This week in taxation: the United Arab Emirates presents its corporate tax plan for 2023

The United Arab Emirates issued a federal decree on corporate and business taxation today, December 9, to set the stage for a 9% rate on taxable profits over Dh375,000 ($102,000) .

The legislation will come into force on June 1, 2023. Profits below MAD 375,000 will be zero-rated to support small businesses and start-ups. This can still allow small businesses to claim money from the tax office.

At the same time, the federal corporate tax system will maintain targeted exemptions for extractive industries, pension funds and investment funds. A zero rate will apply to eligible income earned in free zones.

The Ministry of Finance has designed the corporate tax regime to normalize UAE tax policy, as the Gulf Arab nation has been blacklisted by the EU as an uncooperative tax jurisdiction. However, the global rate of 9% is lower than the global minimum rate of 15% set by the OECD.

Nonetheless, the UAE government maintains that it supports the global minimum corporate rate, so there is a possibility that the 9% could be increased to 15% if the world implements the second pillar.

The European Commission indicated yesterday, December 8, that transport and accommodation platforms including Airbnb and Uber will have to collect the VAT paid by users of their platforms.

the Commission announced the measures under its long-awaited legislative changes to the EU VAT system, called “VAT in the digital age”.

Ridesharing and hospitality apps will be required to collect and remit VAT to tax authorities when the underlying providers on their platforms fail to pay the tax. Service providers may have failed to pay VAT due to different business sizes in online marketplaces.

“It will also make life easier for SMEs who would otherwise need to understand and comply with VAT rules in all countries. [EU] Member States where they do business,” the Commission said in its statement.

The VAT changes aim to reduce the compliance burden for SMEs, while leveling the playing field between online and traditional suppliers in the sectors.

These proposed measures are part of a wider package of VAT amendments that aim to help EU member states collect an additional 18 billion euros ($19 billion) a year.

Unanimous approval by the Council of Ministers will still be required before proposals are transposed into EU law.

Sumitomo Mitsui Financial Group faces a hefty tax bill of ₹55 billion ($670 million) in India following its acquisition of nearly 75% of financial services firm Fullerton India Credit from its former owner.

India’s income tax department is asking SMFG to pay on behalf of the seller, Fullerton Financial Holdings, The Economic Times reported on Wednesday, December 7. SMFG only withheld $170 million from the $2 billion deal, but the tax authority says it should have withheld $500. million more.

SMFG and Singapore-based Fullerton, which still owns 25% of Fullerton India Credit, completed the deal in 2021. India’s tax authority reportedly issued its request in late November.

A spokesperson for SMFG declined to comment on the acquisition itself, but stressed that the Japanese financial institution was taking steps to comply with local laws and regulations.

The Indian government previously ended long-running tax disputes with multinational corporations Cairn Energy and Vodafone Group through negotiation. SMFG and Fullerton are working with officials to reach a settlement.

European Parliament President Roberta Metsola warned European leaders against a trade war with the United States on Wednesday (December 7th) after the Cut Inflation Bill was passed in August.

Metsola said the EU should avoid falling into a race to the bottom on protectionist measures, according to Politico. EU leaders fear IRA subsidies and tax breaks threaten to undermine investment in green technology and vehicle production across the EU.

These concerns are also shared by the President of the European Commission, Ursula von der Leyen. She called on the EU to address the distortions created by the IRA and adjust the bloc’s rules on state aid to boost investment.

“There is a risk that the IRA could lead to unfair competition, shut down markets and fragment the same critical supply chains that have already been tested by COVID-19,” von der Leyen said.

She also highlighted three main concerns with US law: 1) the “buy American” principle that underpins the IRA, 2) tax breaks that could lead to discrimination, and 3) production subsidies that could lead to grant race.

US President Joe Biden has acknowledged European leaders’ unease with the law, including comments made to him by French President Emmanuel Macron. Biden has suggested adjustments could be made to the IRA to benefit European businesses as well.

Two affiliates of the Trump Organization were found guilty of 17 counts of tax evasion by a New York jury on Tuesday, December 6.

Trump Corp and Trump Payroll Corp were found guilty of all counts of tax evasion and falsifying business records. Those companies will face a $1.6 million fine, and the ruling could make it harder for the Trump Organization to secure funding in the future.

Former Trump Organization chief financial officer Allen Weisselberg will be sentenced in January 2023. Weisselberg admitted the charges as part of a plea deal with New York prosecutors in August. He should not incur more than five months in prison.

Former President Donald Trump has promised to appeal the verdict. Although Trump was not personally implicated in the charges, the case comes as he faces a civil lawsuit over allegations of estate tax avoidance. If Trump loses the civil case, he could lose his right to do business in New York State.

RTI talks to tax professionals about the potential impact of new disclosure requirements in Brazil’s draft transfer pricing law. These requirements may require taxpayers to disclose to the tax administration any changes to their PT arrangements. Meanwhile, RTI will examine the most important corporate tax and transfer pricing cases in 2022.

The team will also analyze the UAE’s plans to impose a federal corporate tax system in 2023. RTI will speak with tax experts from the Arab Gulf region on the implications of the new tax regime.

Readers can expect these stories and more next week. Don’t miss the main developments. Sign up for a free try to RTI.