What is the difference between VAT and Corporate Tax?

Article 1 – Definitions In the application of the provisions of this Decree-Law, the following words and expressions shall have meanings assigned against each, unless the context otherwise requires: State Federal Government Local Government Ministry Minister Authority : United Arab Emirates. : The government of the United Arab Emirates. : Any of the governments of the Member Emirates of the Federation. : Ministry of Finance. : Minister of Finance. : Federal Tax Authority. Federal Decree-Law No. 47 of 2022 and its amendments – Unofficial translation (as published by the Ministry of Finance) 2 Corporate Tax : The tax imposed by this Decree-Law on juridical persons and Business income. Business : Any activity conducted regularly, on an ongoing and independent basis by any Person and in any location, such as industrial, commercial, agricultural, vocational, professional, service or excavation activities or any other activity related to the use of tangible or intangible properties. Qualifying Income : Any income derived by a Qualifying Free Zone Person that is subject to Corporate Tax at the rate specified in paragraph (a) of Clause 2 of Article 3 of this DecreeLaw. Government Entity : The Federal Government, Local Governments, ministries, government departments, government agencies, authorities and public institutions of the Federal Government or Local Governments. Government Controlled : Any juridical person, directly or indirectly wholly Entity owned and controlled by a Government Entity, as specified in a decision issued by the Cabinet at the suggestion of the Minister. Person : Any natural person or juridical person. Business Activity : Any transaction or activity, or series of transactions or series of activities conducted by a Person in the course of its Business. Mandated Activity : Any activity conducted by a Government Controlled Entity in accordance with the legal instrument establishing or regulating the entity, that is specified in a decision issued by the Cabinet at the suggestion of the Minister. State’s Territory : The State’s lands, territorial sea and airspace above it. Natural Resources : Water, oil, gas, coal, naturally formed minerals, and other non-renewable, non-living natural resources that may be extracted from the State’s Territory. Extractive Business : The Business or Business Activity of exploring, extracting, removing, or otherwise producing and exploiting the Natural Resources of the State or any interest therein as determined by the Minister. Federal Decree-Law No. 47 of 2022 and its amendments – Unofficial translation (as published by the Ministry of Finance) 3 Non-Extractive Natural Resource Business Qualifying Public Benefit Entity Qualifying Investment Fund Exempt Person Taxable Person Licensing Authority Licence Taxable Income Financial Year Tax Return Tax Period Related Party : The Business or Business Activity of separating, treating, refining, processing, storing, transporting, marketing or distributing the Natural Resources of the State. : Any entity that meets the conditions set out in Article 9 of this Decree-Law and that is listed in a decision issued by the Cabinet at the suggestion of the Minister. : Any entity whose principal activity is the issuing of investment interests to raise funds or pool investor funds or establish a joint investment fund with the aim of enabling the holder of such an investment interest to benefit from the profits or gains from the entity’s acquisition, holding, management or disposal of investments, in accordance with the applicable legislation and when it meets the conditions set out in Article 10 of this Decree-Law. : A Person exempt from Corporate Tax under Article 4 of this Decree-Law. : A Person subject to Corporate Tax in the State under this Decree-Law. : The competent authority concerned with licensing or authorising a Business or Business Activity in the State. : A document issued by a Licensing Authority under which a Business or Business Activity is conducted in the State. : The income that is subject to Corporate Tax under this Decree-Law. : The period specified in Article 57 of this Decree-Law. : Information filed with the Authority for Corporate Tax purposes in the form and manner as prescribed by the Authority, including any schedule or attachment thereto, and any amendment thereof. : The period for which a Tax Return is required to be filed. : Any Person associated with a Taxable Person as determined in Clause 1 of Article 35 of this Decree-Law. Federal Decree-Law No. 47 of 2022 and its amendments – Unofficial translation (as published by the Ministry of Finance) 4 Revenue Recognised Stock Exchange Resident Person Non-Resident Person Free Zone Free Zone Person Unincorporated Partnership Permanent Establishment State Sourced Income Qualifying Free Zone Person Investment Manager Corporate Tax Payable Foreign Partnership : The gross amount of income derived during a Tax Period. : Any stock exchange established in the State that is licensed and regulated by the relevant competent authority, or any stock exchange established outside the State of equal standing. : The Taxable Person specified in Clause 3 of Article 11 of this Decree-Law. : The Taxable Person specified in Clause 4 of Article 11 of this Decree-Law. : A designated and defined geographic area within the State that is specified in a decision issued by the Cabinet at the suggestion of the Minister. : A juridical person incorporated, established or otherwise registered in a Free Zone, including a branch of a Non-Resident Person registered in a Free Zone. : A relationship established by contract between two Persons or more, such as a partnership or trust or any other similar association of Persons, in accordance with the applicable legislation of the State. : A place of Business or other form of presence in the State of a Non-Resident Person in accordance with Article 14 of this Decree-Law. : Income accruing in, or derived from, the State as specified in Article 13 of this Decree-Law. : A Free Zone Person that meets the conditions of Article 18 of this Decree-Law and is subject to Corporate Tax under Clause 2 of Article 3 of this Decree-Law. : A Person who provides brokerage or investment management services that is subject to the regulatory oversight of the competent authority in the State. : Corporate Tax that has or will become due for payment to the Authority in respect of one or more Tax Periods. : A relationship established by contract between two Persons or more, such as a partnership or trust or any other similar association of Persons, in accordance with laws of a foreign jurisdiction. Federal Decree-Law No. 47 of 2022 and its amendments – Unofficial translation (as published by the Ministry of Finance) 5 Foreign Tax Credit Family Foundation Interest Accounting Income Exempt Income Connected Person Tax Loss Qualifying Business Activity Foreign Permanent Establishment Market Value Qualifying Group : Tax paid under the laws of a foreign jurisdiction on income or profits that may be deducted from the Corporate Tax due, in accordance with the conditions of Clause 2 of Article 47 of this Decree-Law. : Any foundation, trust or similar entity that meets the conditions of Article 17 of this Decree-Law. : Any amount accrued or paid for the use of money or credit, including discounts, premiums and profit paid in respect of an Islamic financial instrument and other payments economically equivalent to interest, and any other amounts incurred in connection with the raising of finance, excluding payments of the principal amount. : The accounting net profit or loss for the relevant Tax Period as per the financial statements prepared in accordance with the provisions of Article 20 of this Decree-Law. : Any income exempt from Corporate Tax under this Decree-Law. : Any Person affiliated with a Taxable Person as determined in Clause 2 of Article 36 of this Decree-Law. : Any negative Taxable Income as calculated under this Decree-Law for a given Tax Period. : Any activity that is specified in a decision issued by the Cabinet at the suggestion of the Minister. : A place of Business or other form of presence outside the State of a Resident Person that is determined in accordance with the criteria prescribed in Article 14 of this Decree-Law. : The price which could be agreed in an arm’s-length free market transaction between Persons who are not Related Parties or Connected Persons in similar circumstances. : Two or more Taxable Persons that meet the conditions of Clause 2 of Article 26 of this Decree-Law. Federal Decree-Law No. 47 of 2022 and its amendments – Unofficial translation (as published by the Ministry of Finance) 6 Net Interest Expenditure Bank Insurance Provider Control Tax Group Withholding Tax Credit Withholding Tax Tax Registration Tax Registration Number Tax Deregistration Tax Procedures Law Administrative Penalties : The Interest expenditure amount that is in excess of the Interest income amount as determined in accordance with the provisions of this Decree-Law. : A Person licensed in the State as a bank or finance institution or an equivalent licensed activity that allows the taking of deposits and the granting of credits as defined in the applicable legislation of the State. : A Person licensed in the State as an insurance provider that accepts risks by entering into or carrying out contracts of insurance, in both the life and non-life sectors, including contracts of reinsurance and captive insurance, as defined in the applicable legislation of the State. : The direction and influence over one Person by another Person in accordance with the conditions of Clause 2 of Article 35 of this Decree-Law. : Two or more Taxable Persons treated as a single Taxable Person according to the conditions of Article 40 of this Decree-Law. : The Corporate Tax amount that can be deducted from the Corporate Tax due in accordance with the conditions of Clause 2 of Article 46 of this Decree-Law. : Corporate Tax to be withheld from State Sourced Income in accordance with Article 45 of this DecreeLaw. : A procedure under which a Person registers for Corporate Tax purposes with the Authority. : A unique number issued by the Authority to each Person who is registered for Corporate Tax purposes in the State. : A procedure under which a Person is deregistered for Corporate Tax purposes with the Authority. : The federal law that governs tax procedures in the State. : Amounts imposed and collected under this DecreeLaw or the Tax Procedures Law. Federal Decree-Law No. 47 of 2022 and its amendments – Unofficial translation (as published by the Ministry of Finance) 7 Top-up Tax 1 Multinational Enterprise 2 : The top-up tax imposed on Multinational Enterprises in accordance with this Decree-Law and the rules and controls to be determined by the Cabinet under Article (3) of this Decree-Law for the purposes of the pillar two rules issued by the Organization for Economic Cooperation and Development. : An entity and/or one or more of its member entities located in the State or in a foreign jurisdiction, as specified in a decision to be issued by the Cabinet at the suggestion of the Minister. Chapter Two – Imposition of Corporate Tax and Applicable Rates

Article (4) VAT Group Each Member State may treat the VAT Group as a single Taxable Person in accordance with the rules and conditions it puts in place for that purpose. A VAT Group means two or more Corporate Persons who are Residents of the same Member State. Chapter Two Supplies within the Scope of the Tax

5.4. Multiple supplies versus a simple composite supply In some situations, a supplier may make a supply of a number of goods and services as part of the same transaction. Where there is such a supply of different goods and/or services, the supplier has to determine whether they are making a single composite supply of those goods and/or services, or multiple supplies of goods and/or services. 5.4.1. Multiple supplies Where a person makes multiple supplies, the person must determine the correct VAT treatment of each of the supplies that it makes. This means that potentially different supplies made as part of the same transaction can be subject to different VAT treatments. In such circumstances, where a single consideration was paid for multiple supplies that are subject to different VAT rates, the supplier must determine the value of each supply and apply the correct VAT treatment to that value. Example 8 A tourist visitor from the UK is booking a hotel room in Dubai using the hotel’s website for AED 1,000. While booking the room, the person added an optional extra of being picked up by the hotel from the airport. This optional airport pickup costs an additional AED 150. The hotel accommodation and the transportation service are two different supplies for VAT purposes. These services are clearly independent of each other and both are subject to separate charges. As a consequence, the hotel charges VAT on the hotel room at 5% and treats the airport pick-up service as an exempt local transportation service. 5.4.2. A single composite supply A single composite supply is a single indivisible supply of a mixture of goods and/or services. By being treated as a single supply, all of the goods and/or services which form part of the supply will be subject to the same VAT treatment. A single composite supply may exist, for example, where there is a principal component and incidental components in a supply for which a single price is payable. Example 9 An airline provides free access to a lounge for all business class passengers on international flights. 21 VAT Guide | Taxable Person | VATG001