Yiannos Olymbios: UAE’s introduction of corporate tax “was an inevitable and, in my opinion, a very smart decision”

The United Arab Emirates’ Corporate Tax became effective for many businesses from 1 January 2024, and for those in the know – like Yiannos Olymbios, Partner, Strategy & Growth at STI Taxand which recently opened offices in Dubai – this was an inevitable (and smart) decision. Here he explains the reasoning behind the decision, and compares the business environment in Dubai to that of Cyprus.

Can you tell us about the UAE’s historic decision to start imposing 9% corporate tax, from 0% previously? How did it come about?

The UAE has been known for many years for its zero tax policies and for this reason was an attractive jurisdiction for many companies and professionals around the globe. For many, the introduction of VAT (5%), 5 years ago and most recently the Corporate Tax (9%) was a great shock and surprise. However, for us that we have been dealing with international taxation and have been following the wider tax changes being made across the world it was an inevitable and, in my opinion, a very smart decision. The UAE Federal Government, with Dubai and Abu Dhabi currently considered as Global Financial Centres, decided to introduce tax mainly for 2 reasons. The first is to align with international efforts to tackle tax avoidance and secure tax revenues by adopting OECD guidelines (BEPS and Pillar 2). By doing this the government showed its strong commitment to become a jurisdiction that adheres to international standards cementing its position as a leading financial hub. The second reason is for the UAE Government to diversify its revenues beyond revenues generated by the oil industry which have been the main source of its income.

STI Taxand has expanded its operations to Dubai. What services does it offer there?

STI Taxand is a leading tax advisory firm in Cyprus member of Taxand Global, the largest independent tax network in the world. We do Tax and only Tax and our tax partners are both certified/chartered accountants and tax lawyers with a passion and deep knowledge for tax. Due to the introduction of corporate tax in the UAE, we decided last summer to expand our services there and in October we registered an entity in Dubai International Financial Centre. I have personally been working in the MENA region since 2002 and during my career I have dealt with many international and local firms providing tax services. I strongly believe that the knowledge of our people in STI Taxand can add great value to companies doing business in the UAE and the region and our vision which is very realistic is to become one of the leading tax practices there. The timing of our expansion is ideal and as a Strategy and Growth partner I am currently in charge of building collaborations and creating awareness of our brand and our services. Our services include UAE Corporate tax services, UAE VAT disputes, International Tax advisory, US tax advisory and compliance for US Expats residing in the region. We are also offering seminars on Global tax matters, mainly on Transfer Pricing, which is our expertise.

How do you compare the business environment in Dubai with that of Cyprus?

Dubai is considered a Global Financial Hub. It has attracted hundreds of thousand of corporations small and large from all industries and the last few years it has also attracted exceptional talent from other financial hubs mainly Europe and Asia. Dubai government has been collaborating with the private sector to transform the emirate into a digital, business friendly jurisdiction with good quality of life in a safe and modern environment. The fact that the political system is that of a monarchy, with a very charismatic and visionary leader in charge, helps on taking faster and more efficient actions as opposed to the bureaucracy and opposing party objections that are usually a burden in implementing government policies in Cyprus and European countries in general. The government has also managed to sign bilateral trade agreements with neighbouring countries with total population of more than 2 billion thus providing an excellent hub for businesses trading in the region. The amazing aviation infrastructure, that provides connectivity with direct flights in all parts of the world is another reason for its great development and this is something that Cyprus is currently lacking. However, a big challenge that has become even greater the last two years with the huge influx of Russians in the country (more than 400k) is the high inflation with a robust increase in accommodation, schooling and living expenses that has been the main issue faced by the productive expat community.

Do you believe the introduction of Dubai’s corporate tax could have any impact on Cyprus?

I do not believe that the introduction of the corporate tax will have a positive impact on Cyprus as we are witnessing more and more companies wanting to relocate to the UAE mainly from Europe now that the country is moving out of the Grey List. On the contrary, my personal experience is that many international companies currently registered in Cyprus and facing challenges mainly due to strict compliance processes imposed by the EU are now considering the UAE as a relocation option. In addition, many professionals in the financial services industry are also considering expanding or even moving their operations there to take advantage of the scalability and the vast business opportunities that the emirate and the country is offering.