Alert | Amendment to certain provisions of the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses
December 13, 2023
Recently, the President of UAE issued the Decree-Law No. 60 of 2023 (‘Decree Law’) amending certain provisions of the Federal Decree Law No. 47 of 2022 on the Taxation of Corporations and Businesses (‘UAE CT Law’).
The subject Decree Law has added the below two new definitions to the UAE CT Law for the purposes of the pillar two rules issued by the Organization for Economic Cooperation and Development (OECD) of which UAE is a member to address the challenges faced by tax jurisdictions internationally:
Top-up Tax: The top-up tax imposed on Multinational Enterprises in accordance with the UAE CT Law and the rules and controls that will be determined as per a Cabinet Decision (yet to be issued).
Mutlinational Enterprise (“MNE”): An entity and/ or one or more of its member entities located in the UAE or a foreign jurisdiction as specified in a separate Decision to be issued by the Cabinet.
The Decision further provides that the Cabinet (at the suggestion of the Minister) would issue a decision regulating all cases, provisions, conditions, rules, controls, and procedures for imposing the Top up Tax on MNEs and the exemptions therefrom, such that the total percentage of the effective tax imposed on them is 15% (‘global minimum tax rate’). The provisions of the Top-up Tax would come into effect as on the date specified in a Decision issued by the Cabinet which shall be published in the Official Gazette.
In addition to Corporate Tax and Administrative penalties collected, Top-up Tax revenues collected under the Law shall be subject to sharing between the Federal Government and the Local Governments based on the provisions of a federal law in force in this regard.
Key Takeaways
The subject amendment has now officially adopted the much anticipated ‘global minimum tax’ regime within the ambit of UAE CT Law and will impact a large number of MNCs operating in different jurisdictions meeting the monetary thresholds prescribed by OECD. While the actual date for enforcement of the global minimum tax in UAE is yet to be issued by a Cabinet Decision (which would likely to be after 2024 as per Frequently Asked Questions released by the Ministry of Finance), the same seems to be an eventuality for which each such MNE should start preparing.
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