UAE: First tax year comes; Is your business ready to face corporate tax?

Have you heard about the ‘paradigm shift?’ It is definitely a better way to characterize the significance of the UAE's introduction of a business tax. It's very crucial for companies functioning in the UAE to take into account corporate tax from all angles.

The 2018 VAT implementation experience shouldn't lead to misconceptions regarding business taxation or the notion that it's just another sort of tax. Since VAT is a transaction-based tax, accurate tax treatment must be noted and reported at the time of the transaction. If any mistake happens, then it will end in fines and a missed chance to get back VAT from clients. Corporate tax is not directly recoupable from customers like VAT is. Firms do not need to include corporate tax in price talks or on their invoices. Businesses can rely on outsource tax preparation services and be confident in tax matters.

Corporate tax is not reported in real-time at the moment of each transaction during the fiscal year. Even after the end of the fiscal year, companies will have an additional 9 months to evaluate their books of accounts, make any essential revisions or reclassifications, compute their tax liability, file tax forms, and deposit any essential tax. So, several penalties that might otherwise be imposed under the VAT legislation might not apply under the corporation tax laws. The idea of outsourcing tax preparation will definitely help businesses.

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Exporting products and services

The VAT zero-rates exports of products and services in the UAE, similar to the laws governing several other nations. A zero-rating strategy like this promises that a country’s goods and services are competitive in the global market. Different policy parameters are needed for corporate tax. The majority of nations don't provide corporation tax breaks for exporting products and services.

A few, like India, have in the past granted tax holidays in bond with income from exports of goods or services; this was a decision made by the tax policy under the particular circumstances of the home country. As an example, a country might wish to maximize its foreign exchange earnings by supporting exports through business tax breaks.

Proactive free zone planning

No quick changes will be implemented to company functions at the beginning of the tax or financial year. Firms that wish to prepare their corporate tax return will get 9 months to fix any inaccuracies in the financial statement. For such contexts, like free zone tax benefits, tax groups, and year-end inter-company balances, a proactive strategy and prompt action are required. We suggest you go for tax outsourcing because of the hassle-free procedures and results.

Recently, new cabinet and ministerial decisions that repealed previous decisions were released, effective June 1, 2023, retroactively. In-depth planning is crucial to taking advantage of the free zone preferential tax rate of 0%, as missing this chance will prevent the incentives from being available for the next 4 years.

Perfect accounting?

Accounting for corporate tax must be performed with a complete concentration on the true nature of the transactions. The idea of outsource accounting will help you, so you can consider it. Errors in transaction identification and/or accounting may lead to inaccuracies in compliance and ensuing fines.

Not all transactions are evaluated; only pertinent categories of transactions are, including transfer prices. The book of accounts can be adjusted on a regular basis to promise that related-party transactions are done at arm's length. The plan of a great outsource bookkeeping for small business or large ones and outsourcing accounting services will ensure good business tax compliance.

The corporation tax code has been kept simple, according to the Ministry of Finance. The general anti-abuse regulations confirm that a complex tax code is not essential. It is reasonable to expect periodic tax guidance and revisions to stay up-to-date with business and economic demands. It's very crucial that business owners know both their duties and entitlements by enquiring about everything. If you are not an expert in these matters, you can definitely outsource bookkeeping services, outsource tax preparation services, etc.