Corporate Tax Services

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What is Corporate Tax?

A direct tax on the net income or profit of corporations and other businesses is known as corporate tax.
This 
is 
also known as the Corporate Income Tax” or Business Profits Tax“.

Corporate Tax in the UAE

We know that the UAE will impose a Corporate Tax (CT) on June 1, 2023, at the start of the fiscal year. Everyone is debating and attempting to figure out the effects of CT on businesses, individuals, the government, and the overall economy.

This article discusses how CT affects key stakeholders.

The Impact of Corporate Tax in UAE

The introduction of Corporate Tax would include implementation, training, and bureaucratic compliance costs, which would be fair considering the UAE’s simple tax system. Businesses will undoubtedly focus on tax planning to reduce the impact of CT on their profitability, increasing the demand for tax specialists.

The shareholders will strive to maintain their share of profits by passing on the impact of CT to end users through higher sales prices, making things a little more expensive for end users, which will adversely impact their purchasing power.

Reduced purchasing power would impact demand for products and services, and the trickle-down effect would be on business production and sales, affecting economic growth in the near run.

The introduction of Corporate Tax in the UAE would greatly impact Foreign Direct Investment (‘FDI’) decisions. It creates a gap between the pretax and post-tax returns on FDI. Investors are always interested in learning about direct taxes in the country where they wish to invest and taxes on profit repatriation.

As explained above, enterprises will likely pass on the impacts of Corporate tax to individuals by raising their prices and reducing consumers’ purchasing power. Employees would ask for a raise in wages to maintain their purchasing power. Overall, goods and services become marginally more expensive for end users.

Due to its competitiveness, UAE Corporate Tax would have a nominal impact on corporate savings and FDI, harming the country’s economy in the short run. Still, it would build investor confidence in the long run, contributing to growth. Considering all of the preceding,

CT has been designed to promote investment and maintain openness to match global standards, hence providing a stable society in which enterprises may contribute and add value to the economy’s growth. Text us on WhatsApp or call us today  for any corporate tax assistance required. Our experienced and professional team can assist you with all services you need.

Companies Covered Under Corporate Tax in UAE:

TAX
Resident companies are classified as having a residential status.
Corporate Tax Return Filing

A non-resident entity will only be taxed in the UAE on:

  • UAE sourced income, but subject to certain exemptions.
  • Revenue connected with a permanent establishment in the UAE.

In filing corporate tax returns, a company is obligated to submit a return to the relevant taxation authority. The return should detail the companys income, expenditure, and all other relevant data relevant for the applicable tax period.

The 
return should be filed within the timeframe stipulated by Corporate Tax Law. Additional information or documentation requested by the tax authorities should also be provided.

Corporate Tax Timeline

The corporate tax returns of taxpayers in the UAE have to be filed within nine months from the end of each 12-month Tax Period, which would coincide with the financial year.

Tax Period Defined

  • The Tax Period is defined as the Gregorian calendar year or any 12-month period that coincides with the companys financial statements.
  • Every Tax Period should be accompanied by a Tax Return from the Taxable Person.
Example Tax Periods and Filing Deadlines
First tax period 12 months
1. Accounting Year: June 1, 2023 - May 31, 2024

Tax period: June 1, 2023 to May 31, 2024.
Return Filing Period: May 31, 2024 – February 28, 2025. 9 months.
In this regard, businesses will have to retain records of financial transactions for a period that satisfies tax reporting obligations.

2. Financial Year: January 1, 2024 – December 31, 2024

Tax Period: January 1, 2024 – December 31, 2024.
Return Filing Period: January 1, 2025 – September 30, 2025 (9 months).
Return with supporting documents need to be submitted during this period

3. Financial Year: April 1, 2024 – March 31, 2025

Tax Period: April 1, 2024 – March 31, 2025.
Return Filing Period: April 1, 2025 – December 31, 2025 (9 months).
Be in compliance and file returns with supporting documents before the close of this period.

Key Points to Remember
  • Filing within the Time FrameThe return should be filed within 9 months after the end of the tax period.
  • Supporting documents Such documents may include the financial statements and other requested documents from the tax authorities.
  • Accurate Records: Maintaining proper financial records for the duration of a tax period can help avoid penalties.
Particulars Rate of Tax

AED 375,000/- is the maximum annual taxable income.

0%

The amount of taxable income exceeds AED 375,000/- per year
9%
Consequences of Missing Tax Return Deadlines: Penalties and Fines

Failure to submit tax returns or fulfill tax obligations by the set time may result in several consequences depending on the place and relevant tax laws. Usually, tax bodies impose penalties or surcharges on a late or defaulted submission. These charges are mostly determined by the length of the delay and the amount of outstanding tax.

In the UAE, late payment penalties for corporate tax are computed as follows:
  • There is a first month penalty, usually as a percentage of the unpaid amount of tax.
  • There are further fixed penalties applied for every month following that initial period.
  • The unpaid amount of tax is subject to interest from the due date to the date that the amount paid in full.
Criteria For Determining Expenses That Are Allowed

In general, all revenue expenditures paid for business purposes should be permitted as a deduction when calculating taxable income.

However, the corporate tax regime in the UAE, as outlined in the public consultation paper, includes a list of items that will not be recognized as deductions for calculating taxable income:

  • 50% of the cost of entertaining customers, shareholders, suppliers, and other business partners.
  • Administrative penalties.
  • VAT recovery.
  • Donations made to an unapproved organization.
  • Profits and losses that have yet to be realized.
  • Interest exceeding 30% of EBITDA.
  • Payments given to Free Zone residents are taxed at 0% when the income is received. The final corporate tax legislation in the United Arab Emirates may also disallow some expenditures for computing taxable profits.

 

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Common Questions

Frequently Asked Questions

  • Assemble and submit the necessary documentation in compliance with IFZA guidelines.
  • Make sure the registration payments required for the selected company type have been paid.
  • Observe the minimum capital requirements specified for the firm structure you have selected.
  • Completed application form.
  • Passport copies of shareholders and managers.
  • Proof of address for shareholders and managers.
  • Business plan.
  • Memorandum of Association (MOA)
  • Board resolution (for corporate shareholders)

Any foreign investor wishing to open a firm in any of the UAE's mainland regions must have a local sponsor. Additionally, the sponsor needs to own at least 51% of the business's equity. When can you go without a sponsor? There is no requirement for a local sponsor if you are establishing a business in the United Arab Emirates free trade zone.

Obtaining a business license, obtaining a UAE residence visa, and opening a corporate bank account are the three primary processes required to launch a business in any UAE Free Zone. The entire business establishment process should take one to four weeks if it is well-planned.

When starting a business, entrepreneurs have the option of flexible desks or office spaces, and IFZA visa fees are among the lowest in the UAE. In general, IFZA is a great option for business owners searching for a strategic and affordable place to locate their enterprise in the United Arab Emirates.

For free zone enterprises to rent an office in the mainland, the most important prerequisite is to obtain a NOC (No Objection Certificate) from the appropriate UAE free zone government. The procedures set forth by the relevant free zone authorities in the United Arab Emirates govern how to get a NOC from a free zone.

  • Professional: In Dubai, a professional license is granted to companies that provide consulting and services.
  • Commercial: Permit for distribution, storage, import, and export.
  • Industrial: Permit to import raw materials and to manufacture and process specific products.

Yes, it is crucial to decide on your business's sector and line of operations before beginning the Dubai company creation procedure. Some regions in the United Arab Emirates permit particular

commercial activity.

UAE, Emirates, City`s names, Districts, and Airports Codes of UAE are Restricted. - The trade name cannot start with "international" "Middle East" "Global" etc... Nor can it be translated.

You can launch and operate your own business in Dubai as a non-resident with the right advice from professionals like Trade License Zone, and you can do it from anywhere in the globe.

  • situated in the center of Dubai
  • continuous assistance from the government
  • tax exemption from the UAE government
  • numerous business activity opportunities
  • limitless networking opportunities; and so on.
  • Complete foreign ownership with simple bank account setup and the ability to form an LLC.

In IFZA, the initial startup costs for businesses are AED 14,900*. There are zero visa packages and six visa packages among them. The Dubai Department of Economic Development (DED) is the source for all economic activity allowed in the International Financial Zone (IFZA).

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