UAE: To Impose Penalty for Unpaid Corporate Tax

Arabian Gulf Business Insight, 26 January 2025: The Federal Tax Authority (FTA) has announced that companies failing to pay corporate tax will face a significant penalty, amounting to 14% per annum.

This penalty will be applied to the outstanding tax amount and will be calculated from the day after the payment deadline, accruing monthly on the same date.

To avoid these penalties, tax payments must be completed no later than nine months following the end of the relevant tax period.

Starting 1 January 2025, the UAE will increase the corporate tax rate for multinationals to 15% of profit.

This higher rate will affect companies operating in multiple jurisdictions with consolidated annual revenues of €750 million ($793 million) or more in at least two of the four preceding financial years.

This domestic minimum top-up tax amendment follows the introduction of a 9% corporate tax by the Gulf state a year earlier.

In December 2024, the Finance Ministry has stated that this strategic step reflects the UAE’s commitment to implementing the Organisation for Economic Co-operation and Development’s two-pillar solution, aimed at establishing a fair and transparent tax system aligned with global standards.

In a regional context, Bahrain has announced in September 2024 that it would also implement a Domestic Minimum Top-up Tax (DMTT) starting 1 January 2025 next year for large multinational enterprises (MNEs).

Similarly, Kuwait has declared an upcoming corporate tax rate of 15% for large MNEs, effective from the beginning of 2025.

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UAE: SCA Unveils New Rules for Security and Commodity Tokens

In a significant move towards embracing technological advancements in the financial sector, the UAE Securities & Commodities Authority (SCA) has announced a new regulatory framework for security tokens and commodity token contracts.

The decision, issued by the Chairman of the Authority’s Board of Directors, marks a pivotal step in integrating Distributed Ledger Technology (DLT) into the UAE’s financial markets.

The new regulation acknowledges the transformative potential of Distributed Ledger Technology, which has redefined the issuance, trading, and investment landscape in financial markets.

Security tokens and commodity tokens, as highlighted in the regulation, represent a fusion of traditional securities and commodity contracts with cutting-edge technology, offering investors more flexible and efficient tools.

Security tokens, digital assets created using DLT, represent financial rights or tangible assets.

These include equity tokens, which signify ownership in companies, and bond tokens, representing tradeable debts.

Commodity tokens, on the other hand, are digital assets based on the value of physical commodities like gold and oil, facilitating digital trading while minimising traditional trading costs and risks.

The regulation outlines detailed provisions for the offering, issuance, promotion, and registration of security and commodity token contracts within the UAE.

It emphasises the importance of compliance with existing securities and commodity contract regulations, ensuring a seamless integration of these innovative financial instruments into the current legal framework.

Key aspects of the regulation include the requirement for security and commodity token contracts to be recorded and managed through a distributed ledger.

This ledger must meet stringent technical and organisational standards to ensure integrity and protect against unauthorised modifications.

The regulation also stipulates that these tokens can only be traded and settled through licensed markets or alternative trading systems.

The SCA has placed a strong emphasis on investor protection and market integrity.

Obligors, or entities responsible for issuing these tokens, are required to provide comprehensive information to token owners, including details about the distributed ledger’s operation, associated risks, and disaster recovery measures.

The regulation also holds obligors accountable for any damages resulting from inaccurate or misleading information.

In cases of regulatory violations, the SCA is empowered to impose administrative measures, including suspending offerings and cancelling subscriptions.

The Authority also reserves the right to publish the names of violators, ensuring transparency and accountability in the market.

This regulatory development underscores the UAE’s commitment to fostering innovation in its financial markets while maintaining robust regulatory oversight.

By embracing Distributed Ledger Technology and establishing a clear framework for security and commodity tokens, the UAE is positioning itself as a leader in the adoption of digital financial instruments.

The decision will be published in the Official Gazette and will come into effect 30 days from the date of publication, signaling a new era for the UAE’s financial markets.

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UAE: Family Law Reforms

Khaleej Times, 10 January 2025: The UAE’s newly introduced family law represents a significant modernisation of the legal framework, aimed at enhancing the protection of children and families.

Set to take effect in April 2025, this legislation brings about substantial changes in child custody arrangements, financial rights, and educational guardianship.

One of the most notable amendments is the extension of custody age to 18 for both boys and girls, reflecting a stronger focus on the welfare of children while respecting their growing independence.

Previously, custody was granted to mothers until boys turned 11 and girls turned 13.

Now, children at the age of 15 can choose which parent they wish to live with, provided the court deems their choice to be in their best interests.

In cases involving children with severe medical or psychological conditions, custody will remain with the mother unless the court finds an alternative arrangement more suitable.

The law also expands rights for non-Muslim mothers, allowing them to retain custody of their children from Muslim fathers beyond the age of five, subject to court approval.

This marks a significant departure from the previous law, which automatically transferred custody at this age.

The legislation introduces measures to expedite family-related disputes, with educational guardianship primarily remaining with the mother but now addressable by the Urgent Matters Court for more efficient resolution.

Parents now have one year, instead of six months, to file custody claims, with courts able to grant further extensions for valid reasons.

This adjustment ensures that technicalities do not override the best interests of the child.

Equal travel rights for parents are also established, allowing either parent to travel alone with their child for up to 60 days per year, with extensions possible in special circumstances.

The law broadens the definition of family support to include non-cash assistance, such as benefits or in-kind contributions, allowing families to meet their specific needs more effectively.

Wives can now claim backdated maintenance for up to six months and request increases in mandated amounts, with monthly alimony payments given precedence over most other debts.

Stricter controls have been introduced regarding the handling of children’s identification documents, with severe legal consequences for misuse.

Criminal penalties are established for custodians who violate travel provisions or fail to deliver documents to the rightful guardian, highlighting the UAE’s commitment to safeguarding children and protecting family rights.

This new family law reflects the UAE’s dedication to fostering stronger family bonds and ensuring the best interests of all its members, in line with the country’s progressive vision for a modern society.

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