No Match Found
Although corporate income tax goes into effect in 2023, organisations should understand what it means for them and hire resources early as the talent ‘race’ is magnified, PwC expert said.
Announced in February, the UAE’s new 9 percent corporate tax is the latest in a “generational” transformation of the region’s taxation ecosystem.
And although June 2023, when the corporate tax goes into effect, may seem far away, companies need to remember the lessons learned from the Value Added Tax (VAT) experience and start preparing for its introduction from now, said Jay Riche, Tax Strategy and Transformation leader at PwC.
“In the Middle East, we have the tax transformation of a generation. I don’t think that, in our lifetimes, we’ll see anything close to that level of transformation, from a tax perspective that we’ve been witnessing in the Middle East anywhere else in the world,” said Riche.
“When VAT was first introduced in Saudi Arabia and the UAE in 2018, it marked a significant change [in the region] so people didn’t know how to deal with that and it created angst for several years. As you see more transformation happening and more taxes being implemented, people are becoming more comfortable with it and it’s not a foreign concept anymore,” he continued.
Riche called the UAE’s corporate tax a “game changer” and a “good move by the UAE government”, especially when looked at it in the context of the Organisation for Economic Co-operation and Development (OECD) and the global minimum tax initiatives. He explained that “many countries that have been low tax jurisdictions now have to deal with this.”
“In an environment where the OECD and other government regulators have the ability to put countries on grey lists and blacklists for failure to comply with international standards around tax transparency, fair taxation and adherence to the OCED’s Base Erosion and Profit Shifting (BEPS) minimum standards, for the UAE to be seen as taking a proactive approach, I think is a very positive development from local government,” said Riche.
Preparing for corporate tax application
While there is still time under the tax goes into effect on June 2023, Riche said UAE corporates should learn the lessons from the VAT experience and not wait until the month before the tax goes into effect to start “figuring out what it means for them and getting ready for that.”
This is especially important given that the regional tax-experts talent pool is somewhat shallow.
“Historically, because tax is still a relatively new concept in the GCC, you do not tend to have a lot of organic tax knowledge that emanates from here so people come with expertise and knowledge from other countries,” said Riche.
“The race for companies to get the people they need to help them deal with the continual increases in tax regulation is magnified even more because of all of the changes that are happening right now. That’s why one of the key takeaways from our survey was advising businesses to get ahead in the race to recruit tax talent because, if they want good quality tax people on their in-house tax teams, there’s not a lot of resource available out there and if you wait too long, you might not be able to get the people you want or need,” he continued.
Preparations include figuring how much needs to be paid in tax and getting the tech infrastructure ready – which is less of an issue now that the region’s corporations are more comfortable with taxation, explained Riche.
Last year PwC called its Middle East Tax Leaders survey The Perfect Storm in reference to all the tax transformation happening in the region and Riche explained that the findings indicated the business community wasn’t really ready for them and didn’t have good technology in place to help them.
“What really stood out when we ran the report again 12 months later, is what a difference a year made- we call it the hockey stick phenomenon,” said Riche.
“Between when we did this study the first time until now, it seems like the tax community has woken up and there seems to be a greater sense of confidence and comfort – and a sharp increase in knowledge around how to deal with tax challenges – hence, the ‘hockey stick’ analogy, a shape reflecting the increase in the speed and volume of awareness around tax transformation.
“This is why we called this year’s report Navigating the Storm – as businesses find their way through, adapt and respond to this increasing complexity,” he continued.
Despite the tax, “the UAE is still going to be one of the most competitive countries in the world to do business,” said Riche.
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