Background
On 31 January 2022, the UAE Ministry of Finance announced the introduction of Federal Corporate Tax in UAE w. e. f. 1 June 2023. UAE Federal Tax Authority, on 28 April 2022 issued a public consultation document covering various aspects of the proposed law. In this article, we are describing the withholding tax provisions under UAE CT Regime
Withholding Tax
Given the position of the UAE as a global financial center and an international business hub, a 0% (zero percent) withholding tax will apply on domestic and cross-border payments made by UAE businesses
The following income shall be subject to 0% withholding tax:
▪ UAE sourced income earned by a foreign company that is not attributable to a PE in the UAE of that foreign company;
▪ Mainland UAE sourced income earned by a Free Zone Person those benefits from the 0% CT regime unless the income is attributable to a mainland branch of that Free Zone Person;
▪ Dividends and other profit distributions made by a Free Zone Person those benefits from the 0% CT regime to a mainland UAE shareholder in the Free Zone Person.
▪ Given the rate of withholding tax is proposed to be at 0%, UAE businesses will not be required to make any deductions from payments made, nor will there be an obligation to file withholding tax return