From MENA to the WORLD: UAE Corporate Tax with Marco De Leo

From MENA to the WORLD

With Suzan Taha

UAE’s Corporate Tax Law with Marco De Leo

2023 marks the beginning of a new era for businesses and law firms operating in the UAE. With corporate tax laws coming into effect, the legal community has to evolve in order to help businesses navigate the corporate tax landscape.

LegalcommunityMENA sits down with Marco De Leo (pictured), Managing Partner at BonelliErede Dubai office, to shed some light on the matter.

How was the new UAE Corporate Tax law received by the community?

Once it was announced, many were worried that it may scare away new business owners, since UAE has always been known as a tax haven. While in fact, the tax rate is multiple times lower than many foreign countries and will therefore attract new sophisticated investors, not only small companies or entrepreneurs, but also large corporations who normally cannot operate in tax haven or blacklisted jurisdictions.

What about exemptions?

Actually, there are no exempted sectors, rather a basket where no tax is required for entities with an income below AED375,000. A company can set of losses and revenue; they can carry forward losses. For example, if a company is a part of a group, they can use the losses of other countries to set off against the tax they need to pay in the UAE.

The community understood that all the tax regulation will be pretty much flexible allowing companies to pay tax on the minimum possible profit. This will motivate international groups to push revenue in the UAE because they will only pay 9% tax.

How will International companies handle the new taxation?

There will be a significant increase in transfer pricing because at the end of the day the international companies will want to take advantage of the low tax rate. If the group has more than EUR750 million revenue globally, then they will pay a flat 15% tax, which is part of the Pillar 2 program. In such cases the companies’ headquarters will manage the taxes.

Many law firms do not provide tax services in the UAE, how will the legal community handle the new law?

We are lucky that we are an international firm who is able to provide the service. Until six months ago there was no talk of taxes in Dubai and therefore there was no need for the service. Now all the firms in Dubai have started to recruit and deploy tax professionals from their other offices. The local firms will not have the mindset for tax so they will probably be looking into international tax experts.

It is important to understand that it is not an increase in tax, it is a completely new territory for many.  When the 5% VAT was introduced five years ago it caused a lot of confusion, even though it was rather simple and straight forward. Corporate tax on the other hand is quite complex and will therefore probably be managed on HQ level.

About Marco De Leo

The 43-year-old Sicilian father of a 2 year old toddler moved to the UAE in 2017 and currently serves as the Managing Partner at the BonelliErede Dubai Office. His practice primarily focuses on corporate law, including joint ventures, mergers and acquisitions, private law, and corporate litigation. He has experience handling multi-jurisdictional transactions in various industries, including banking, pharmaceuticals, shipping and transportation, and automotive. De Leo is also a holder of a PhD in international law from the Trinity College, Dublin.

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