, challenges loom on the horizon. The success of the FTA hinges on maintaining a balanced trade benefit equation, while adapting to new market demands and regulatory standards poses ongoing challenges for businesses in both regions.

The GCC-South Korea FTA heralds a new era in international trade, offering multifaceted economic, strategic, and cultural benefits. Serving as a bridge between two dynamic regions, this agreement has the potential to set a precedent for future international trade accords. Navigating this historic agreement requires careful consideration to unlock its full potential for mutual gains for both the GCC and South Korea.

EU Tax Observatory Unveils Global Tax Evasion Report 2024 with a Spotlight on UAE Real Estate

On October 22, 2023, the EU Tax Observatory unveiled its "Global Tax Evasion Report 2024," delving into the impact of global tax policy initiatives on curbing tax evasion and profit shifting. The report scrutinizes the effectiveness of measures such as the automatic exchange of bank information and global minimum tax agreements, shedding light on challenges in their implementation and their repercussions on government revenues and global inequality.

For the UAE, renowned for its extensive international business and investment endeavors, the report holds particular significance. While acknowledging strides made in reducing global tax evasion in the UAE, the analysis advocates for ongoing improvements in policy implementation and enhanced international cooperation in the country.

A noteworthy segment of the report focuses on Dubai's real estate market, examining over 800,000 properties and uncovering insights into offshore ownership linked to potential tax evasion. Despite the UAE's adherence to Common Reporting Standards (CRS) and its non-tax haven status, Dubai's secrecy and investment policies continue to allure foreign investors, with Indians constituting the largest group, alongside substantial investments from the UK, Gulf countries, and the United States.

In a meticulous study, researchers matched Norwegian taxpayers owning real estate in Dubai to their wealth tax returns, revealing discrepancies in reporting. Out of 371 Norwegian nationals with Dubai properties in 2020, only 66 duly reported them on their wealth tax returns, raising concerns about compliance.

To counter international tax evasion, the report proposes expanding the assets covered by the CRS, incorporating offshore real estate. It advocates for information exchange on real estate ownership, similar to financial assets, possibly coupled with disclosure on the ownership of shell companies often used as nominal owners for luxury real estate.

This in-depth exploration of global tax policies offers valuable insights for the UAE in refining its tax strategies. With a specific focus on multinational corporations, integral to the UAE's economic fabric, the report's findings and recommendations carry substantial weight for policymakers and the business community in the region. 

Italian Supreme Court’s Landmark Ruling on Italy,- UAE Double Tax Treaty Residency

On December 18, 2023, the Italian Supreme Court (ISC) issued a significant ruling (Decision No. 35284/2023) concerning the application of the Italy – United Arab Emirates double tax treaty established on January 22, 1995 (Italy – UAE DTT).

The ISC's decision holds substantial importance as it affirms that, under the Italy – UAE DTT, a natural person need not be subject to Personal Income Tax (PIT) to qualify for tax residency. The ruling clarifies that even individuals residing in the UAE, where PIT is not levied, can attain tax resident status for purposes of the treaty. Notably, access to tax reliefs under the Italy – UAE DTT is deemed unconditional, requiring only potential PIT liability in the UAE.

This ruling echoes previous decisions on the same matter under the Italy – UAE DTT, notably Decision No. 10548/2023.

The decision also addresses the significance of a tax residency certificate. According to the ISC, the absence of a tax certificate proving residency in the UAE does not impede access to tax treaty benefits. The individual can substantiate UAE tax residency through alternative evidence, overcoming the rebuttable presumption outlined in Article 2(2-bis) of the Italian Tax Code concerning the transfer of tax residency to blacklisted countries, including the UAE.

Based on this rationale, the ISC concludes that income from employed sources is, in principle, taxable only in the UAE when the individual is a resident, and none of the conditions under Article 15(2) of the Italy – UAE DTT applies. Consequently, income from dependent employment earned by the UAE resident is not subject to Italian PIT.

Ministerial Decision No. (247) of 2023 on the Issuance of Tax Residency Certificate for the Purposes of International Agreements

If you meet the tax residency requirements outlined in your applicable international agreement with the UAE, you can now officially apply for a tax residency certificate. This handy document acts like a tax passport, verifying your residency status for any cross-border business deals.

Simple Application Process: No need to navigate bureaucratic mazes! The application process is straightforward and streamlined, with a clear form and all necessary information requirements spelled out.

Fast and Efficient Verification: The authorities will promptly review your application and, if everything checks out, issue your residency certificate in a format your international partners accept.

Effective Dates: This initiative has been in effect since March 1st, 2023, so go ahead and apply!

Benefits for Everyone: This streamlined process benefits both businesses and the UAE. Streamlined tax residency verification means smoother international transactions, fostering a vibrant and attractive business environment for everyone.

2024 January Business Takeaway UAE

Entering 2024, the introduction of UAE Corporate Tax (CT) necessitates careful preparation. Oblique Consult provides precise guidance on crucial pre-year-end tasks, including assessing Free Zone benefits, examining group structures, aligning financial policies for tax efficiency, ensuring transfer pricing rule compliance, minimizing exposure to foreign entities, optimizing benefits through CT legislation, and establishing operational readiness. We highlight the significance of internal awareness sessions and cross-functional training as integral components for navigating this transformative phase.

At Oblique, we stand ready to assist businesses in seamlessly adapting to the upcoming era of UAE CT, ensuring strategic resilience and compliance amidst the evolving tax landscape.

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