Latest news with #corporatetax
The National
a day ago
- Business
- The National
Breaking down the new UAE corporate tax ruling on property
Two years into the UAE corporate tax universe, we continue to have changes to the law, so it is essential to keep up. Crammed within five short pages of the Ministerial Decision No. 173 of 2025 are a set of rules for treatment that demand the attention of those who have property investments. As an investment class, property can be used in different ways, particularly with how it interacts with tax and accounting. This holds true in any country due to how incentives are typically employed. Industrial, commercial and residential zones and within those categories, the level permitted within planning regulations. Planning rules are a function of the current version of an area's master plan. Where regeneration is required, rules tend to be much more relaxed. Starting with accounting treatment, we'll move on to the tax implications. The former must comply with international financial reporting standards (IFRS) to be considered in line with the various UAE regulatory authorities' laws. Some definitions to lay the ground. A depreciation charge recognises that a physical asset loses value over time, primarily from wear and tear, usage and general perceived value compared with new market offerings in the same space. The traditional approach is to declare a lifetime – say five years – and then take a charge to the profit and loss on an equal monthly basis until the original cost in financial accounts is zero. Impairment builds on this. Say you purchased a building in the Dubai International Finance District in 2009. We know there was a global recession and that property values were materially depressed. In 2025, the opposite is true. Our depreciation definition above suggests the building would be almost worthless in our financial accounts; however impairment says we must recognise the realisable value were it to be sold today. This is almost certainly much higher than the original purchase price. But surely you cannot account separately for both? The truth is that we separate the differing elements of the building. The core structure becomes a property asset and its innards, fixtures and fittings assets. The former is impaired annually and occupies a single accounting line. The latter is depreciated monthly and occupies as many lines as there are items. The UAE has relatively few mandatory annual financial reporting requirements. Large family and single-person-owned entities do not have shareholders to report to, and these make up a large part of the national economy. Hence there has been no oversight of the valuation of certain asset classes in company balance sheets. A building might never have had its fittings depreciated or an old building downwards impaired; one that is in need of demolishing and redeveloping. These buildings become purchase or whole entity takeover targets for wise corporate tax planners. Why? Until this ministerial release, if you could pay less than the accumulated write down to your net profit, you could reduce your tax bill. Years and years of unused tax credits. Article 2, section 1(a) caps the annual deductible value against corporate tax to 4 per cent of the original cost. While this closes a tax planning loophole, it raises a question I have asked before. From when does this law take effect? This is important, because it is possible that a reporting entity may have already submitted two tax returns that took full advantage of this scenario. Happily, this is dealt with in Article 7. It applies from the January 1, 2025. This will cover almost everyone. Yet, it is possible that an entity has both taken the tax benefit after this date and submitted a return. Say an entity with a March 2024 to February 2025 fiscal year, which filed in May 2025. What do they now do? The obvious answer is that they must file an amendment to their return having recalculated their final reported position. It'd be worth contacting the Federal Tax Authority for guidance, not unreasonably, as the legislation has just appeared, and confirm that they have acted in good faith, coupled with reporting in a very timely manner. There are additional exceptions that should be reviewed – groups and related parties in particular should carefully review and consider their positions, and any decisions already executed. For example, this decision does not apply to undeveloped or bare land. It applies specifically to investment properties. Would this include an entity's headquarters, and let us suppose that this is an iconic building or one in a strategic location, meaning its value is likely to rise? International Accounting Standard 40, the tape measure being used, says to me, no. Corporate lawyers, family offices and some wealthy individuals have much to reconsider here.
Irish Times
3 days ago
- Business
- Irish Times
The Irish Times view on national economic planning: strategy must be recession-proof
National economic planning always involves dealing with significant uncertainties. Ireland's economy has been upended on a number of occasions, requiring sharp changes in policy direction, most notably during the financial crisis which hit after 2008. So a key test of the revised National Development Plan due to be unveiled today will be its resilience. Inevitably a change in economic circumstances will mean that flexibility is needed in any plan, but are the broad goals of what will be outlined achievable, even if the economy is hit by some kind of slowdown, or even a downturn? Some lessons have been learned in the management of the public finances, with cash being put aside in two funds for the future and the annual figures being kept in surplus. That said, decisions have been made much easier by a big surge in corporation tax. And this has allowed the Government to increase day-to-day, or current, spending rapidly, alongside higher capital investment. To leave sufficent leeway, further growth in State capital investment has to be married with tighter control of current spending. Hints on the strategy here may be contained in the Summer Economic Statement, also due for release today. And in the years ahead more tax revenues are also going to be needed. The Irish tax base is increasingly reliant on potentially transient corporate tax receipts and on income tax paid by middle and higher earners. READ MORE The key immediate uncertainty in national planning comes, of course, from the new US policies on trade. Significant financial buffers are needed to deal with the potential fall-out here and its implications for growth and tax revenue in the short term. Ireland cannot go back to a situation where it is forced to slash State investment to balance the books, as happened after the financial crash. The State is still paying the cost of that today through massive deficiencies in housing and other infrastructure. Strong economic growth and high immigration have added to the pressures. Delivery is also vital, of course . Ireland's slow progress on major investment projects has cast doubts over economic growth prospects, potentially hampering investment. Dealing with this is a key social, as well as economic, priority. The outlook may be seriously affected by what happens between the EU and the US in trade talks over the coming weeks. Whatever transpires, it is fair to assume that significant uncertainty will remain for a prolonged period of time. And that this will raise questions about Ireland's economic model and how it needs to adjust. More investment in key infrastructure is a vital part of the answer. As we consider how this is to be paid for, we can only hope that the impact of Trump's trade policies, while certain to be serious, does not become hugely disruptive.
Reuters
17-07-2025
- Business
- Reuters
Portugal to push ahead with promised corporate tax cuts, PM says
LISBON, July 17 (Reuters) - Portugal's minority government will present a bill that would gradually cut the corporate tax rate to 17% by 2028 from 20% now, aiming to improve business competitiveness and boost investment, Prime Minister Luis Montenegro said on Thursday. In keeping with the centre-right ruling coalition's electoral promise and following a one-percentage-point cut this year approved by the previous legislature, the bill would trim one percentage point off the tax rate in each year between 2026 and 2028. The cabinet should approve the bill on Friday, Montenegro said. "This opens a new cycle of tax attractiveness for Portugal ... to strengthen investment with incentives for our entrepreneurs," Montenegro told lawmakers, adding that it would also improve workers' conditions. Business owners have long complained about stifling corporate tax rates, which reach more than 30% when state and municipal taxes are added, representing the second-highest rate in the European Union, according to international think-tank Tax Foundation. The bill is likely to be approved by parliament later with support from the far-right Chega party, which has advocated a substantial tax cut for companies. Chega became the main opposition party after a parliamentary election in May that gave Montenegro's Democratic Alliance a new term.
Arabian Business
17-07-2025
- Business
- Arabian Business
UAE announces new tax benefits for fair value investment properties
The UAE Ministry of Finance has issued a Ministerial Decision allowing taxpayers to claim tax depreciation on investment properties held at fair value under Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses. Under the decision, taxpayers who elect for the realisation basis can now deduct depreciation from their taxable income for investment properties maintained on a fair value basis. The tax depreciation deduction will be calculated as the lower of the tax written down value of the investment property or 4 per cent of the original cost of the investment property for each 12-month tax period, with pro-rata adjustments for partial tax periods. The deduction applies to taxpayers who hold investment properties both before and after the introduction of corporate tax. The decision clarifies the value basis for tax depreciation claims depending on whether the investment property is transferred between related parties, third parties, or has been constructed by the taxpayer. The ministry stated the decision creates parity between taxpayers holding investment properties on a historical cost basis, who can already benefit from accounting depreciation deductions, and those holding investment properties on a fair value basis. To access this benefit, taxpayers must make an irrevocable election in their first Tax Period beginning on or after January 1, 2025 in which they hold an investment property. This election will apply to all investment properties going forward. The decision includes an exceptional window for taxpayers to elect for the realisation basis to access the tax depreciation deduction, given that the realisation basis election is typically made in the first Tax Period. The ministry has provided guidance on when claw-back of tax depreciation may occur in instances outside of disposal of an investment property. This ensures taxpayers understand their tax compliance obligations and can assess their returns on investment property. The ministry said the release of this decision reflects its commitment to ensuring a level playing field for all taxpayers, enhancing the principles of tax neutrality and equity in the UAE corporate tax regime, and ensuring such deductions align with international best practice.
Reuters
17-07-2025
- Business
- Reuters
Taxation in EU budget proposal sends 'wrong signal', German minister says
DURBAN, South Africa, July 17 (Reuters) - German Finance Minister Lars Klingbeil doubled down on Berlin's criticism of the European Commission's proposed budget on Thursday, taking aim at corporate tax under the plan which he said sends "the wrong signal". "Everyone should come to us, we want investments to take place in Germany and in Europe," Klingbeil said in Durban, South Africa, on the sidelines of a gathering of G20 finance ministers. "And in this regard, the corporate taxation now proposed by the European Commission, in this form, sends the wrong signal." His comments echoed a statement from the German government on Wednesday expressing its opposition. "A comprehensive increase in the EU budget is unacceptable at a time when all member states are making considerable efforts to consolidate their national budgets," government spokesperson Stefan Kornelius said, also taking aim at the corporate tax element. The European Commission on Wednesday proposed a 2-trillion-euro ($2.31-trillion) EU budget for 2028 to 2034, with a new emphasis on economic competitiveness and defence and plans to overhaul traditional spending on farming and regional development. The Commission proposed several ways to raise more funds directly, including a new tax on companies doing business in Europe that have an annual net turnover exceeding 100 million euros in an EU country. "At first glance, much of what has now been proposed by the Commission does not meet with our approval," Klingbeil said, mentioning a tobacco duty estimated to raise 11.2 billion euros annually, which he said Germany also cannot support.
