UAE Trends and Developments Contributed by: Marios Palesis, Theodora Charalambous and Giorgos Kinanis, Kinanis Tax Consultancy Middle East Limited
Kinanis Tax Consultancy Middle East Limited
Unit IH-00-01-01-OF-01 Level 01, Innovation One Dubai International Financial Centre UAE
Tel: +971 56 576 1818 Email: uae@kinanis.com Web: www.kinanisuae.com
Introduction For several decades, the United Arab Emirates (UAE) has been widely characterised as a jurisdiction oper - ating without a broad-based federal corporate income tax regime applicable to the general business commu - nity. Although certain sectors are subject to taxation at the emirate level pursuant to specific decrees or concession agreements, the UAE did not maintain a unified federal system of corporate taxation govern - ing business profits across all economic sectors. This fiscal environment constituted a central feature of the UAE’s economic model and contributed significantly to its attractiveness as a regional and international investment hub. In January 2022, the Ministry of Finance of the UAE formally announced the introduction of a federal cor - porate tax on the profits of businesses. This announce - ment marked a fundamental shift in the country’s fis - cal architecture and signalled the transition from a predominantly tax-neutral corporate environment to a structured federal corporate tax regime. The corpo - rate tax applies to financial years commencing on or after 1 June 2023, or from 1 January 2024 for entities operating on a calendar-year basis. The legislative framework underpinning this reform was enacted on 9 December 2022, when His High - ness Sheikh Mohamed bin Zayed Al Nahyan, Presi - dent of the UAE, issued Federal Decree-Law No 47 of 2022 on the Taxation of Corporations and Business - es, effective 1 June 2023. The announcement of this Decree-Law represents a historic development in the evolution of the UAE’s fiscal policy and establishes, for
the first time, a comprehensive federal regime govern - ing the taxation of corporate income. Transfer Pricing Provisions Within the Federal Decree-Law A central feature of Federal Decree-Law No 47 of 2022 is the express incorporation of the arm’s length principle into the UAE Corporate Tax framework. The Decree-Law requires that transactions between relat - ed parties be priced as if they had been concluded between independent parties under comparable cir - cumstances. This statutory adoption marks the formal entry of transfer pricing into the UAE’s domestic tax system. Prior to the introduction of corporate tax, transfer pric - ing considerations were not determinative for UAE tax purposes due to the absence of a general corporate income tax regime. With the enactment of the Decree- Law, however, intra-group pricing directly affects the calculation of taxable income. Therefore, the inclusion of the arm’s length principle positions transfer pricing as a core compliance and risk area within the UAE’s new corporate tax land - scape, aligning the jurisdiction with internationally rec - ognised principles governing profit allocation within multinational enterprise (MNE) groups. The statutory basis for transfer pricing in the UAE is set out in Chapter Ten – Transactions with Related Parties and Connected Persons of Federal Decree- Law No 47 of 2022. Article 34 formally codifies the arm’s length principle and establishes it as the govern -
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