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Corporate tax round-up

Kitty Miv, Editor
11 May, 2022

In this week's column, we turn our attention to corporate taxes, which are so often the focus of scrutiny both at a national and international level.

We'll begin by looking to the United Arab Emirates, where the authorities are seeking feedback from taxpayers on the implementation of a federal corporate tax from June 1, 2023.

The UAE announced its plans to introduce a corporate tax in January 2022. It said the regime will feature a nine percent rate, which will be charged on corporate profits over AED375,000 (USD102,000), while the tax regime for natural resources businesses will remain unchanged.

The UAE Government has also said it will introduce transfer pricing rules alongside the new regime.

Announcing plans for the corporate tax regime, the UAE Government acknowledged international plans for the introduction of a global minimum effective tax rate, which is to be set at 15 percent. It indicated that it, too, will adopt a rate higher than the nine percent rate proposed for in-scope large multinational enterprises (MNEs with revenue above EUR750m), without disclosing whether the UAE would adopt the 15 percent rate. Feedback is being sought by May 19, 2022.

In New Zealand, also, the authorities were seeking input from interested parties on the way forward in light of the OECD reform plans, with the Inland Revenue Department on May 5, 2022, launching a public consultation on the implementation of Pillar Two of the OECD's international tax reform plans.

An officials' issues paper, OECD Pillar Two: GloBE rules for New Zealand, discusses the rules and areas officials would like feedback on. The closing date for submissions is July 1, 2022.

Finally for this week, and straight from the horse's mouth, as part of its work to deliver the two-pillar international tax reform plan, the OECD itself has launched a public consultation on the Regulated Financial Services Exclusion under Amount A of Pillar One.

Under pillar one of the OECD's two-pillar plan, the agreement will bring in new tax rules to reallocate to market jurisdictions taxing rights on profits earned by the world's largest multinational enterprises. The measure, developed in response to the digitalization of the economy, is aimed at ensuring that market economies receive revenues even where large digital firms lack a physical presence. Pillar one is to provide that three types of taxable profit may be allocated to a market jurisdiction, described as Amount A, Amount B and Amount C.

Amount A is described as a "share of residual profit allocated to market jurisdictions using a formulaic approach applied at an MNE group (or business line) level." The new taxing right is to apply irrespective of the existence of physical presence, especially for automated digital services.

The new consultation concerns the Regulated Financial Services Exclusion, which will exclude from the scope of Amount A the revenues and profits from Regulated Financial Institutions.

The OECD has said that it is seeking written comments no later than May 20, 2022.

Until next week!


About the Author

Kitty Miv, Editor

Kitty was born in Argentina in 1960 to a Scottish cattle rancher and his Argentine wife. Educated in Edinburgh and at Princeton, Kitty worked for the World Bank as an economist, where she met and married an emigre Iranian banker. During her time with the Bank, Kitty worked in a number of emerging markets, including a spell in the ex-USSR as a Transition Economies Team Leader. Kitty is now a consultant in Brussels and has free-lance writing relationships with a number of prominent economic publications. kitty@lowtax.net


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