UAE telecoms operators to pay royalties under new simplified structure

The federal royalty rate of 38 per cent will be applied on the sum of 'regulated and non-regulated' UAE net profit starting from January 1

E& said royalty and corporate tax will be neutral to its financials. Antonie Robertson/The National

The UAE's telecoms operators e& and Emirates Integrated Telecommunications Company, known as du, will start paying corporate tax and royalties to the federal government under a new and simplified structure starting from January 1 next year.

Technology company e&, formerly known as the Etisalat Group, will pay a minimum aggregate amount of Dh5.7 billion ($1.55 billion) in corporate tax and federal royalty, the company said in a regulatory filing to the Abu Dhabi Securities Exchange, where its shares are traded.

The aggregate amount of royalty and corporate tax payable by EITC shall not be lower than Dh1.8 billion a year, du said in a separate bourse filing to the Dubai Financial Market on Tuesday.

The new royalty regime will be effective from 2024 to 2026 in the context of the new corporate tax regime, it said.

The telecoms operators said they have received new guidelines from the government, under which the federal royalty rate of 38 per cent will be applied to the sum of “regulated and non-regulated” UAE net profit.

The 9 per cent corporate tax law will apply to e& from the beginning of next year, it said.

The aggregate annual amount of royalty and corporate tax shall be paid within five months from the end of the fiscal year, it added.

The two operators said their profits attributable to non-controlling interest holders of UAE-controlled entities will be excluded from the royalty calculation.

Profit generated by international entities, dividend distributions, or other profits from international investments that are subject to a local corporate tax, will also be excluded from the royalty calculation.

“We believe that the new royalty structure is more simplified and avoids complexity in the calculation,” e& said.

“Based on our initial assessment, the combined impact of royalty and corporate tax will be neutral to e&’s financials.”

Du said the new royalty regime ensures “clarity” by pegging the calculations solely to net profit.

“Based on our initial assessment, the aggregate amount of corporate tax and royalty under the new regime will not be higher than the royalty under the old regime,” it said.

E&, which has transformed into a technology investment conglomerate over the past few years, reported a 20 per cent jump in its third quarter net income as its subscriber base grew.

Consolidated net profit in the three months up to September 30 increased to Dh3 billion as revenue reached Dh13.4 billion.

E&’s total subscribers climbed to 167 million at the end of September, about five million more than the same period last year.

Du also reported a strong third-quarter as its net profit surged 60 per cent Dh502.37 million.

It posted a 3.7 per cent annual rise in revenue in the July-September quarter to Dh3.29 billion, driven by a 5.7 per cent growth in mobile service revenue to more than Dh1.5 billion.