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Indeed, profits and net income of corporations fall under the purview of corporate taxation. Specifically, corporate profits are commonly taxed through Corporate Income Taxes (CIT).
It is noteworthy that, there will be a UAE Corporate Tax for all UAE businesses, except for natural resource extraction, which will continue to be a matter of Emirate taxation.
To be subject to Corporate Tax in the UAE, foreign entities and individuals must engage in ongoing or regular business activities within the country.
Furthermore, in the UAE, there is currently no federal corporate tax system. Instead, each emirate relies on a tax decree to enforce corporate taxes (CT).
Currently, only oil and gas companies and foreign banks are subject to UAE corporate taxes. Furthermore, the UAE hosts over 40 free zones, each with distinct rules and regulations. As a result, the creation of these zones often results in UAE companies benefiting from substantial tax advantages. Consequently, this enhances the region’s attractiveness as a tax-friendly jurisdiction overall.
Additionally, in the UAE, income derived from employment continues to remain untaxed. Presently, corporate taxes in the country apply solely to oil and gas companies as well as foreign banks. Are you looking for Corporate Tax Services in the UAE? Come to us and take advice.
In the United Arab Emirates, businesses and individuals with commercial licenses must acquire a license. However, for free zone businesses that comply with all regulatory requirements and refrain from operating in the UAE’s mainland, will continue to enjoy the existing corporate tax incentives.
Moreover, foreign entities and individuals are obligated to obtain a license only if they engage in ongoing or regular trade or business activities within the UAE. This requirement extends to banking operations and businesses involved in real estate management, construction, development, agency, and brokerage activities.
CT will be levied on a business’s annual taxable income according to the following structure:
In UAE VAT, any person conducting business is not allowed to have more than one Tax Registration Number (TRN), unless otherwise prescribed in the UAE Executive Regulation. Thus, even if you are operating via branches in more than one Emirate, only one VAT registration is required. With a similar objective, if two or more persons are related or associated parties in the businesses, they are allowed to apply for VAT group registration.
VAT-registered businesses collect the amount on behalf of the government; consumers bear the VAT in the form of a 5 per cent increase in the cost of taxable goods and services they purchase in the UAE.
UAE imposes VAT on tax-registered businesses at a rate of 5 per cent on a taxable supply of goods or services at each step of the supply chain.
Tourists in the UAE also pay VAT at the point of sale.
VAT applies equally on tax-registered businesses managed on the UAE mainland and in the free zones. However, if the UAE Cabinet defines a certain free zone as a ‘designated zone’, it must be treated as outside the UAE for tax purposes. The transfer of goods between designated zones are tax-free.
At the end of each tax period, VAT registered businesses or the ‘taxable persons’ must submit a ‘VAT return’ to Federal Tax Authority (FTA).
A VAT return summarises the value of the supplies and purchases a taxable person has made during the tax period, and shows the taxable person’s VAT liability.
Moreover, when strategizing for corporate income tax management, it is essential to stay abreast of the latest advancements in tax legislation, rules, and international tax agreements. Ensuring compliance with regulations not only enhances tax planning approaches but is also vital. Similarly, the diligent upkeep of accurate and comprehensive records for all business transactions and expenses associated with tax matters is crucial. In this regard, we stand ready to support you in rectifying your accounting records, ensuring their accuracy, and preparing your company for corporate taxation in the UAE.
The company should provide its employees with training on tax laws, regulations, and compliance requirements regarding corporate income tax. Consequently, this training can facilitate a comprehensive understanding of the new tax system, enabling employees to comply with the stipulated requirements.
To achieve effective implementation and compliance with corporate income tax in the UAE, companies must proactively engage in tax planning, meticulous documentation, and strict adherence to tax laws and regulations.
Moreover, companies may opt for professional assistance from audit firms in Dubai, accountants, and legal experts to ensure seamless compliance with tax laws and regulations.
Truly, let us know what service you are looking for and hence we can get back to you with more details.
Definitely, Alya Auditors is the one partner you need to ensure your business is built on accurate accounting books certainly, to spearhead greater growth and wider market reach.
An association of legally independent auditing & accounting firms in the UAE
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