The Organization for Economic Co-operation and Development (OECD) has played a key role over the last decade or so with the introduction of key tax policies and proposals, which have helped in shaping the global tax regime.
The OECD's Inclusive Framework for Base Erosion and Profit Shifting (BEPS) has evolved and introduced certain key proposals recently to address tax avoidance, tackle challenges associated with the digitalization of the economy, and ensure consistency of the international tax rules with the introduction of BEPS Pillar 1 and Pillar 2 amongst the many tax proposals introduced.
Following the global trend and observing the impact, many of the GCC countries have already committed to introducing BEPS recommendations in their respective domestic tax legislations.
The UAE introduced the Economic Substance Regulations (ESR) to restrict harmful tax practices, largely in line with the Action Plan 5 of the BEPS Project. ESR was launched on 30 April 2019 and was applicable for the accounting year starting on or after 1 January 2019.
Furthermore, the UAE Federal Tax Authority (FTA) released the final version of the UAE Corporate Tax (CT) law through Federal Decree Law No. 47 of 2022 on 9 December 2022. The law is largely based on the public consultation document issued earlier during the year 2022. The CT regime would be effective for the financial year starting on or after 1 June 2023.
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