Newsletter | Corporate Tax – No.6

Background

A Person conducting Extractive Business can claim exemption, provided it meets all the following conditions: The Person
• must hold an interest in a right, concession or license issued by a Local Government for undertaking Extractive Business.
• is subject to tax under the applicable law of an Emirate
• notifies the Ministry of Finance of the above in the form and manner agreed with the Local Government.

Taxing the Extractive Businesses under the UAE Corporate Tax Law

If such a Person engages in Extractive as well as other Business that is taxable under the UAE Corporate Tax Law,
then following treatmentshall apply

Income from Extractive Business shall be taxed according to the applicable law of the Emirate in question
The Person shall not be considered to derive income from other Business, where two conditions are met • The other Business is ancillary to the Person’s Extractive Business; and • The Revenue of such other Business does not exceed 5% of the total Revenue
The other Business shall be treated as an independent Business, and financial statements shall be kept for this Business separately from the Extractive Business

The Person shall calculate the Taxable Income for its other Business independently for each Tax Period in accordance with the provisions of the UAE Corporate Tax Law
Any common expenditure between Extractive and other Business shall be apportioned in ratio of the respective Revenues for the Tax Period, unless law of the Emirate allows a different proportion
Transactions between the Extractive Business and the other Business of the same Person shall be considered Related Party transactions unless the other Business is exempt from Corporate Tax under Article 8

The Article addresses the possibility that an Emirate may impose a different type of tax on the income of the Person conducting Extractive Business, e.g., royalty or revenue tax, etc.

Dr Abhishek Jajoo

Founder & Chairman

Serial Entrepreneur with expertise on REGTECH & Risk Management

Muhammad Altaf Hussain

Partner, Tax & Advisory

Ex Big 4 with 24 years of experience in Taxation, Advisory & Assurance

Harsh Bhojani

Associate Director

Ex Big 4 with 9+ years of post qualification experience in taxation advisory and compliances

Ajai Subramanian

Manager

Ex Big 4 with 8+ years of post qualification experience in tax advisory, compliance and litigation