After all major countries including the UAE signed OECD’s global tax deal, the fear is that the country will introduce corporate tax of at least 15% across the board that will even apply to income of holding trusts and entities.
Many Indian families had moved their holding companies and trusts to Dubai in the last two years either completely or partially. Now with the OECD global tax deal, the fear is that there could be a 15% tax in the UAE even on these entities that would eventually wipe out a large part of the tax arbitrage,
The OECD last week brought together 136 countries to accept a deal to ensure that large multinationals pay a minimum tax of 15% on their global income from 2023 and those with profit above a threshold pay taxes in the markets where they conduct business. While the OECD deal as of now is only applicable to around 100 multinationals that have a particular size, this is set to create tax complications for other companies and entities that are present in countries such as the UAE, say tax experts.
This is mainly because countries which have low or no corporate tax may be increasing or introducing corporate tax at 15% across the board at some point in next one or two years and that will then also impact the trusts or holding entities in these countries
Countries such as the Emirates were preferred for setting up certain holding entities or trusts as it did not have any income tax or other direct taxes up until now.
Apart from family holding units, some of the operational entities may also be restructured, say tax experts.
With a likely introduction of corporate tax in countries like the UAE and Bahrain, large business houses are already looking at their business structures and have started assessing the impact. The tax landscape in the region is now at an interesting and evolving crossroad