[World Tax News] UAE Amends Corporate Tax Law to Introduce Global Minimum Tax and More

Editorial Team – [2023] 157 Taxmann.com 167 (Article)

World Tax News provides a weekly snippet of tax news from around the globe. Here is a glimpse of the tax happening in the world this week.

1. UAE amends Corporate Tax Law to introduce Global Minimum Tax

The UAE released Federal Decree Law No. (60) of 2023, which modifies certain provisions of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses. This amendment aims to streamline the implementation of domestic minimum taxes.

The key amendments are as follows:

(a) New Definitions

Corporate Tax Law will see the incorporation of new terms. “Top-up tax” will be defined as an additional tax levied on Multinational Enterprises (MNEs) to guarantee their adherence to an effective tax rate of 15%, aligning with the Pillar Two rules.

Meanwhile, an “MNE” is defined as an entity and/or one or more of its member entities located in the State or in aforeign jurisdiction, as specified in a decision to be issued by the Cabinet at the suggestion of the Minister.

(b) Tax Rate

In due course, A separate decision shall be issued detailing the mechanisms, terms, conditions, rules, and procedures for the application of the top-up tax on Multinational Enterprises (MNEs) in accordance with the Pillar Two rules.

(c) Commencement Date

The regulations concerning the top-up tax will come into force on the date of the Minister’s forthcoming decision, as published in the Official Gazette.

2. The Czech Senate gives nod to law implementing Global Minimum Tax under pillar 2

On December 1, 2023, the Czech Senate, the upper house of parliament, approved the enactment of legislation aligning with Council Directive (EU) 2022/2523 dated December 14, 2022. This legislative initiative, which had already received the nod from the Chamber of Deputies (lower house) on October 27, 2023, encompasses the adoption of the Pillar 2 global minimum tax.

The legislation incorporates the Pillar 2 Income Inclusion Rule (IIR) and the Undertaxed Payment/Profit Rule (UTPR), aiming to establish a minimum tax threshold of 15% for multinational enterprise (MNE) groups with an annual consolidated revenue exceeding EUR 750 million in at least two of the preceding four fiscal years.

Moreover, the approved law introduces a qualified domestic minimum top-up tax (QDMTT) applicable to members of in-scope groups. Additionally, it incorporates permanent and transitional safe harbour rules to provide a comprehensive framework for implementing these tax regulations.

For the law to become effective, it requires the president’s signature and publication in the Official Gazette. The Income Inclusion Rule (IIR) and Qualified Domestic Minimum Top-Up Tax (QDMTT) provisions will be applicable for fiscal years commencing on or after December 31, 2023.

Conversely, the Undertaxed Payment/Profit Rule (UTPR) will take effect for fiscal years beginning on or after December 31, 2024. Nevertheless, in the case of groups with an ultimate parent entity residing in a Member State that opts not to defer the application of the IIR and UTPR for six consecutive fiscal years starting from December 31, 2023, the UTPR will be applicable for fiscal years beginning before December 31, 2024. This deferral option is in accordance with the allowance provided by the Directive.

3. Hong Kong offers tax deductions on spectrum utilization fees payable by mobile network operators

The Inland Revenue Department of Hong Kong has introduced the Inland Revenue (Amendment) (Tax Deductions for Spectrum Utilization Fees) Bill 2023. This Bill aims to provide tax deductions for spectrum utilization fees (SUF) payable by mobile network operators (MNOs) on radio spectrum acquired in future auctions to encourage MNOs to invest more proactively in telecommunications infrastructure to provide better communications services to business sectors and the general public.

The Government proposes that the SUF payable by MNOs for the radio spectrum to be acquired in future auctions is fully deductible, and the tax deduction will be spread over the spectrum assignment term (generally 15 years).

The proposal has no retrospective effect and will only apply to the SUF derived in auctions conducted on or after the commencement of the Bill. In other words, the SUF derived in all past auctions, whether they are already paid or to be paid, will not be affected and will remain tax deductible.

Source: Inland Revenue (Amendment) (Tax Deductions for Spectrum Utilization Fees) Bill 2023