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The UAE’s Corporate Tax Law – A Closer Look At Transfer Pricing Regulations

The OECD’s Inclusive Framework has established a two-pillar strategy on Base Erosion and Profit Shifting (BEPS) to combat tax evasion, advance coherence and transparency in the international tax system, and solve tax issues through the digitalization of the economy. The BEPS project aims to ensure that major multinational corporations pay the bare minimum in global taxes.

The United Arab Emirates (UAE) agreed to implement anti-BEPS minimum requirements and joined the Inclusive Framework in 2018. To fulfill this pledge, the UAE Ministry of Finance (MoF) introduced the Economic Substance Rules (ESR) in 2019.

These regulations ensure that businesses operating in the UAE appropriately report profits consistent with the economic activity they engage in there. In addition, the UAE MoF unveiled Country-by-Country Reporting (CbCR) regulations in April 2019 that essentially follow the OECD’s BEPS Action Plan 13.

The MoF of the UAE announced the Federal Corporate Tax (CT) on January 31, 2022. It will go into effect for fiscal years beginning on or after June 1, 2023. In April 2022, the government made a Public Consultation Paper available. To provide additional direction on the tax system, it published the Corporation Tax Law (the Law) in December 2022 by Federal Decree-Law No. (47) of 2022.

To help the UAE CT regime, the MoF has also released 158 Commonly Asked Questions. With the help of the new regulations, businesses will be better able to grasp the tax system and how to get ready to apply the corporate tax in the UAE.