The UAE's new 15 per cent tax on large multinational companies didn't come as a shock to many corporates, according to analysts. And, despite a short-term impact on profits, experts say it offers businesses the clarity they need to plan for the future.
The Ministry of Finance said the Domestic Minimum Top-up Tax will take effect from January 1, and will apply to multinational enterprises with consolidated global revenue of €750 million ($793 million) or more in at least two of the four financial years immediately preceding the financial year in which the tax applies.
“Those taxpayers effected by the new regulations were aware of these incoming changes following much movement globally in line with the OECD Pillar Two framework and the completion of the UAE’s public consultation around Pillar Two,” said Vishal Sharma, managing director and UAE tax practice leader at Alvarez & Marsal. “Many of these taxpayers have already begun to assess the scope of these rules against their group, identifying the potential future tax and compliance impact.”
When you start to do business in any region, you have to look at the big picture
Glendy Kam,
chief product officer, blockchain services provider Tassat
Operationally, multinationals must gear up to introduce the tax in the UAE and its overall implementation as applicable, said Nilesh Ashar, senior managing director and head of Middle East Tax at FTI Consulting.
“MNEs need to assess the impact of DMTT on the UAE businesses, on their tax policy and also need to review system capabilities for tax reporting and compliances. Importantly, MNEs should evaluate the availability of any reliefs (like transitional safe harbour) in addition to the potential incentives announced in UAE for R&D and high-value employment activities,” he said.
The DMTT will require many UAE companies to further make operational and structural adjustments to deal with its impact and compliance, according to Basel Arafe, tax partner, Deloitte Middle East.
“Companies will need to enhance their financial reporting systems to meet the detailed record-keeping and reporting requirements under the DMTT and OECD rules,” he told The National.
It will also require many companies to review their tax and corporate structures to optimise liabilities, he said.
“Overall, while many UAE companies have begun adapting to the evolving tax landscape, additional preparation and restructuring may likely be required for full compliance. Large multinational enterprises are preparing by aligning with OECD's Pillar Two rules, yet smaller domestic enterprises are generally unaffected,” Mr Arafe said.
Impact on profits
In the short term, a higher tax regime will inevitably have an impact on profitability for businesses that were used to enjoying the relatively lower taxes offered by the UAE, said Bal Krishen, chairman of Century Group. “However, corporations in the country’s free zones will maintain their tax-exempt status, and despite a 15 per cent tax rate, the UAE would still be an attractive business destination, relative to countries like the UK and Saudi Arabia, which have a 25 per cent and 20 per cent corporate tax rate, respectively,” he said.
After the 9 per cent corporate tax was introduced in 2023, it was a “major deal”, but companies revised their financial strategies in order to comply with the new regulations, Mr Krishen added. According to Mr Sharma, handling the new tax system will require collaboration and commitment from the finance, IT, legal and HR teams, and not just the tax department.
The announcement gives the qualifying companies “a strong mandate to press on with their Pillar Two implementation plans, obtaining additional budget from their business leads to invest in transformation and technology to support with tackling the extensive Pillar Two compliance burden, which is heavily data dependent”, he added.
OECD's reforms
The OECD's Pillar Two reform programme set up a global minimum corporate tax to ensure large multinational enterprises pay a minimum 15 per cent tax on profits in each country where they operate.
The global minimum tax, which is based on Global Anti-Base Erosion (Globe) Model Rules, aims to reduce the incentive for profit shifting and places a floor under tax competition, bringing an end to the race to the bottom on corporate tax rates, the OECD said.
More than 140 jurisdictions have signed up for the reform programme, which was announced in October 2021. The global minimum tax is in effect in more than 30 jurisdictions, and an increasing number of other jurisdictions have announced their intention to implement the Globe rules within the next year, the OECD said in May.
Bigger picture
The DMTT is unlikely to deter multinational companies aiming to expand into the UAE, according to Amro Zakaria, a global financial markets strategist and the founding partner of Kyoto Network and Madarik Ventures.
“This region offers so many benefits … Global capital is gravitating towards the region. And the region itself has a lot of organic capital from sovereign wealth funds, big regional companies that are becoming multinationals and family offices,” he told The National on the sidelines of Abu Dhabi Finance Week.
The Gulf stands out globally when it comes to factors that businesses look for, such as demand, stability and growth and so “even if there is a gradual increase in taxation, I don't think it is going to dent the attractiveness of the region”, he added. Companies tend to focus on “the big picture” rather than just one piece of data, agreed Glendy Kam, chief product officer at US-based blockchain services provider Tassat, which plans to expand into the UAE.
“When you start to do business in any region, you have to look at the big picture – what are the opportunities, what are the revenue, [all of these] factor into the cost of doing business,” she told The National.
According to Simon Evenett, professor of Geopolitics and Strategy at IMD, the move "brings UAE closer into line with the new OECD minimum tax standard".
"The package is balanced – a higher corporate tax rate will offset by more generous allowances that will favour innovative firms and those companies with regional or global headquarters in UAE," he told The National.
"These measures reinforce the attractiveness of UAE as a base for the cutting edge firms keen on having strong commercial ties throughout the world.”
Some of the key incentives in this region include connectivity, infrastructure support, the workforce and the knowledge in technology and innovation, Ms Kam said. The company, which, this year, reached more than $2 trillion in transactions since its inception in 2019, has operations globally.
“We have looked at Europe, APAC and we just started looking at Mena. One advantage here is that it is a new market and I can see the energy and effort put into a very good regulatory environment to support the development of new business, new technology,” Ms Kam said. “It doesn't have some of the burdens of other regions where you have very old regulations and then you are trying to figure out how you work backward into those regulations.”
More on animal trafficking
The Melbourne Mercer Global Pension Index
The Melbourne Mercer Global Pension Index
Mazen Abukhater, principal and actuary at global consultancy Mercer, Middle East, says the company’s Melbourne Mercer Global Pension Index - which benchmarks 34 pension schemes across the globe to assess their adequacy, sustainability and integrity - included Saudi Arabia for the first time this year to offer a glimpse into the region.
The index highlighted fundamental issues for all 34 countries, such as a rapid ageing population and a low growth / low interest environment putting pressure on expected returns. It also highlighted the increasing popularity around the world of defined contribution schemes.
“Average life expectancy has been increasing by about three years every 10 years. Someone born in 1947 is expected to live until 85 whereas someone born in 2007 is expected to live to 103,” Mr Abukhater told the Mena Pensions Conference.
“Are our systems equipped to handle these kind of life expectancies in the future? If so many people retire at 60, they are going to be in retirement for 43 years – so we need to adapt our retirement age to our changing life expectancy.”
Saudi Arabia came in the middle of Mercer’s ranking with a score of 58.9. The report said the country's index could be raised by improving the minimum level of support for the poorest aged individuals and increasing the labour force participation rate at older ages as life expectancies rise.
Mr Abukhater said the challenges of an ageing population, increased life expectancy and some individuals relying solely on their government for financial support in their retirement years will put the system under strain.
“To relieve that pressure, governments need to consider whether it is time to switch to a defined contribution scheme so that individuals can supplement their own future with the help of government support,” he said.
The five pillars of Islam
The five pillars of Islam
Mohammed bin Zayed Majlis
KILLING OF QASSEM SULEIMANI
More from Neighbourhood Watch
More from Neighbourhood Watch:
Defence review at a glance
• Increase defence spending to 2.5% of GDP by 2027 but given “turbulent times it may be necessary to go faster”
• Prioritise a shift towards working with AI and autonomous systems
• Invest in the resilience of military space systems.
• Number of active reserves should be increased by 20%
• More F-35 fighter jets required in the next decade
• New “hybrid Navy” with AUKUS submarines and autonomous vessels
The years Ramadan fell in May
A cryptocurrency primer for beginners
Cryptocurrency Investing for Dummies – by Kiana Danial
There are several primers for investing in cryptocurrencies available online, including e-books written by people whose credentials fall apart on the second page of your preferred search engine.
Ms Danial is a finance coach and former currency analyst who writes for Nasdaq. Her broad-strokes primer (2019) breaks down investing in cryptocurrency into baby steps, while explaining the terms and technologies involved.
Although cryptocurrencies are a fast evolving world, this book offers a good insight into the game as well as providing some basic tips, strategies and warning signs.
Begin your cryptocurrency journey here.
Available at Magrudy’s , Dh104
Zayed Sustainability Prize
The burning issue
The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.
Read part four: an affection for classic cars lives on
Read part three: the age of the electric vehicle begins
Read part one: how cars came to the UAE
More from Neighbourhood Watch:
More from Neighbourhood Watch:
The 10 Questions
- Is there a God?
- How did it all begin?
- What is inside a black hole?
- Can we predict the future?
- Is time travel possible?
- Will we survive on Earth?
- Is there other intelligent life in the universe?
- Should we colonise space?
- Will artificial intelligence outsmart us?
- How do we shape the future?
The five pillars of Islam
Ticket prices
General admission Dh295 (under-three free)
Buy a four-person Family & Friends ticket and pay for only three tickets, so the fourth family member is free
Buy tickets at: wbworldabudhabi.com/en/tickets
The specs
Engine: Four electric motors, one at each wheel
Power: 579hp
Torque: 859Nm
Transmission: Single-speed automatic
Price: From Dh825,900
On sale: Now
UAE currency: the story behind the money in your pockets
Zayed Sustainability Prize
Killing of Qassem Suleimani
More from Neighbourhood Watch:
COMPANY%20PROFILE
%3Cp%3E%3Cstrong%3EName%3A%20%3C%2Fstrong%3EQureos%0D%3Cbr%3E%3Cstrong%3EBased%3A%20%3C%2Fstrong%3EUAE%0D%3Cbr%3E%3Cstrong%3ELaunch%20year%3A%20%3C%2Fstrong%3E2021%0D%3Cbr%3E%3Cstrong%3ENumber%20of%20employees%3A%20%3C%2Fstrong%3E33%0D%3Cbr%3E%3Cstrong%3ESector%3A%20%3C%2Fstrong%3ESoftware%20and%20technology%0D%3Cbr%3E%3Cstrong%3EFunding%3A%20%3C%2Fstrong%3E%243%20million%0D%3Cbr%3E%3C%2Fp%3E%0A
The five pillars of Islam
1. Fasting
2. Prayer
3. Hajj
4. Shahada
5. Zakat
KILLING OF QASSEM SULEIMANI
Killing of Qassem Suleimani
Champions parade (UAE timings)
7pm Gates open
8pm Deansgate stage showing starts
9pm Parade starts at Manchester Cathedral
9.45pm Parade ends at Peter Street
10pm City players on stage
11pm event ends
THE%20SPECS
%3Cp%3EBattery%3A%2060kW%20lithium-ion%20phosphate%3Cbr%3EPower%3A%20Up%20to%20201bhp%3Cbr%3E0%20to%20100kph%3A%207.3%20seconds%3Cbr%3ERange%3A%20418km%3Cbr%3EPrice%3A%20From%20Dh149%2C900%3Cbr%3EAvailable%3A%20Now%3C%2Fp%3E%0A
The years Ramadan fell in May
How to get there
Emirates (www.emirates.com) flies directly to Hanoi, Vietnam, with fares starting from around Dh2,725 return, while Etihad (www.etihad.com) fares cost about Dh2,213 return with a stop. Chuong is 25 kilometres south of Hanoi.
Company%20Profile
%3Cp%3E%3Cstrong%3ECompany%3A%3C%2Fstrong%3E%20Astra%20Tech%3Cbr%3E%3Cstrong%3EStarted%3A%20%3C%2Fstrong%3EMarch%202022%3Cbr%3E%3Cstrong%3EBased%3A%20%3C%2Fstrong%3EDubai%3Cbr%3E%3Cstrong%3EFounder%3A%20%3C%2Fstrong%3EAbdallah%20Abu%20Sheikh%3Cbr%3E%3Cstrong%3EIndustry%3A%3C%2Fstrong%3E%20technology%20investment%20and%20development%3Cbr%3E%3Cstrong%3EFunding%20size%3A%3C%2Fstrong%3E%20%24500m%3C%2Fp%3E%0A
Banned items
Dubai Police has also issued a list of banned items at the ground on Sunday. These include:
-
-
-
-
-
-
-
-
-
Political flags or banners
-
Bikes, skateboards or scooters
Company profile
Date started: Founded in May 2017 and operational since April 2018
Founders: co-founder and chief executive, Doaa Aref; Dr Rasha Rady, co-founder and chief operating officer.
Based: Cairo, Egypt
Sector: Health-tech
Size: 22 employees
Funding: Seed funding
Investors: Flat6labs, 500 Falcons, three angel investors
More coverage from the Future Forum
More on Quran memorisation:
MOUNTAINHEAD REVIEW
Starring: Ramy Youssef, Steve Carell, Jason Schwartzman
Director: Jesse Armstrong
Rating: 3.5/5
More on animal trafficking
ASHES SCHEDULE
First Test
November 23-27 (The Gabba, Brisbane)
Second Test
December 2-6 (Adelaide Oval, Adelaide)
Third Test
December 14-18 (Waca Ground, Perth)
Fourth Test
December 26-30 (Melbourne Cricket Ground, Melbourne)
Fifth Test
January 4-8, 2018 (Sydney Cricket Ground, Sydney)
KILLING OF QASSEM SULEIMANI
All%20The%20Light%20We%20Cannot%20See%20
%3Cp%3E%3Cstrong%3ECreator%3A%20%3C%2Fstrong%3ESteven%20Knight%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStars%3A%C2%A0%3C%2Fstrong%3EMark%20Ruffalo%2C%20Hugh%20Laurie%2C%20Aria%20Mia%20Loberti%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ERating%3A%20%3C%2Fstrong%3E1%2F5%C2%A0%3C%2Fp%3E%0A
More from Rashmee Roshan Lall
Read more about the coronavirus
KILLING OF QASSEM SULEIMANI
Zayed Sustainability Prize
COMPANY PROFILE
Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Total funding: Self funded
The%20specs
%3Cp%3E%3Cstrong%3EPowertrain%3A%20%3C%2Fstrong%3ESingle%20electric%20motor%0D%3Cbr%3E%3Cstrong%3EPower%3A%20%3C%2Fstrong%3E201hp%0D%3Cbr%3E%3Cstrong%3ETorque%3A%20%3C%2Fstrong%3E310Nm%0D%3Cbr%3E%3Cstrong%3ETransmission%3A%20%3C%2Fstrong%3ESingle-speed%20auto%0D%3Cbr%3E%3Cstrong%3EBattery%3A%20%3C%2Fstrong%3E53kWh%20lithium-ion%20battery%20pack%20(GS%20base%20model)%3B%2070kWh%20battery%20pack%20(GF)%0D%3Cbr%3E%3Cstrong%3ETouring%20range%3A%20%3C%2Fstrong%3E350km%20(GS)%3B%20480km%20(GF)%0D%3Cbr%3E%3Cstrong%3EPrice%3A%20%3C%2Fstrong%3EFrom%20Dh129%2C900%20(GS)%3B%20Dh149%2C000%20(GF)%0D%3Cbr%3E%3Cstrong%3EOn%20sale%3A%3C%2Fstrong%3E%20Now%3C%2Fp%3E%0A
