8 December 2022 - The tax landscape is changing more than ever, especially in the Middle East (ME) region. To highlight two key topics, we refer to the United Arab Emirates (UAE) announcing the introduction of Corporate Tax (CT) from fiscal year 2024 (FY24), including Transfer Pricing rules. In this connection, the UAE Ministry of Finance (MoF) released FAQs in January 2022, and a Public Consultation in April 2022 with the expectation that the CT law will be published later this year.
And secondly, we refer to the OECD announcing BEPS Pillar Two Global Minimum Tax (BEPS), which will establish a global minimum tax regime applying to both public and privately held multinational groups, with a consolidated annual revenue over €750m. This will impact organizations in the ME with a global presence and is expected to be implemented in FY24. As the BEPS minimum tax rate is currently set at 15%, the impact could be more significant for businesses, due to the headline CT rates in the region being below the minimum 15% (e.g., UAE, 0% in Free Zones (subject to specific requirements) or 9% in the Mainland, and Qatar 10%). This potentially will result in additional taxes (so called ‘top up tax’).
Both CT and BEPS will significantly increase the compliance and reporting burden that the tax function will need to consider and incorporate accordingly. A robust tax accounting process will be critical to facilitate this, to ensure accurate and reliable data is shared (internally or externally) for decision making purposes.
The latest developments will require an in-depth knowledge of tax accounting and technical expertise to comply with all the regulations and reporting in FY24. For example, the BEPS initiative has roughly 180 data points that will need to be assessed and collected to calculate the effective tax rate (per jurisdiction).
We have highlighted some key considerations that the Head of Tax and CFOs should be discussing with stakeholders, which are as follows:
The above questions are some key discussion points to help understand the current maturity level of the tax function and to develop a road map to be day one ready for reporting and compliance purposes.