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Corporate Tax in UAE for Oil and Gas Industries

With every coming day, the world is dynamically shifting towards collaboration and union in every field to achieve different goals at a wider level. Setting up a business and doing investments worldwide is a great fantasy for every investor. UAE is now advancing its tax strategies to come in line with the requirements of the modern world and to become an attractive trade center for businesses all around the world. Corporate tax law is a reflection of it.

UAE goes for a globally small 9% corporate tax rate to make it a wonderful choice for foreign investors. Also, a nine percent corporate tax will ensure you will be devoid of income loss to international jurisdictions. Base eroding revenues from royalties and interests are subject to extra source taxation. Also, corporations owning royalties and interests in the UAE are not supposed to pay extra source taxes outside the United States Emirates.

Read More : Introduction to Federal Corporate Tax in UAE

Impact of Corporate Tax in UAE on the Oil and Gas Industries?

Generally, businesses that are involved in dealing with the natural resources of emirates are dealt with different laws and regulations.

According to the proposed corporate tax in UAE, enterprises extracting natural resources will proceed at the Emirates level and are excluded from corporation tax.

Thus, we can say that there will not be any particular impact of corporate tax in UAE on gas and oil industry. However, UAE service corporations that are aligned with worldwide oil and gas organizations are apt to be liable for corporate tax regimes.

Also, Pillar II is subjected to the mega-level industries of oil and gas with a communal sale of 3.15 billion dirhams. Pillar II will also pertain to global industries of oil and gas having combined sales of 3.15 billion dirhams. Effective Tax Rate (ETR) enterprises of oil and gas falling under Pillar II should have to make sure that their Effective Tax Rate (ETR) in the United Arab Emirates and other states is alleviating the 15% GMT rate.  If they are not satisfied, they will fall under the category of low-taxed entities and will be required to pay extra taxes to the other jurisdictions that have acquired Pillar II.

Important Points To Know on Corporate Tax

Industries of oil and gas operating in the United Arabs Emirates should have to keep the following suggestions in mind while calculating Effective Tax Rate (2) for Pillar II purposes:

  • For Pillar II purposes, the tax paid via the concession agreement or fiscal letter may be regarded as a "Covered Tax". UAE industries should hold to the GMT rate because this tax is frequently higher than fifteen percent.
  • For Pillar-II purposes, royalties paid via a fiscal letter or concession agreement might not be regarded as "Covered Tax."

What's the Current Scenario Regarding Corporate Tax in UAE in the Oil and Gas Industries?

The corporate tax regime is pretty facilitating for businesses and investors. Dubai is an economic center giving amazing tax reliefs to the ones who brought up their business in Dubai. Corporate tax is overhauled at the utmost rate in oil and gas enterprises. A standard Value Added Tax (VAT) tax rate of five percent was imposed by the UAE in 2018 over the majority of services and goods. Twenty percent tax is imposed on the international bank branches running in the UAE. Fifty-five percent is imposed over industries carrying emirate-level gas and oil concession pacts. When we particularly talk about corporate tax in Dubai, industries of oil and banks are prone to corporate income tax. 55% CT is paid by oil firms having UAE-source revenues while international bank branches operating in Dubai are supposed to pay twenty percent on an earned profit.

Corporate Tax Advisory Services

Not everyone is familiar with their endeavors to retain their stature as tax-paying people and industries when it reaches to the complex topic of taxation. At this point, hiring a corporate tax advisor is essential since it safeguards people and businesses from legal repercussions. They facilitate enterprises to sort tax issues by considering their tax profiles, keeping all legal requirements and exemptions in mind. Thus, you must take effective help from a Corporate tax consultant to standardize your business according to the corporate tax regime. The more you keep your business by Law, the more flourishing and fascinating your brand will be and you will confront any serious trouble on the way.

Choose Farahat & Co. Tax Consultants in UAE

The new corporate tax law will be imposed with full effect in 2023. However, it is better for businesses to start preparing for compliance with this upcoming law. As a business, you can choose our best and most qualified advisory services to understand how will corporate tax law impact your business. We can also help you meet the corporate tax law as soon as it is enforced in the UAE.

Read More : How Corporate Tax in UAE will Impact the Real Estate Industry.

Ervee is a CPA with international experience in Tax and Accounting. He has over 12 years of experience in accounting and bookkeeping and over a year in VAT implementation, registration, and accounting in UAE. He regularly drives out inefficiencies in company operations and loves the challenge of helping clients find additional ways for an easier and improved compliance and verification of transactions.