Top Up Tax: A Key Amendment to the UAE CT Law

The UAE has recently amended its Corporate Tax Law, which represents a significant move in aligning with global tax reforms. The Federal Decree Law No. (60) of 2023 revises certain provisions in the UAE Corporate Tax Law. It also introduces the highly significant Top-up Tax and a new definition for Multinational Enterprises (MNEs).

Businesses need to have a comprehensive understanding of the latest amendments to the UAE corporate tax law to avoid compliance failures. Corporate tax consultants in Dubai can guide you in the process. Now, let us discuss the key highlights of the Federal Decree Law No. (60) of 2023 and its significance.

Introduction of Top-Up Tax in the UAE

The top-up tax is defined as a tax imposed on MNEs as per the Federal Decree Law No. (60) of 2023 and the rules and controls to be determined by the Cabinet under Article (3) of this Decree-Law for the purposes of the pillar two rules issued by the Organization for Economic Cooperation and Development (OECD).

Definition of Multinational Enterprise

An MNE is defined as an entity and/or one or more of its member entities located in the UAE or in a foreign jurisdiction, as specified in a decision to be issued by the Cabinet at the suggestion of the Minister of Finance.

Clause Addition to Article (3)

The new amendment adds a new Clause to Article (3) of the Federal Decree-Law No. 47 of 2022. It states that the Cabinet will regulate the imposition of the Top-up Tax on MNEs. This ensures the total effective tax rate on these entities is 15%. Consult with corporate tax consultants in Dubai for more clarity on this amendment.

Article (65) Revision

The latest amendment has revised the text of Article (65) of the Federal Decree-Law No. (47) of 2022. It will be replaced by the following text:

“Corporate Tax and Top-up Tax revenues and Administrative Penalties collected under this Decree-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.”

Implementation of Top-up Tax in the UAE

The provisions of the Top-up Tax specified in Clause (2) of Article One of this Decree-Law will come into effect as of the date specified in a decision issued by the Cabinet at the suggestion of the Minister of Finance. The new law also stated that such a decision shall be published in the Official Gazette.

Effective Date of the Amendment

The Decree-Law will be effective from the day following its publication in the Official Gazette.

Significance of the new Decree-Law

The new Decree-Law is significant as the UAE is taking a step towards adopting the OECD’s Pillar Two rules. This may include Income Inclusion Rule (IIR) and Undertaxed Profits Rule (UTPR). Adoption of the Pillar Two Rules means the profits made by the MNEs will not be taxed at a minimum rate globally.

Without the domestic top up tax, the profits earned by an MNE in the UAE may be subject to additional taxation in other countries where their parent companies are based. In this respect, the top tax is a  Corporate tax advisers in Dubai can advise you further on the top-up tax.

Hire the Best Corporate Tax Advisers in Dubai, UAE

The introduction of the top-up tax should be seen as a proactive step by the UAE government. The best corporate tax consultants in Dubai such as Tax Gian can keep you updated on the implementation of the domestic top-up tax mechanism.  We are a brand of Jitendra Tax Consultants providing the best corporate tax advisory in Dubai.

Tax Gian has a team of highly qualified tax experts in the UAE who can provide you with robust solutions to all your tax-related issues. Tax Gian and its associate Jitendra Chartered Accountants (JCA) have been serving companies in the UAE for more than two decades. Associating with Tax Gian will help you navigate the complex landscape of corporate tax in the UAE.

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