Do-it-yourself corporate tax. How difficult can it be?
Which business person reading this has not reviewed dozens of contracts, be it trading or employment related?
While the two legal documents I have named are different, there is a structural integrity to each. Once you have read a few, you know what should appear when and where.
While this article is not meant to be corporate tax for dummies, adding to the well-known series of “how to” books, understanding how the legislation is built can be useful when having conversations with specialists.
No one wants to be the person who, brandishing the latest release, declares to all – with certainty – a particular perspective regarding an element of tax treatment.
Think of each formal publication as a single piece of a jigsaw. That will never be sufficient to comprehend the bigger picture.
This article will ignore core law, which underpins everything, as this does not directly instruct our actions with regard to corporate tax. Think of it as the foundation to the house of law you are entering.
Let us even set aside the corporate tax decree law released in December 2022, instead considering it part of our base understanding.
There are three primary sources of detailed supplementary statutory information. Two elements from the central government, Cabinet and ministerial departments, and one from the decree created by the Federal Tax Authority.
The senior party in this triumvirate is the Cabinet. Based on a special provision of the law, the Cabinet’s Council of Ministers may allow a minister or other competent authority to issue certain regulations.
Remember that each of these has other responsibilities besides corporate tax. That means when a decision is released using each respective body’s nomenclature, it will not necessarily sit in numerical order with regard to the subject matter.
For example, Cabinet Decision 49 of 2023 addresses the categories of businesses or their activities for resident and non-resident persons that are subject to corporate tax.
The determination of tax residency is Ministerial Decision No 27 of 2023.
Meanwhile, FTA decision No 5 of 2023 relates to changing an organisation’s tax period for corporate tax purposes.
Take one number off each of these and you have an entirely different subject matter area.
An additional challenge is that the information is not available in one place.
Most importantly, these decisions are coming into the public domain as they are ready for release.
Each can contain one or more components that can add a new dimension, clarification and complementary information to something already in the public domain.
The next category, while formal, should only be seen in a relatively supporting light.
Firstly, the public roadshows, where there are opportunities to ask questions after the formal presentations.
Meanwhile, the release in May of a 107-page corporate tax explanatory guide, written in English, has the potential to be remarkably helpful for any non-technical person.
To come is case law. Again, the relevant information will be published in another location. This is how all the countries in the world operate.
If you truly want to stay abreast of such a technical subject, the requirement is that you understand that world and surround yourself with all the data as it becomes available.
Let us look at two examples of having to take numerous sources of information from the official Cabinet, Ministerial and FTA communications.
Topic one: Natural persons and sole establishments
I’ve touched on these in my third article. You, the reader, are a natural person. Your entity is a juridical person.
A sole establishment is created through a juridical process, yet because it has unlimited liability, it is still a natural person.
That is the advice of the corporate tax explanatory guide. You may not have thought that reading the decree law.
Topic two: Threshold levels
These numbers come from three separate releases but must be read together.
Corporate tax becomes payable on amounts of taxable profits over Dh375,000. The small business relief applies to entities with revenue/turnover less than Dh3 million. These numbers exist on opposite sides of your profit and loss.
Finally, corporate tax will only apply to resident or non-resident individuals where the total business or business activity-related revenue exceeds Dh1 million.
In three days, corporate tax goes live.
If you have done nothing about it until now, have another read of this article and acquaint yourself with how best to prepare a reading list. Or find support.
After all, too many facts can be useless if you do not know how to use them.
David Daly is a partner at the Gulf Tax Accounting Group in the UAE
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Date started: 2012
Founder: Amir Barsoum
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Sector: HealthTech / MedTech
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Tips for job-seekers
- Do not submit your application through the Easy Apply button on LinkedIn. Employers receive between 600 and 800 replies for each job advert on the platform. If you are the right fit for a job, connect to a relevant person in the company on LinkedIn and send them a direct message.
- Make sure you are an exact fit for the job advertised. If you are an HR manager with five years’ experience in retail and the job requires a similar candidate with five years’ experience in consumer, you should apply. But if you have no experience in HR, do not apply for the job.
David Mackenzie, founder of recruitment agency Mackenzie Jones Middle East
Top 5 concerns globally:
1. Unemployment
2. Spread of infectious diseases
3. Fiscal crises
4. Cyber attacks
5. Profound social instability
Top 5 concerns in the Mena region
1. Energy price shock
2. Fiscal crises
3. Spread of infectious diseases
4. Unmanageable inflation
5. Cyber attacks
Source: World Economic Foundation
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Qualified teams
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2. PNG
3. Ireland
4. Namibia
5. Scotland
6. Oman
T20 World Cup 2020, Australia
Group A: Sri Lanka, PNG, Ireland, Oman
Group B: Bangladesh, Netherlands, Namibia, Scotland
Guide to intelligent investing
Investing success often hinges on discipline and perspective. As markets fluctuate, remember these guiding principles:
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- Strategic patience: Understand why you’re investing and allow time for your strategies to unfold.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
French business
France has organised a delegation of leading businesses to travel to Syria. The group was led by French shipping giant CMA CGM, which struck a 30-year contract in May with the Syrian government to develop and run Latakia port. Also present were water and waste management company Suez, defence multinational Thales, and Ellipse Group, which is currently looking into rehabilitating Syrian hospitals.
Other acts on the Jazz Garden bill
Sharrie Williams
The American singer is hugely respected in blues circles due to her passionate vocals and songwriting. Born and raised in Michigan, Williams began recording and touring as a teenage gospel singer. Her career took off with the blues band The Wiseguys. Such was the acclaim of their live shows that they toured throughout Europe and in Africa. As a solo artist, Williams has also collaborated with the likes of the late Dizzy Gillespie, Van Morrison and Mavis Staples.
Lin Rountree
An accomplished smooth jazz artist who blends his chilled approach with R‘n’B. Trained at the Duke Ellington School of the Arts in Washington, DC, Rountree formed his own band in 2004. He has also recorded with the likes of Kem, Dwele and Conya Doss. He comes to Dubai on the back of his new single Pass The Groove, from his forthcoming 2018 album Stronger Still, which may follow his five previous solo albums in cracking the top 10 of the US jazz charts.
Anita Williams
Dubai-based singer Anita Williams will open the night with a set of covers and swing, jazz and blues standards that made her an in-demand singer across the emirate. The Irish singer has been performing in Dubai since 2008 at venues such as MusicHall and Voda Bar. Her Jazz Garden appearance is career highlight as she will use the event to perform the original song Big Blue Eyes, the single from her debut solo album, due for release soon.
