Aiming to boost investment and increase corporate efficiency inside the UAE, the government has lately changed its tax reporting rules.

Companies will not be obliged to provide economic content reports for financial years ending after December 31, 2022, according the Ministry of Finance (MoF), This modification corresponds with the publication of Cabinet Decision No. (98) of 2024, which modifies certain of the earlier Cabinet Decision No. (57) of 2020 on economic substance requirements.

The amendment matches the UAE's change in fiscal policies as it adopts a federal corporation tax system on business profits, therefore transforming the nation's tax laws, Eliminating economic substance reporting requirements is considered as a step toward lessening administrative load for companies and improving adherence to the new corporate tax system.

Under-secretary of the Ministry of Finance, Younis Haji Al Khoori, clarified that this modification will let companies focus on satisfying UAE corporate tax system criteria. He pointed out that the amendment seeks to guarantee businesses follow the required tax laws and increase the general effectiveness of the tax system, This action is also a part of more general initiatives by the Ministry to improve the tax system of the nation and draw more outside capital, therefore fostering a more business-friendly climate.

Companies still have some obligations even though they are free from reporting economic substance data for financial years ending after December 31, 2022. They have to keep fulfilling their responsibilities for past financial years, including answering information requests or corrections from the Federal Tax Authority (FTA) and regulatory authorities, Companies also have to pay any fines the FTA imposes for non-compliance from past reporting cycles.

Originally implemented to guarantee that businesses engaged in specific UAE operations had enough economic presence in the nation, especially those related to banking, insurance, and intellectual property, the economic substance rules were first These guidelines were developed to comply with global norms on tax openness and stop destructive tax policies, But currently the main system controlling taxation for businesses is the UAE's new corporate tax system, which emphasizes business earnings, thereby making the economic substance reporting useless for next financial years.

This modification is supposed to simplify corporate tax reporting for companies so they may concentrate on the corporate tax system. Set at a rather low rate, UAE corporate tax is meant to strengthen the nation's reputation as a worldwide commercial center and guarantee that it stays compliant with international tax criteria, Attracting foreign companies and investments helps the UAE diversify its economy and lessen its dependency on oil revenues by means of the new tax structure.

The UAE's choice to revoke economic substance reporting for financial years ending after December 31, 2022, shows its continuous efforts to improve company efficiency and simplify tax compliance, The action fits the nation's implementation of a federal corporation tax system meant to improve its tax system and boost more international investment. Businesses still have responsibility for meeting their commitments for past financial years, though, including answering inquiries from regulatory authorities and paying any penalties resulting from past non-compliance, Emphasizing efficiency, compliance, and the appeal of worldwide investment, this move marks a significant change in UAE corporate taxes policy.