New corporate tax to bring influx of accountants to UAE
The imminent introduction of the OECD-proposed global minimum tax (GMT) for corporates will lead to an influx of specialised accounting and audit firms into the UAE, according to an industry expert.
Corporates in the UAE and the wider Gulf Cooperation Council (GCC) region will need to beef up their reporting and compliance procedures to comply with the new tax, according to Sharron Gunn, chief operating office at the Institute of Chartered Accountants in England and Wales (ICAEW).
The UAE’s proposed 9% tax for companies will kick in from June 2023. Other countries in the GCC, such as Saudi Arabia, Kuwait, Oman and Qatar, are set to impose taxes on corporate income of 20%-10%.
The OECD’s proposed 15% GMT for multinationals with revenues of more than €750m (£650m) will come into effect from January 2024.
“With some of the GCC countries having varying rates for corporate tax and the impending deadline for the GMT, corporate tax [regimes in the region] is set to become more complicated,” said Gunn.
She said the demand for auditing and assurance services in the region is expected to see a surge in step with the increased financial reporting requirements, and “overseas firms will definitely be looking to take advantage of the expected market expansion”.
“We may see more specialist accounting services coming to market to support these [rising] needs,” she said.
However, Gunn said the UAE and other GCC countries in the region already had well-established accounting sectors, with a number of domestic and international firms already operating in the region.
She added that local GMT frameworks for participating GCC countries are still being determined, and it is not clear whether tax rates will be raised to 15% or if a top-up tax will apply.
“However, what is certain is the new and evolving corporate tax regimes will intensify reporting efforts as more data will have to be gathered and scrutinised to ensure compliance. This presents a challenge and opportunity for professional accountants and accounting firms,” she said.
“The new and evolving corporate tax regimes mean that not only will they [accounting and auditing professionals] need to help companies get their data houses in order, they will have to up their reporting game, too.”
However, Gunn told the Arabian Business website that it was difficult to guage the size of the accounting and auditing services market in the UAE in the coming years.
“Over the next five years, demand for professional accounting services is expected to see a massive increase as a result of intensifying economic diversification and modernisation efforts in the UAE, Saudi Arabia and wider region.
“The growing complexity of business operations, as well as the increasing importance of environmental, social and governance factors, are also expected to drive demand for advisory services,” she said.
Gunn, however, said the regional business environment and regulatory landscape could present challenges for firms looking to enter the market.
“They may need to learn to navigate cultural differences as well as the complex legal and regulatory frameworks that differ in each Middle East country,” Gunn said.
She said accounting firms already present in the region will have an edge in terms of knowledge and experience.
“However, the [expected] increased competition from new market entrants will be healthy for the continued development of the profession and ultimately will help elevate the standard of accountancy services [in the region],” the ICAEW COO said.
As of now, four of the six GCC countries have announced or imposed new corporate tax regimes, with varied rates.
Saudi Arabia has the highest rate of 20%, while Kuwait and Oman have 15% and Qatar has 10%.
The UAE has set the lowest corporate tax rate of 9% on taxable profits over AED 375,000 (£82,000).
