Corporate Tax United Arab Emirates Prepare For It now

The United Arab Emirates (UAE) recently announced a new corporate Tax (CT) regime that will become effective for financial years starting on or after 1 June 2023. Under the new corporate tax regime, businesses operating in the UAE will be subject to a uniform tax rate of 5% on their profits. In addition, the new corporate tax regime introduces a simplified tax filing process for businesses. Companies will only have to file a single corporate tax return each year, rather than the multiple returns required under the previous regime. This simplification should make it easier for companies to comply with their corporate tax obligations and make the process of filing tax returns more efficient. Overall, the introduction of the new tax regime in the UAE is a positive step for the country’s economy. It is expected to bring the UAE closer to international standards and help to attract more foreign investments. The simplified tax filing process also makes it easier for companies to meet their corporate tax obligations and reduce their tax compliance burden. Since it is new for businesses, it is better to seek help from any leading accounting and auditing firm in the UAE.

Corporate Tax rates

There are three rates in the newly announced UAE corporate tax regime:

• All annual taxable profits under AED 375,000 are subject to a 0% rate.
• All annual taxable profits in excess of AED 375,000 are subject to a 9% tax rate

Accounting profits subject to specific adjustments are referred to as taxable profits.

Scope of the Corporate Tax

The UAE's federal tax system applies to all businesses and commercial ventures within the seven emirates, with a few exceptions:

• Business related to the extraction of natural resources. The tax decrees issued by the relevant Emirate will still apply to these. These will continue to be subject to the individual Emirate's tax decrees.
• Businesses registered in Free Trade Zones, provided they meet all regulatory standards and do not conduct business with Mainland UAE.
• Individuals earning revenue in their own capacity (i.e. salary, investment income) as long as the source of income does not necessitate a commercial license.

Get prepared

Accepting and embracing the impending change is the first step in preparing for the implementation of the federal corporate tax. It is essential that companies operating in the UAE have a comprehensive understanding of corporate tax. Since the new regime gets effective from June 2023, businesses should review the current federal corporate tax rate and any projected changes. It is also advisable to develop a plan for minimizing the impact of the new rate on your bottom line. Review your company's internal processes and procedures to identify areas where you can adjust to better meet the new rate. Businesses should also consider the potential benefits of certain tax strategies such as accelerated deductions, tax credits, and other deductions. It is better to consult with a tax professional to ensure you are taking full advantage of the new rate.

Professional help?

Seeking professional assistance is essential when preparing for the new UAE corporate tax regime. Professional auditing firms like Reyson Badger can provide guidance on the best strategies and methods to minimize the tax burden and maximize the benefits of the new regime. We will also be able to answer questions and provide clarity on any issues that may arise. We can also assist in the filing of required documents and help ensure that all deadlines are met. Reyson Badger, being one of the accounting and auditing firms in the UAE can help you efficiently prepare for corporate tax in the UAE.