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Corporate tax has been put into application in the United Arab Emirates starting from 1 June this year. The first tax period for Emirati companies will be the first calendar year or a 12-month period after 1 June for which financial statements are drawn up (articles 57 and 69 of Federal Decree-Law No. 47 (2022) “On the taxation of corporations and businesses” (the “Law on Corporate Tax”)). For most companies, the first tax period will be 2024, and business does not have much time left to prepare for the corporate tax regime in the UAE. Read more in the article of Maria Nikonova, Pepeliaev Group's partner.

In 2021 the Plenum of the Russian Supreme Court recommended that courts investigate in more detail objective economic reasons for the conduct of market players, assess whether profit can be generated and establish a causal link between an agreement and unlawful consequences. This has changed approaches to proving cartels. Already today practice contains an example of a court of the highest level referring a case for retrial based on the economic part of it.

Art 3(2)(a) of the UAE Corporate Tax Law (CTL) provides for a 0 percent tax rate for Qualifying Income. Art 18(1)(b) of this Law vests the Cabinet with authority ‘to specify’ Qualifying Income. The Cabinet in Decision No. 55/2023 delegated to the UAE Minister of Finance (the MoF) power to list the Qualifying Activities, i.e. activities which generate Qualifying Income. On 1st June 2023, the MoF released Decision No. 139 with such list.

On 1 of June 2023 the UAE Minister of Finance issued the Decision No.139. It lists activities in the free zones qualifying for 0% Corporate Tax rate. MoF established that ‘holding of shares and other securities’ ‘shall be considered Qualifying’.

The regulator is paying special attention to the fight against anti-competitive agreements. The courts are also making no less a contribution, forming common approaches to the consideration of such cases. The decisions of the Russian Constitutional Court are particularly significant: its legal positions contribute to uniform law enforcement in this area. The Court recently adopted two rulings clarifying the issues of cartel immunities and the interpretation of the concept of ‘income’. Elena Sokolovskaya, a partner at Pepeliaev Group, is reviewing the main conclusions.

This article will focus on the issues of confirming economic substance in the UAE.

Before we begin I would like to provide some key background information which will help you to understand what place economic substance has within the system of tax legal relationships.