Ways to Reduce Corporate Tax Liability in UAE

Corporate tax in the UAE has historically been minimal compared to other nations, with no federal corporate income tax. However, starting from 2023, the UAE has introduced a minimum corporate tax for businesses generating revenue in the country. Consequently, companies may seek to mitigate their corporate tax obligations in the UAE through meticulous corporate tax compliance strategies.

Corporate Tax in UAE

Starting from June 1, 2023, the UAE will introduce a Corporate Tax set at a standard rate of 9% for businesses with earnings exceeding AED 375,000. This legislation reflects the UAE’s commitment to adopting global taxation standards, fostering economic growth, and combating tax evasion. 

The implementation of Corporate Tax aligns with the UAE’s strategic objectives, driving its progress and evolution.

Rates for Corporate Tax in UAE​

Corporate Tax Rates in UAE vary depending on the entity’s annual revenue and their status under international tax regulations. UAE businesses are subject to the following corporate tax rates:

– For businesses earning more than AED 375,000 annually, the standard corporate tax rate is 9%.
– Multinational corporations falling under OECD Base Erosion and Profit-Sharing laws (Pillar 2 of BEPS 2.0) with combined worldwide revenues exceeding AED 3.15 billion are subject to a 15% corporate tax rate.

Despite these rates, businesses can explore strategies to minimize their corporate tax liabilities in the UAE.

Ways to Reduce Corporate Tax in UAE

To minimize corporate tax liabilities in the UAE, businesses can employ strategies such as optimizing operational structures, leveraging tax incentives, and maximizing deductions. Compliance with corporate tax laws is crucial to avoid penalties. 

Partnering with an FTA Registered Tax agent like Unicorn Global Solutions, renowned for its expert corporate tax consultants in the UAE, ensures adherence to compliance requirements and efficient CT return filing. 

The UAE government provides tax exemptions and incentives to eligible businesses, particularly in specific industries. By meeting eligibility criteria and applying for these benefits with relevant authorities, businesses can reduce their corporate tax burden effectively.

1. Leverage Tax Exemptions and Incentives

The UAE government provides tax breaks and incentives to businesses across specific sectors. These include Government Entities, Extractive Businesses, Non-extractive businesses, and Public Benefit entities. Moreover, entities operating within the Dubai International Financial Centre (DIFC) may also access tax exemptions and incentives.

Recently, the Ministry of Finance issued a clarification regarding Corporate tax exemptions for Qualifying Public Benefit Entities.

To capitalize on these benefits, businesses must fulfill eligibility criteria and submit applications to the relevant authorities.

2. Optimize Business Structure

Strategically structuring your business offers advantages beyond tax reduction. Establishing a subsidiary in a free zone enables access to corporate tax incentives within that zone, along with streamlined business operations. Free zones in the UAE provide various perks, including simplified regulations, efficient customs procedures, and top-notch infrastructure.

Alternatively, consider establishing a branch in a free zone. Unlike a subsidiary, a branch operates as an extension of the parent company, with the parent company assuming tax liability. However, branches can leverage free zone tax incentives while operating under the parent company’s brand.

Moreover, under the corporate tax law, transactions involving Qualifying Free Zone Persons with other entities within free zones or outside the UAE incur 0% corporate tax.

When determining the optimal business structure, consider factors like operational nature, transactions, growth plans, and long-term objectives. Seek guidance from legal and tax professionals to ensure compliance with UAE regulations.

3. Diligent Financial Record-Keeping

Accurate financial records enable businesses to claim deductions on legitimate expenses, reducing taxable income and corporate tax liability. Additionally, comprehensive records support the business’s tax position during audits by tax authorities.

At Unicorn Global Solutions, we offer expert assistance in maintaining meticulous financial records and preparing audit statements for multinational corporations and corporate entities, ensuring compliance and maximizing tax benefits.

4. Engage a Certified Tax Consultants

Partnering with a certified tax advisor ensures adherence to the latest tax regulations and maximizes tax planning strategies.

 Not all tax agents are registered with the FTA, so it’s essential to choose a reputable firm like Unicorn Global Solutions with FTA-accredited tax agents in UAE. Our experienced consultants provide tailored tax compliance solutions, ensuring optimal tax practices for your business.

5. Ensure Timely Corporate Tax Compliance

Adhering to deadlines for corporate tax return filing and payments is crucial in UAE to avoid penalties and fines. Gathering necessary documents well ahead of the fiscal year’s end can prevent last-minute rushes and ensure timely compliance.

It’s essential to meticulously leverage tax advantages and maintain compliance to minimize corporate tax liabilities and mitigate risks of penalties or legal actions. Partnering with a trusted and accredited tax firm like Unicorn Global Solutions ensures comprehensive tax compliance and expert guidance to navigate complex tax regulations effectively.

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Corporate Tax Consultants in UAE

Minimizing corporate tax liability is a significant concern for businesses in the UAE. Unicorn Global Solutions is a premier auditing and tax consultancy firm in Dubai, recognized as a leading tax advisor in the Middle East. 

Our team of expert tax consultants and auditors specializes in providing strategic advice on Corporate tax registration, tax planning, optimization, compliance, and reporting. Leveraging our extensive experience and knowledge, we assist businesses in structuring transactions to maximize tax efficiency, ensure regulatory compliance, and mitigate the risk of penalties. Text us on WhatsApp or call us today  to get started.

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