The recent introduction of corporate tax in the UAE has triggered a need for businesses to assess their restructuring options to optimize their tax and cost structures, comply with regulations, gain a competitive edge, and build a sustainable business model. With the implementation of corporate tax, businesses operating in the UAE must adapt their operations to accommodate the new tax system.
Under the UAE corporate tax law, one entity can set off tax losses against another entity’s taxable profit if certain conditions are met. This implies that restructuring the ownership of businesses within the group can aid in optimizing their tax, even if they are not part of a “tax group.” This creates an opening for businesses to restructure their operations for better tax efficiency.
Furthermore, as the UAE is a popular spot for foreign direct investment (FDI) and tax-free income, business owners intending to relocate to the UAE must meticulously evaluate their operating structure. Deciding strategically from the UAE could potentially bring the foreign entity under the purview of the UAE corporate tax, as it might be considered effectively managed and controlled in the country.
To summarize, the implementation of corporate tax in the UAE has had significant ramifications for businesses operating in the region. It has necessitated businesses to reassess their operations and contemplate restructuring options to improve their tax and cost structures, adhere to regulations, gain a competitive advantage, and establish a sustainable business model.