The Ministry of Finance of the UAE announced the introduction of corporate tax, in January 2022. Under the agreement signed between the Organisation for Economic Co-operation and Development (OECD) and the United Arab Emirates, this newly implemented system adheres to global best practices and guidelines issued by the former in order to minimize the compliance burden on businesses. However, being a new regime, it needs to be well-planned and strategically thought out, which is why companies seek UAE corporate tax consultants to ensure the smooth functioning of the organization.
Corporate Tax in the UAE
Corporate tax, also known as ‘business profit tax’ ‘corporate income tax’, or ‘corporation tax’, is a direct tax levied on the net income or profit of the company. According to the law, all business and commercial activities carried out across the country are subject to Corporate Tax. However, certain entities are exempted from this regulation, such as –
- Mining industries and businesses engaged in the utilization of natural resources
- Personal income/ gain of an individual
- Free Zone Companies earning income from outside of the UAE or within the same or similar free zones
- Government and Government-owned Entities
- Charities and Public Benefit Organizations (with the approval and decision of the Ministry)
- Regulated investment funds and Real Estate Investment Trusts that meet certain requirements of the FTA
The key objective of launching the new corporate tax system is to position the United Arab Emirates as a world-class investment and business hub and achieve its strategic goals by accelerating its development. The new system will help keep taxes transparent and avoid unfavorable tax issues, thereby enforcing best tax practices within the country.
Corporate Tax Rate Structure
The following rates would be applied under the new corporate tax regime:-
- For taxable income up to AED 375,000 – 0% Corporate Tax
- For taxable income over AED 375,000 – 9% Corporate Tax
Need for UAE corporate tax consultants
Businesses often seek corporate tax consultants in Dubai to navigate the complex landscape of UAE taxation efficiently, ensure compliance, take advantage of the tax benefits, minimize risks, improve processes, and obtain expert tax planning advice. Partnering with professional tax consultants like Shuraa Tax can enhance the financial management of the organization’s corporate tax impact assessments.
There are several benefits of utilizing the expertise of UAE corporate tax consultants:-
- Accurate calculation and submission of taxes
- Reduced tax burden through strategic planning
- Adherence to tax laws and guidelines
- Prevention of penalties for non-compliance
- Access to professional support on tax-related matters
Services offered by corporate tax consultants in Dubai
Corporate tax consultants in the UAE can assist businesses with the following:-
- Corporate tax consultancy – Corporate Tax consultants are responsible for providing a comprehensive understanding of preparing financial statements with internationally accepted accounting standards, deductible/non-deductible expenses, rules related to tax losses, transitional provisions, transfer pricing rules, conditions for free zone exceptions, tax group participation exception, corporate tax rates, available exemptions, and relief provisions.
- Corporate tax audit – CT consultants help businesses with corporate tax compliance audits and confirm their adherence to the UAE’s corporate tax law. They also ensure that businesses file tax returns on time and remit the correct tax amount, thus avoiding severe penalties, interest charges, and potential criminal suits.
- Corporate tax registration – Tax consultancy firms assist businesses with the corporate tax registration process. They help them arrange the mandatory documents required for the process such as the trade license, Emirates ID/passport of the applicant, etc.
- Documentation – Corporate Tax service providers help in assembling standard documents required for corporate tax compliance such as Corporate tax registration certificates, financial statements, transfer pricing documents, tax returns, supporting documents for deductions and exemptions, proof of foreign tax credits, and other documents relevant to corporate tax.
- Corporate tax return filing – Corporate Tax consultants help organizations fulfill their corporate tax obligations and provide the required details in accordance with the FTA such as financial statements, taxable profits, corporate tax payable, and name and registration number of the company.
Their additional services include:-
- Tax planning and preparation
- Determining the impact of legislative changes on the business structure and adapting the tax approach accordingly
- Guiding on the tax consequences of potential transactions
- Assistance in business reorganizations
- Examining the tax consequences of business agreements or other legal documents
Phase-Wise Approach to Corporate Tax Planning
Below explained are the different stages of corporate tax planning performed by the UAE corporate tax consultants –
Impact assessment
UAE corporate tax consultants evaluate the business and prepare them to acquaint with the corporate tax regime.
Action plan:-
- Preliminary impact assessment
- Review the nature of transactions to assess their relevance with corporate tax
- Understand the structure of the organization
- Assess specific transactions such as related party / intra-group transactions, deductibles, transfer pricing, etc.
- Understand existing IT systems and the potential impact on the cash flow
- Develop a project plan
Detailed assessment and planning
Tax consultants carry out a detailed impact assessment and build a preliminary blueprint for change.
Actions plan:-
- A comprehensive study of the business activities based on corporate tax and transfer pricing regulations
- Understanding the corporate tax law concerning the specific industry of the company and preparing the financials as required
- Identify potential risks and exposures
- Review the impact on productivity for related party transactions
- Suggest an ideal and cost-effective reporting strategy
- Recommend the most beneficial structure from the corporate tax perspective
- Perform need-based adjustments to the impact assessment
Implementation assistance
Consultants help companies incorporate corporate tax regimes and best practices in their day-to-day operations.
Action plan:
- Apply corporate tax and transfer pricing policies
- Recommend structural changes to integrate tax function
- Assess and suggest available covering systems, governance, and technical aspects
- Identify gaps in the system and deal with them
- Train and educate the in-house tax and finance teams
- Modify the graph of accounts
- Register for corporate tax with the FTA (for individuals and groups)
- Apply tax reduction measures such as depreciation, director compensation, interest, etc.
- Regular monitoring and reporting of the reorganization progress
Post-implementation assistance
This is the final stage where the UAE corporate tax consultants extend their ongoing support and ensure that the tax affairs of the organization are up-to-date and dealt with efficiently.
Action plan:-
- Post-implementation support and ongoing tax advisory
- Prepare financial statements for tax purposes
- Examine audited / unaudited financial statements as per GAAP (Generally Accepted Accounting Principles)
- Suggest taxable changes that can be made as per the corporate tax legislation
- Tax planning advisory
- Guidance on important tax matters while ensuring compliance with the law such as tax calculations, submission of accurate information, etc.
- Prepare and file corporate tax returns with mandatory supporting documents
- Communicate and deal with the tax office
- Prepare appeals
Shuraa Tax and Accounting Services for Businesses
Shuraa Tax Consultants and Accountants has a team of experts who are well-versed in international tax standards, and therefore, can provide the best guidance and activities related to corporate tax in the UAE. Their in-depth understanding of UAE’s tax laws will help in achieving the best tax solutions. Moreover, they have a vibrant approach through which they support their clients in planning and systematically executing their tax procedures.
So, if you are looking for reliable corporate tax consultants in Dubai, UAE, then Shuraa is the right choice for you. Know more about their excellent corporate tax services at www.shuraatax.com