Introduction
The United Arab Emirates (UAE) has a history of being a trading hub in the region and in recent years has emerged as a thriving hub for economic growth, trade, investment innovations and technology. The UAE is geographically located in a very strategic place which allows the businesses to coordinate with different countries under different time zones. UAE has residents from different cultural backgrounds.
In the recent past years, the UAE government has implemented several crucial laws and regulations aimed at strengthening the nation’s economy and promoting a business-friendly environment. In this article, we will explore some of the major regulatory developments in the UAE that have significantly impacted its economic landscape, helped it to diversify its tax base from oil and to enhanced its position on the global stage.
1. Excise Act: Encouraging Healthier Choices – Cabinet Decision No. 52 of 2019
The Excise Act was introduced in 2017 and came into effect on 1 October 2017 to curb the consumption of goods that pose health or environmental risks, such as tobacco, energy drinks, and soft drinks. Tobacco and energy drinks were levied with 100% excise tax, and soft drinks were levied with a 50% excise tax. By imposing taxes on these items, the government aims to reduce their consumption while generating additional revenue for public welfare initiatives. Excise tax is a single-phased tax, levied once at import or at the production stage within the country. It is due when goods are released for consumption and is collected by businesses on behalf of the Tax Authority. We at M&M, being one of the best tax consultants in Dubai, UAE, can assist in compliance with the provisions of this Act.
2.Value Added Tax (VAT): Diversifying Revenue Sources – Federal Decree-Law No. (8) of 2017
This law was introduced in 2017 and came into effect on 1 January 2018. It imposes 5% a tax on sale value of goods and services. Every person having taxable revenue more than AED 375000/- must be registered for the purpose of VAT. This move was aimed at diversifying the government’s income sources and supporting the delivery of essential public services, paving the way for a more sustainable and resilient economy. VAT laws cover provisions for companies operating from designated free zones, free zones, and mainland. Certain trading activity which are third port shipments is considered as out of scope. Sale of goods and services are taxable either at 0% or at 5% depending upon the location of customer, provision of services etc. M&M over a period of five years have developed expertise in VAT refund in Dubai, UAE, VAT return filing in Dubai, UAE, Vat compliance in Dubai, UAE.
3. Economic Substance Regulations (ESR): Complying with International Standards – Cabinet Ministers Resolution No. 57 of 2020
To align with international expectations and prevent tax evasion, the UAE introduced Economic Substance Regulations in 2019 and came into effect on 30 April 2019. These regulations require companies engaged in nine relevant activities to demonstrate adequate economic substance within the country through assets, employees, and expenses. The major exercise in ESR is to prove that Core income generating activities (CIGA) are being conducted in UAE. Every company should evaluate every year whether they are carried out any relevant activity and if the answer is yes, file notification within six month of the end of the financial year and submit ESR report within twelve month of the end of the financial year. Non submission attracts fine of AED 20000 and AED 50000 respectively. M&M has expertise to assist client in ESR notification filing in Dubai, UAE and ESR report filing in Dubai. Compliance services in Dubai, UAE covers to see whether the businesses carry out CIGA in UAE and have demonstrated that decisions are taken in UAE by the key decision makers of the businesses.
4. Country-by-Country Reporting (CBCR): Enhancing Transparency – Cabinet Resolution no. 44 of 2020
This law was introduced in 2019 and came into effect on 1 January 2019. CbCR Reporting is part of Action 13 of the Base Erosion and Profit Shifting (BEPS) initiative led by the Organization for Economic Co-operation and Development (OECD) and the Group of Twenty (G20) industrialized nations. The Country-by-Country Reporting law mandates multinational enterprises with revenues more than Euro 750 Mn (AED 3.15 billion) to disclose financial information, taxes, and activities for each country they operate in. This move enhances transparency and facilitates cooperation among tax authorities to curb tax avoidance practices. M&M can assist in compliance with these provisions under our Compliance services in Dubai, UAE
5. Ultimate Beneficial Ownership Reporting: Combating Illicit Practices – Cabinet decision No 58 of 2020 UAE
This law was introduced in 2020 and came into effect on 27 October 2020 to combat money laundering, terrorism financing, and tax evasion. The UAE introduced a law requiring companies to disclose their ultimate beneficial owners—the individuals who ultimately own or control the company. This measure promotes transparency and accountability in corporate structures. M&M can assist in UBO declaration in Dubai, UAE
7. Commercial Companies Law (New in 2022): Promoting Business Growth – Commercial company law 32 of 2022
Federal law 8 of 1984 concerning commercial companies’ law was replaced by Federal law no 2 of 2015. The United Arab Emirates government published the Federal Decree No. 32 of 2021 concerning Commercial Companies Law (CCL 2021) which came into force on 2nd January 2022, on which date the Federal Decree Law No. 2 of 2015 and its amendments (CCL 2020) were repealed. This law is applicable to the companies specified in the law viz., Limited liabilities company, Private joint stock companies, public joint stock companies and others. Auditors need to be appointed for such companies and financials records needs to be maintained and audited. M&M being one of the reputed Audit firms in Dubai, UAE, whichis also in the panel of DMCC approved auditors, Dafza approved auditors and DSO approved auditors can carryout the audit for the corporates and the businesses.
10. Anti-Money Laundering: Combating Financial Crimes – Federal Decree by Law No. (20) of 2018 on Anti Money Laundering and Combating the Financing of Terrorism
UAE has strengthened its Anti-Money Laundering laws and regulations to prevent and combat money laundering, terrorism financing, and other illicit financial activities. Entities dealing with money or valuables must implement robust policies and procedures to identify and report risks. Now Designated non-financial businesses and profession (DNFBP) are also required to appoint Money Laundering reporting officer (MLRO) and register with the financial intelligence Unit (FIU) and report and suspicious transaction report (STR). MLRO services for DNFBP can be outsourced and M&M can assist in AML / CFT regulations in Dubai, UAE
14. Corporate Tax: Aligning with International Standards – The Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (Corporate Tax Law)
To diversify government revenue sources, the UAE has implemented 9% corporate tax on profits exceeding AED 375,000 for corporate entities, with certain exemptions and incentives in place. M&M follows a very methodical approach of first carrying out the impact analysis to understand the current scenario, level of preparedness and likely impact. M&M provides services such as corporate tax filing in UAE, Permanent Establishment (PE) advisory, Transfer Pricing services in Dubai, UAE etc.
Conclusion
The United Arab Emirates has demonstrated a commitment to economic progress and international best practices through the implementation of various laws and regulations. By creating a business-friendly environment, enhancing transparency, safeguarding individual rights, and complying with global standards, the UAE continues to solidify its position as a leading economic powerhouse in the region. As the nation remains focused on innovation, inclusivity, and sustainable growth, businesses and investors can confidently explore the plethora of opportunities that this thriving economy has to offer.