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United Arab Emirates: Tax developments in response to COVID-19

General Information

This page offers an overview of tax developments being reported globally by KPMG member firms in response to the Novel Coronavirus (COVID-19).

The content will be updated regularly. However, due to the fast-moving pace of change, it may not always reflect the most current developments in a given jurisdiction. Please refer to the date of accuracy and refer to the relevant links, under additional information, for original source information.

Date accurate as of: 18 November 2020

Except for VAT and corporate tax on oil and gas companies, and branches of foreign banks, the UAE does not impose corporate tax on businesses registered onshore. However, several transparency initiatives implemented recently in the country, related to the OECD’s BEPS project, and international exchange of information, could have material impact on business operations (i.e. Economic Substance Rules).

On 26th August 2020, Cabinet Resolution No. 44 of 2020 amended country-by-country (CbC) reporting rules in the United Arab Emirates (UAE), specifically the definition of “reporting entity” to identify the ultimate parent entity of an MNE group (tax resident in the UAE) is the only entity of the MNE group required to comply with CbC reporting obligations. 

Additionally, on 28 August 2020, the UAE Ministry of Economy published Cabinet Resolution No. 58 of 2020 (the Decision) on the “Regulation of Procedures Related to Real Beneficiaries”. The Decision requires companies based on the UAE mainland and in commercial free zones to maintain registers of their beneficial owners and shareholders. Further, the decision also requires companies to file their registers with the relevant registrar and licensing authorities.

The Federal Tax Authority (FTA) released Public Clarification VATP020 “VAT-free special offers” to remind taxpayers of their obligations under the UAE’s VAT legislation, where goods or services are sold under certain promotional schemes. Retailers may often advertise promotions where the price for goods or services is discounted by the equivalent of the amount of VAT that would ordinarily be charged as offers that are “VAT free” or “the VAT is on us”.

Further, Public Clarification VATP021 “VAT registration of sole establishments” provides clarity on the VAT registration obligations of natural persons operating a number of sole establishments. Sole establishments are businesses owned and operated by natural persons and are not legally distinct from their owners. Where a natural person owns a number of sole establishments, the sole establishments are not required to be registered separately for VAT. The FTA has clarified that a single VAT registration in the name of the owner should be obtained.

On 22 October 2020, the UAE Ministry of Finance (MoF) published templates for filing notifications and reports under the UAE Economic Substance (ES) Regulations. Pursuant to release of the new UAE ES Regulations, all UAE businesses (including those that had earlier filed the ES notifications by 30 June 2020) are now required to file (or re-file, as the case may be) notification through the MoF’s dedicated portal. While the ESR portal is yet to be launched, the MoF has published templates for re-filing such notification and the ES report required to be filed within 12 months following the end of the licensee’s financial year (first report due by 31 December 2020 for the financial year ended 31 December 2019).