[World Tax News] UAE Opens Corporate Tax Registration for Public & Private Companies and More

Editorial Team – [2023] 150 taxmann.com 337 (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 opens Corporate Tax registration for Public Joint Stock Companies and Private Companies

The Federal Tax Authority (FTA) has enabled the registration process for corporate tax through the EmaraTax digital tax services platform for Public Joint Stock Companies and Private Companies from 15-05-2023.

The registration is required in line with Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, which stipulates that taxable persons will become subject to corporate tax from the beginning of their first financial year that starts on or after 1stJune 2023.

The FTA invited all taxable persons that are Public Joint Stock Companies and Private Companies resident in the UAE for corporate tax purposes to register with the FTA, noting that this will not cover Free Zone Persons for whom corporate tax registration will be made available at a later stage.

Similarly, corporate tax registration for other categories of taxable persons, such as natural persons conducting business or business activity as specified by a Cabinet Decision, will open later.

To register for Corporate Tax, the taxable person may visit the registration portal available at https://tax.gov.ae

Source: News, dated 14-05-2023

2. UAE publishes Cabinet Decision specifying business activities subject to corporate tax

The UAE Finance Ministry released Cabinet Decision No. 49 of 2023, specifying the categories of businesses or business activities conducted by a resident or non-resident natural person,which shall be subject to corporate tax.

This decision also specified a list of activities not considered as businesses or business activities.

The Cabinet Decision stipulates that businesses or business activities conducted by a resident or non-resident natural person shall be subject to corporate tax only if the total turnover derived from such businesses or business activities exceeds AED 1,000,000 (one million United Arab Emirates dirhams) within a Gregorian calendar year.

Further, the following activities are kept out of the purview of business or business activities:

(a) Wages

The wage is given to the employee in consideration of their services under the employment contract, whether in cash or in kind, payable annually, monthly, weekly, daily, hourly, or piecemeal. It also includes all allowances and bonuses in addition to any other benefits provided for in the employment contract or in accordance with the applicable legislation in the State.

(b) Personal Investment Income

Investment activity that a natural person conducts for his personal account is neither conducted through a Licence nor requiring a Licence from a Licensing Authority in the State nor considered a commercial business per the Federal Decree-Law No. 50 of 2022.

(c) Real Estate Investment Income

Any investment activity conducted by a natural person related to, directly or indirectly, the sale, leasing, sub-leasing, and renting of land or real estate property in the State that is not conducted or does not require to be conducted through a Licence from a Licensing Authority.

The turnover from the above three sources is not subject to corporate tax, irrespective of the amount derived from such activities.

Further, if a natural person is not conducting business activities subject to corporate tax as defined above, he is not required to register for corporate tax.

Source: Cabinet Decision No. 49 of 2023

3. Sri Lanka notifies Inland Revenue (Amendment) Act; limits cash transactions exceeding LKR 5,00,000 in a day

The Sri Lanka Inland Revenue Department published the Inland Revenue (Amendment) Act, No. 4 of 2023, in the Official Gazette on 12thMay 2023. Some of the main measures incorporated in the Amendment Act are mentioned below:

(a) Limitation on the cash transaction exceeding LKR 5,00,000

Any payments exceeding LKR 500,000 made within a day, in a single transaction, or in a series of transactions related to a particular event cannot be considered deductible or included in the asset’s cost unless they are made through an account payee cheque, account payee bank draft, credit card, debit card, or electronic payment system via a bank account.

(b) Mandatory e-filing of Tax Returns

Starting from the assessment year commencing on 1stApril 2023 (2023/2024), the mandatory requirement of electronically filing tax returns has been implemented for all taxpayers.

(c) Implementation of new source rule for employment income

A new rule to provide a source of employment income has been implemented. It provides that payments received in respect of employment shall be deemed to have a source in Sri Lanka to the extent such payment is derived from a company resident and conducting business in Sri Lanka;

(d) Changes with respect to Dividend taxation

The following changes have been introduced with respect to the taxation of dividend income:

• Dividends disbursed by a resident company to a non-resident between 1st October 2022 and 31st December 2022 will be exempt from income tax.
• For residents, the applicable income tax rate for dividends received or derived during the second 6-month period of the assessment year 2022-23 is set at 15%.
• Dividends paid by a resident company to a member to the extent that such dividend payment is attributable to, or derived from, another dividend received by that resident company or another resident company is exempt from income tax with effect from 1st October 2022.

Source: Inland Revenue (Amendment) Act, No. 4 Of 2023