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UAE’S Corporate Income Tax Explained – How Does it Impact Your Business?

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The UAE Ministry of Finance published the Federal Decree-Law No. 47 of 2022 on Taxation of Corporation and Businesses on December 9, 2022 (CIT Law). With the CIT Law in effect beginning June 1, 2023, it’s vital that businesses ensure the requirements are met.

There are many facets to this new law, including 0% WHT, important General Anti-Abuse Rules (GAAR), and Specific Anti-Abuse Rules. Our panel of experts includes seasoned professionals who have extensive experience in tax. They’ll share their expertise on CIT and how businesses can ensure they’re ready and complying with this new regulation.

Webinar transcript

Disclaimer: Please be advised that this recorded webinar has been edited from its original format, which may have included a product demo. To set up a live demo or to request more information, please complete the form to the right. Or if you are currently not on CSC Global, there is a link to the website in the description of this video. Thank you.

Farida: Hello, everyone. Good morning, good afternoon, and welcome to today's webinar, "UAE's Corporate Income Tax Explained." My name is Farida Azarioh, and I will be your moderator today. So for today's webinar, joining me today are Priyanka, tax counsel from Aurifer Tax, and Gary Colbert from Corptax CSC. So I would like to welcome them both and give the floor to Priyanka to start with the webinar.

Priyanka: Thank you so much, Farida. Good afternoon, everyone. I hope you are having an excellent week. Thank you for joining our today's session. As an introduction to corporate tax, I am sure you all know by now that the corporate tax regime is live in the UAE as of 1st June 2023.

If we look at the timeline, which can be seen on this slide, the first formal announcement on introduction of corporate tax was made by the Ministry of Finance on 31st January last year. This was followed by public consultation document, which was issued on April last year, where the public was invited to make comments and suggestions on the architecture of the corporate tax legislation. The legislation was finally released on 9th December last year. It was published in the "Official Gazette" on 10th of October, and it came into force on 25th of October. The law applies to all business for financial years starting on and after 1st June 2023. So if your financial year is a calendar year, the corporate tax will apply to your business from 1st January 2024.

Moving ahead, if we look at the main characteristics of the law, it is interesting to note that many aspects of the law are delegated at Cabinet or ministry or tax authority level. This is the reason why you have seen in last the couple of months a series of decisions being released on different provisions of the law by the Cabinet and the ministry. We believe that such information will continue to be released in upcoming months, and you can watch out our space for these updates.

In terms of rate, the headline rate of corporate tax is 0% and 9%. Zero percent is applicable to taxable income up to 375,000 dirham. Any taxable income excess of this threshold is subject to 9%. For Free Zone, the tax rate is 0% on qualifying income and 9% on non-qualifying income. At present, the rate of withholding tax is 0%, which would mean that for all cross-border payments there would not be any withholding tax implications. For MNEs in UAE, though initially it was announced that a different rate would be introduced, you can see in the corporate tax legislation, there is no reference to Pillar 1 and Pillar 2 implementation. Thus, as of now, there is no clarity on the timeline and the method of implementation of two pillars in the UAE.

The law also has general and specific anti-abuse rules, which we will be covering later in the slides, but as a note, business should be cautious of these anti-abuse rules for any restructuring or remodeling transactions.

Moving ahead on to the hard provisions of the legislation, looking first at who is covered under the scope of the UAE corporate tax or to simply say who is the taxable person. The following legal entities will be in the scope of UAE corporate tax. Firstly, legal entities incorporated in the UAE. This includes Mainland entities and Free Zone entities. Foreign legal entities that are effectively managed and controlled in the UAE are also covered under the scope of UAE corporate tax. Foreign entities that have permanent establishment in the UAE or are sourcing income from UAE are also covered under the scope of UAE corporate tax. Recently, a Cabinet decision was released which stated that foreign legal entities that earn income from immovable property in UAE will be considered to have nexus in the state and will be subject to corporate tax on such real estate income.

Now, apart from legal entities, it is interesting to note that even natural persons can be in the scope of UAE corporate tax if they are conducting business or business activity. The definition of business is very wide and akin to the definition given in the value-added tax legislation. However, wage, investment income, and real estate income, which does not require any license, is outside the scope of corporate tax. Similarly, for individuals, any business income below the threshold of one million dirham is also outside the scope of corporate tax. Very simply put, if you are an individual, you are engaged in business in UAE and earning income more than one million dirham, then you will be subject to corporate tax.

Moving ahead, other persons such as unincorporated partnerships will be treated as fiscally transparent for corporate tax purposes. This means that partners of such partnership will be considered to be conducting business and subject to corporate tax at that level. The law also gives an option to partnership to make an election to be not transparent and be subject to corporate tax at a partnership level.

Foreign partnership with local branches can also be treated as fiscally transparent subject to certain conditions. Further, family foundations and trusts also have an option to apply to be treated as unincorporated partnerships upon meeting certain conditions, such as if they don't conduct any business and they are formed only for the benefit of individuals and so on.

Going ahead, the law also has small business relief. This relief was introduced to support startups and other small or micro businesses by reducing their tax burden. The main condition of this relief is that the revenue of the resident business must be less than three million dirham in the current or previous tax years. This relief ends on December 2026 and is not applicable to MNEs and Qualifying Free Zones. Further, since the revenue is not taxable under this relief, even tax losses is not allowed to be carried forward.

Moving ahead, apart from small relief, certain entities are also specifically exempted from corporate tax, such as government entities, government-controlled entities, persons engaged in extractive and non-extractive business, and so on. Each of such exemptions is subject to specific conditions in the law.

Now, moving ahead to the topical discussion of UAE corporate tax regime, the treatment of Free Zones. Foremost, please note that Free Zones must meet certain specific conditions to be treated as Qualifying Free Zones. Only Qualifying Free Zones persons are eligible for preferential rate of 0% on their qualifying income. Now, these condition among other things include maintaining adequate substance, that means maintaining adequate staff and employees in the Free Zone, deriving qualifying income, we will discuss in the next slide what qualifying income means or how it is determined, and meeting transfer pricing requirements. Please note that failure to meet any of these conditions will practically disqualify Free Zone from getting the benefit of 0% CIT.

Qualifying Free Zone or Qualifying Income, the most awaited decisions clarifying the scope of qualifying income were released just two weeks before, right on the first day of implementation of corporate tax in the UAE. These are Cabinet Decision 55 and Ministerial Decision 139. It is interesting to note that the adopted regime is slightly divergent and more refined than the one proposed last year in the public consultation document. As per the new regime, to determine qualifying income, it is important to first identify if the income is derived from other Free Zone persons or from other non-Free Zone persons, such as foreign or mainland entities. If the income is derived from other Free Zone persons, then it will constitute as qualifying income only if it is not specifically treated as excluded activity.

The list of excluded activities is stated in the slide here. From this list, you can see that it mainly covers regulated financial services, income from intangibles, and income from immobile property. So if a Free Zone person earns income for such excluded activities, it will be treated as non-qualifying income subject to 9% corporate tax. Now, instances of such income could be royalty payments, or rental income from mainland properties, and so on. Now, the rationale for only listing these activities as exclusions is not yet provided. One may only hope that this would be clarified in times to come by the ministry or tax authority to give some background and clarity to the industry in this regard.

Coming back again to the next category is income derived from non-Free Zone persons. If qualifying Free Zone person earns income from non-Free Zone persons, such as mainland entities or foreign companies, then it will be treated as qualifying income only if it is received from specified qualifying activities. Now, there are around 12 specific qualifying activities listed in the ministerial decision. I'll go to the slide here so you can see these are the 12 qualifying activities which are listed. The interesting and the most important point that you will note is that this list is very restrictive and does not cover all categories of the activities with foreign countries or for which the Free Zone were originally established. For instance, it does not cover income from drop shipment arrangements wherein goods never come to the UAE. It does not cover income from services such as for professional services, management services, consultancy or legal services, software development services, leasing of assets that are not aircraft, and so on.

So, to note, that if a Free Zone person is earning income from excluded activities or earning income from non-qualifying activity, this will disqualify the Free Zone from getting the benefit of 0% duty. This is, however, subject to an overall de minimis requirement. To satisfy de minimis requirement, the non-qualifying revenue earned by a Free Zone person must not exceed 5% of their turnover or 5 million dirhams, lower of the two. There is also a carve-out provided to income received from immovable property, which is located in the Free Zone. Such carve-out states that only income received from commercial immovable property from Free Zone persons will be treated as qualifying income. Balance, any other income received from immovable property from non-Free Zone persons or for non-commercial activities will be treated as non-qualifying income subject to 9% corporate tax. Similarly, any income attributable to domestic or foreign permanent establishment of Free Zone persons, such as foreign or mainland branch office, etc., will be treated as non-qualifying income subject to 9% corporate tax.

In overall, we note that though the beneficial Free Zone treatment is a welcome move, it's certainly not easy to administer and caution is advised as the right of this regime can be lost for five years.

Other considerations which can be noted for Free Zone is that Free Zone requires to make an election to be taxable at 9% or 0%. Also this election will start in the same year of application or in the following year of the application. This indicates that a Free Zone person can choose from which year it wants to benefit from the qualifying Free Zone of 0% beneficial rate.

Interestingly, there are a few restrictions on being a qualifying Free Zone. For instance, a qualifying Free Zone cannot become a member of a tax group. It cannot transfer losses to related parties that are subject to 9% or offset losses for that matter of its related parties that are taxed at 9%. However, a related party that earns dividend or capital gains from its ownership interest in qualifying Free Zone can continue to claim participation exemption. We will talk about the concept of participation exemption in the ensuing slides.

A few other considerations for Free Zone person. A Free Zone person will need to file returns, get themselves registered. It also may require to submit a disclosure form, which is not yet released. And lastly, a Free Zone person is also required to maintain audited financial statements annually.

Now, let's move on to understanding the basis of taxation specified in the corporate tax law. Now, UAE follows a blended approach of taxing based on two parameters, which is residency of taxable person and earning of income that is sourced in the UAE. In simple words, resident persons that are in business will be taxed on income that they derived from UAE and from outside UAE, whereas non-resident persons are taxed to the extent the income that is attributable to its permanent establishment in the UAE or the income which is not attributable to their permanent establishment but still sourced in UAE.

Now, speaking about permanent establishment, the definition of permanent establishment under UAE corporate tax is akin to Article 5 of the OECD Model Tax Convention. It mainly contains fixed PE and agency PE scenario. It does not explicitly cover service PE scenario, though the definition of PE in the domestic legislation is expanded by introduction of the term, any other form of nexus, which is yet to be clarified through Cabinet decision. A non-resident person in our view must consider these principles and the relevant bilateral tax agreements in their assessment of whether they have a PE in UAE or not.

Now, moving ahead, we dive deeper into how taxable income is computed for CIT purposes. As a starting point, the taxable person should start with its accounting net profit as per the standalone financial statements. In simple words, we start with the net profit of the company and then adjust it to reach to the taxable profits. Such adjustment includes any unrealized gains or losses related to capital items, eliminating any exempt income, claiming any relief that could be announced by the ministry or relief under tax grouping or business structuring, and finally, claiming any expenses that are eligible for deduction. Recently, Ministry Decision 114 was released, which clarifies that on broad level the accounting standards which are to be used by a company is IFRS, depending on their turnover.

Moving ahead to participation to the exempt income, CIT law provides that dividends and capital gains or other income earned by the resident taxable person from UAE resident entity will be exempt from corporate tax. Such exemption seems to be unconditional in the sense that there is no requirement for minimum holding interest or holding period. Additionally, a resident person earning dividend or capital gain from foreign entity could be exempt subject to certain conditions. This is known as participation exemption. We will take a look at these conditions in the next slide. In addition to such participation exemption, the corporate tax law also states that income derived by a non-resident person from operating aircraft or ships in international transport will be exempt subject to certain conditions.

On this slide, what we have done is we have tried to simplify and list down the conditions to avail participation exemption from qualifying foreign shareholding. Firstly, the minimum participation interest should be 5%. The minimum holding period of 12 months is also stipulated in the corporate tax law. Additionally, the subsidiary must be subject to at least 9% corporate tax in the foreign jurisdiction. Lastly, a specific anti-avoidance rule is also stipulated in the law that must be met. In addition, the ministry has stipulated conditions in the recent released ministerial decisions, which also need to be looked at when claiming this participation exemption.

Now, going ahead to expense deductibility, this slide is mostly self-explanatory. All expenses which are wholly and exclusively for taxable income and not capital in nature are allowed as deduction. Expenses that are not incurred for taxable business or which are incurred for deriving exempt income, or losses which are not connected with taxable person's business are not allowed as deductions. There is also requirement for apportionment of expenses where it is incurred for both taxable and exempt activity.

Now, there are certain expenses where there is a limitation on deduction or which are not deductible at all. Entertainment expenses which are incurred for customers, shareholders, suppliers, or other business partners, such as meals, accommodation, transportation is allowed to be deducted only to the extent of 50%, whereas fines, penalties, recoverable VAT, donations to unapproved charities, corporate tax liability, such kind of expenses are not allowed to be deducted while calculating the taxable income.

Now, for interest expenses, there is a specific cap which is provided under the law. So interest expenditure is allowed to be deducted to the extent of 30% of the taxable EBITDA. Now, this restriction is also subject to a de minimis rule, which was recently announced in Ministerial Decision 126. It specifies that this interest deductibility limitation will not apply where the net interest expenditure for relevant tax period does not exceed 12 million dirhams.

Now, what is deductible? What we have done on this slide, we have given a few examples of general business expenses that are deductible, such as rent, license fees, or salaries and wages. These are the normal business expenses which will be allowed as deduction for calculating the taxable income.

Moving ahead to tax grouping, this is a facility which is provided under the law. To form a tax group, there are certain conditions which are required to be met. All companies which are resident in UAE can actually apply for tax grouping if they meet these specific conditions. One of the conditions is that the parent company must be at least owning 95% or more shareholding or controlling interest of the subsidiary companies. None of the companies should be qualifying Free Zone or an exempt person. All companies must have the same financial year and use the same accounting standards. Please note that qualifying tax group is treated as a single taxable person for the purpose of UAE corporate tax regime.

There are certain benefits of forming a tax group. One of it is that intracompany transactions are going to be eliminated, and also losses can be utilized fully. It will not have a limitation of 75%. However, one consideration that should be kept in mind is that once a group is formed, the threshold of 375,000 dirham will apply to the group as a whole, so it will not apply to individual members of the group. There are also specific restrictions on use of certain losses. These losses is mostly like pre-existing losses that is before forming the group. So there are restrictions to utilization of these losses. Once the group is formed, all the companies of the group will be jointly and severally liable for the tax liability or the further corporate tax liability.

Now, what we have done on this slide is we have compared the corporate tax grouping in comparison to the VAT grouping provisions because even in the value-added tax law, there is a provision of forming a group. Now, if you look at when the ownership conditions under the corporate tax law and under the value-added tax law, under corporate tax law, there is a requirement of 95% share capital, or voting rights, or shareholding. Whereas for value-added tax, this is only 50%. For corporate tax, Free Zones are not allowed to be part of the tax group. Whereas for value-added tax, there is no such restrictions. The Free Zones can be part of a tax group for value-added tax. Losses which is allowed to be set off in a tax group, for value-added tax, this is not relevant.

Intragroup transfers in corporate tax, as well the intragroup company transactions will be disregarded. It's similar for value-added tax. They are considered as out of scope. However, for corporate tax, you can see there is a two-year clawback period, which is there in the law, which is not there in the value-added tax law.

Administration and payment, under corporate tax law, only a parent company is treated as the member who is required to administer the tax payment, also file the tax return. Whereas for value-added tax law, while forming the tax group, the tax group can decide who will be the responsible member for administration and payment of taxes. And joint liability, yes, in both the laws, there is a joint and several liability created by forming a tax group.

Just moving ahead, what we have done on this slide, we have done a comparison between when a company forms a tax group versus a company when it is individually filing tax returns. You can see in this that when the company is individually filing the tax returns, its comparative liability is lesser than when the individual is filing the returns as a one tax group. This is mainly because the benefit of 375,000 threshold for a tax group is as a whole, whereas when it is individual filings, it is for each individual member, and that's why the liability for a tax group comes to a higher number than when it is done at the individual level. The tax grouping though can be beneficial when there are loss making companies in the group.

Moving ahead to transfer pricing, the corporate tax law contains transfer pricing rules to ensure that the price of transaction is not influenced by relationship between the parties involved. In order to achieve this outcome, corporate tax law prescribes application of internationally recognized arm's length principle to the transactions and arrangement between related parties and connected persons. The UAE's transfer pricing rules are intended to be aligned with the OECD principles so it is more in alignment with the international practices.

Now, if you look at transfer pricing compliance obligation, there is a three-level disclosure that is required. One is disclosure form, second is master file and local file. Now, disclosure form may be required to be filed by the related parties and the connected persons. The threshold and the format of it is not very clear and not really released by the Ministry of Finance. For master file and local file, there is a ministerial decision, which was released, which said it is only applicable to MNEs which have a revenue of more than 3.15 billion dirhams or for companies which have a taxable income of more than 200 million dirhams. The form of local file or the format is expected to be OECD-aligned, but it is not yet released by the Ministry of Finance.

The content of the local file includes transactions between non-resident person, transactions between exempt person, transactions with small businesses, and also transactions with resident persons which are subject to different CIT rate. Now, you can see that even the transactions between resident persons, which are also paying tax at a 9% level, those transactions are not required to be included in the local file.

Coming ahead to administration, administration, it is still there are a lot of aspects in administration which are not yet released. We definitely know that Free Zone companies are required to get registered. The registration portal is opened by the Federal Tax Authority, but it is only open limited for standalone registrations of private limited company. The registrations, the ministry or the Federal Tax Authority has an announced that the registration for Free Zone entities will be launched later.

De-registration. There is on cessation of activity or dissolution or liquidation, there is a requirement to de-register. Now, there is also a return required to be filed under corporate tax, and also payment of liabilities needs to be made. The format of the return is not yet released, but it is going to be one return for one financial year. It requires to be filed within nine months from the end of the financial year. This means that if your financial year is a calendar year, the due date of filing of the tax return will be 30th September 2025. The return needs to be filed electronically. There are no provisions for provisional tax payment or advanced tax payment, and the form is expected to be announced at a later stage. The payment is also required to be made within nine months from the end of your financial year.

Just looking at these practical considerations, if your business is having a turnover of less than 3 million dirhams, then you may get a benefit of small business relief. You are allowed to maintain financial statement using cash basis accounting. If your business has a revenue of more than 3 million dirhams but less than 50 million dirhams, then you can prepare your financial statements as per IFRS for small and medium enterprises. If your revenue is more than 50 million dirhams but less than 200 million dirhams, then you are mandatory required to maintain audited financial statements, but still not required to maintain local file or master file. If your revenue is more than 200 million dirhams, then you are required to comply with TP compliance obligations, which is to maintain the master file and local file, including the CBCR filings. And if you are an MNE, as I mentioned, there is no particular reference in the law, but you might be subject to a different rate, and you will definitely require to comply with TP compliance obligations and CBCR filings.

If I quickly go to next steps, so, as per us, the immediate next step for any company is basically to look at their corporate structure and to see the impact of this legislation. This is a very important step which needs to be done by the business to see the impact of corporate tax on their current structure as well as their business operations. If any business is thinking about remodeling or thinking about restructuring, they need to be cautious about the anti-abuse rules which are there in the law. They also need to look at the impact on accounting records and data systems. This is because certain accounting policies, like requirement to do deferred tax adjustment or certain accounting records which may be impacted and required to be updated. To do all this, one of the important criteria is to keep in mind that if there is sufficient time to implement the recommendations from this analysis and before the go-live stage.

So that's the main points from my side today. I hope you find this information useful. I will hand it over now to Gary to take it forward, the webinar. Thank you.

Gary: Thank you, Priyanka. And just a little bit of background on myself. I'm Gary Colbert. I'm a senior director with CSC Corptax. We're a sister company to Intertrust, and we specialize in providing organizations with solutions around income tax filings and automation. And what I want to talk to you today about related to the new corporate income tax in the UAE is just some of the practical aspects of it and how to go about implementing it from a best-practice perspective.

And the first thing I want to point out is that just in today's business and regulatory environment nothing operates in a silo. So there are a number of dependencies related to the corporate income tax that need to be taken into account.

First of all, and Priyanka alluded to this in her presentation, even before you have the compliance filing, there's a financial statement impact to the corporate income tax. It has to get recorded as a current income tax in the financial statements long before you would even be filing it. So that needs to be taken into account.

In addition to just the calculation of the tax itself getting accrued in the financial statements, organizations will need to track temporary differences and record a deferred tax impact based upon the future deductibility or future taxes related to the current book income. All of that needs to be done either quarterly or annually depending on how you're recording your financial statements.

In addition to just the accrual of the tax, there are certain financial statement disclosures that need to be incorporated into the financial statements themselves. Both the International Accounting Standards Board, which promulgates the standards for IFRS, and the Financial Accounting Standards Board, which regulates the U.S. GAAP financial statements, both those bodies are expanding the financial statement disclosures related to income taxes, specifically around the rate reconciliation and income taxes paid. And those need to be taken into account as you're going through and putting together your process for the corporate income tax within the UAE.

In addition to the financial statements themselves, there's other regulatory filings, both with the EU, the UK, the Securities and Exchange Commission in the U.S., that require additional disclosures related to the income tax that need to be taken into account. And as Priyanka mentioned, there's an impact to the master file and local file from a transfer pricing perspective as well.

In addition to just the financial statements and the filing of the corporate income tax in the UAE, there is now a Pillar 2 impact as well. The income tax rate in the UAE is at 9%, which is below the 15% that the OECD set as a global minimum tax rate for purposes of Pillar 2. So almost certainly the information you need to put together to file the corporate income tax in the UAE will have an impact in other countries where Pillar 2 gets adopted, both from a standpoint of including in GloBE income the income from the UAE, but also cover taxes from both a current income tax standpoint as well as deferred taxes, and the impact of temporary differences will need to be included in the Pillar 2 calculation as well.

Obviously, the information from Pillar 2 and the information from the corporate income tax will have an impact on country-by-country reporting in a number of jurisdictions that already require the CBCR filing. All of those indicate that the data that you need to collect in order to calculate the corporate income tax will have impacts within your organization outside of the UAE in other filings as well.

The other aspect of it that may not get enough attention at first is the implementation of the corporate income tax creates a new tax base. So in addition to your financial statements, it's very likely you'll need to track your tax basis over time by preparing a tax basis balance sheet. And so the impact of that is you'll need to structure your data and your calculations in a way that allow you to cumulatively track a new basis of accounting essentially, based on the requirements of the corporate income tax.

All of those interdependencies can't live on their own. So as you build a process around the corporate income tax, it's important to structure it in a way that allows for the free flow of data from one process to another. And you can only do that by structuring your data in a way that makes it accessible to all these other processes. And how do you do that? Focusing primarily on data, starting with sourcing the data. Where are you going to get the data for the corporate income tax itself? What financial systems apply to it? And how can you get that data into the calculation of the corporate income tax?

In addition to identifying where that data sits, part of sourcing that is identifying where can you get the most tax sensitization? In other words, in order to determine the different adjustments to your financial statement income, where can you get the data to calculate the different adjustments? And that may not be at the account level. It may be going below that to look at different transactions and then being able to identify that in a way to automate it so that you can get it from the financial system into whatever system you're using to calculate the tax in a way that allows for the automation of the adjustments. There may be other manipulation you need to do to that data, once you get it from a source, in order to be able to be used in the calculation, and that becomes part of sourcing the data.

Next item is organizing that data, and this is where you need to put some structure around it in order to calculate the tax, in order to be able to use it in other systems as well. It's very easy, and tax is very used to using Excel as sort of the calculation tool and the repository for data. Excel is great in a lot of ways. It's easy to use. It's flexible. It is not a good tool as a data repository. It's important to structure and centralize the data that you're using for the calculation in a way that makes it, first of all, organized in a way that allows for a proper audit trail, but also makes it accessible to the other processes that need that same data to avoid additional reconciliation, and also secures the data in a way that makes it only accessible to the stakeholders that need it.

And then finally, providing the ability to share that data. Certainly, you'll need it for filings. You'll need it to provide the information up your ownership chain for financial statements, for Pillar 2, and all the different dependencies that we talked about. In addition to the different dependencies and filings, it's important to be able to have access to that data for analytics, to be able to analyze it and understand the story that it's telling about your organization so that you can explain it, to both executives, shareholders, and the market, and what it says about the organization. In order to be able to share that that way, it needs to be structured and it needs to be centralized.

There are some other considerations in addition to just data, although data is obviously critical to the discussion. But starting with people. As you build out a process for calculating the corporate income tax and reporting it both internally and externally, it's important to identify who's going to own it, who will be the owner of the calculation, who will be the owner of the data, and making sure that they understand that they own it and build a process around it. It's also important to train your people on both the technical aspects of the calculation, but also the process. So training of your people becomes another important aspect of building out a process.

And then there's the process itself. Starting with a timeline, what needs to be done when? And as I mentioned earlier on, the calculation doesn't start with the compliance filing. It starts with the provision and the income tax accounting. So you need to have a timeline in place that builds, starting from the financial statements during the year, up to the compliance filing. And then that process also needs to have a governance structure to it. Who prepares the calculation, who reviews the calculation, and then ultimately who approves it, both from a financial statement standpoint, from an internal reporting standpoint, and then from a compliance standpoint.

And then, finally, technology. Like I said, Excel is great in a lot of ways, but start to consider what technology solutions need to be a part of the process. Certainly from a compliance and from a filing standpoint, how is the data going to be transmitted to the UAE? Is that going to be through Excel, through some other e-filing mechanism? And then how do you get the data in the format to be able to report it? It also needs to feed into other technology solutions, both from a financial reporting standpoint. Pillar 2, most likely your organizations will have some kind of technology solution around Pillar 2. How will you feed that information up to that Pillar 2 calculation? And what mechanisms and technology solutions does it need to feed into?

And those are all considerations that you need to take into account. And then, like I said, it all starts with data. It's important to structure your data in a way that feeds into the other aspects of the process — people, process, and technology.