RNG Auditors provide the following commentary on recent Tax Updates in the UAE

  1. Corporate Tax Updates

In order to alleviate the burden of corporate tax and compliance costs for small and micro businesses, the Ministry of Finance has released Ministerial Decision No. 73 of 2023 on Small Business Relief (SBR), in accordance with Article 21 of Decree-Law No. 47 of 2022 on corporate tax. This decision aims to provide support to startups and other small businesses. Below are Key highlights from the same.

  • All Resident Taxable Persons are eligible if the threshold for the relevant Tax Period and previous Tax Periods shall be AED 3,000,000 or below for each Tax Period.
  • A Taxable Person shall be unable to elect to apply the SBR if their Revenue (to be calculated as per Accounting standard) in any relevant or previous Tax Period has exceeded the threshold of AED 3,000,000.
  • The threshold shall apply to Tax Periods commencing on or after 1 June 2023, and such threshold shall only continue to apply to subsequent Tax Periods that end before or on 31 December 2026.
  • Below person not eligible for SBR.
    o A Constituent Company of a Multinational Enterprises Group has a turnover of more than AED 3.15 Billion.
    o A Qualifying Free Zone Person.
  • Tax losses and net interest Expenditure cannot be carried forward unless they are related to a tax period in which SBR was not elected. Further, they can be utilized in future tax periods in which SBR is not elected.
  • If a business owner opts for SBR, they will not be required to pay any corporate tax during the relevant periods. However, registration for CT and filling out annual CT returns will be mandatory.

Note – Where the Authority establishes that one or more Persons have artificially separated their Business or Business Activity and the amount of Revenue across the Persons’ entire Business or Business Activity exceeds the threshold in any Tax Period and such one or more Persons have elected to apply for the Small Business Relief, this would be considered an arrangement to obtain a Corporate Tax advantage. Hence GAAR provision will apply.

  1. VAT Updates

A new law, Federal Decree Law 18 of 2022, allows the Federal Tax Authority (FTA) to issue a notification of tax audit to a taxable person before the end of 5 years from the relevant tax period. The FTA must complete the audit within 4 years of the notification. This amendment allows tax audits to be conducted even after five years from the end of the relevant tax period if the FTA issues the notification within five years. As a result, many taxpayers have already received tax audit notifications.

Therefore, it is highly recommended that you regularly check your registered email address, including your junk or spam folder. If you receive a notification of the audit, please do not hesitate to contact us.

  1. Electronic attestation of Import commercial invoices

From February 1, 2023, the Ministry of Foreign Affairs and International Cooperation (MOFAIC) implemented a new electronic attestation system for importing commercial invoices. Customers will need to obtain MOFAIC attestation for all goods imported into the UAE with a value of AED 10,000 or above.

Below are exceptions for the same:
• Goods imported into Free zones
• B2C e-commerce movements
• Goods imported by Diplomatic, police and military, charitable societies and international organizations.
• Transit Import
• Imports from GCC
• Personal Imports

The MOFAIC would collect AED 150 per commercial invoice to import goods for electronic attestation services. (https://www.mofaic.gov.ae/en/Services/EDAS-Attestation)

Further, the attestation has to be done in a maximum of 14 days from the declaration of goods. Failure to do so will result in a penalty of AED 500.

For any further queries or support, please feel free to contact RNG Auditors.