Farhat & Co., a reputable Tax Consultant in the UAE is determined to assisting businesses to seamlessly navigate corporate tax and ensure compliance. As corporate consultants, we offer tailored tax solutions to businesses, from startups to multinational Organizations. Thus, businesses are advised to seek the expert services of premier Tax Consultants in UAE to effectively meet corporate tax requirements and ensure compliance.
UAE's Corporate Tax Rates: - UAE corporate tax rates are as detailed below: -
- 0% Tax Rate: This shall be applied to businesses whose annual taxable income does not exceed AED 375,000 (approximately $102,110). This provision is welcome relief for startups and small businesses, as they can grow without being put under corporate tax duress.
- 9% Tax Rate: When the business is earning more than AED 375,000 in taxable income, a statutory corporate tax rate of 9% shall be applied. In this way, the multi-tier approach helps to capture only the more lucrative businesses in order to meet global standards on tax while still fostering the development of businesses.
Tax Rates and Free Zone Entities: -Regarding companies conducting their activity in one of the UAE free zones, there are special tax provisions:
- Qualifying Free Zone Entity: Only those entities that satisfy the particular regulatory requirements qualify for a zero corporate tax rate. Companies operating in the free zones could enjoy customs exemptions or at least simpler procedures related to them.
- Non-Qualifying Income: Income from the sources which do not satisfy the standard of qualifying income will be charged the at 9% corporate tax.
Our consultancy ensures that your business takes maximum advantage of free zone privileges while being in compliance with UAE corporate tax laws.
Taxable Persons Under UAE Corporate Tax: - The UAE's corporate tax regime makes a distinction between a resident and a non-resident taxpayer:
- Resident Taxpayers: Natural persons whose businesses are conducted in the UAE. Legal entities incorporated or having a substantial ability to conduct relevant activities within the UAE.
- Non-Resident Taxpayers: Similarly, corporate tax applies to foreign companies or individuals whose income is sourced from within the UAE, for example, those carrying out business activities in the country. This will involve entities with permanent establishments in the UAE, or those with substantial abilities that involve state-sourced income. For businesses with international ties, understanding these distinctions is crucial, and our consultants are here to help clarify your status and obligations.
Corporate Tax-Exempt Income:
- Income 375,000 AED
- Profit distributions and Dividends from certain investments
- Gains from shares selling
Exemptions and Special Provisions
- Exempt Entities: Certain types of entities and income are exempt from corporate tax in the UAE including UAE Federal and Emirate Governments and their wholly-owned businesses, government-owned natural resource companies, charities, public benefit organizations, and approved investment funds. Public and private pension and social security schemes are also exempt. Entities eligible for exemptions often need to apply for formal approval from the FTA. We guide businesses through the application process to ensure they secure their exempt status efficiently.
Current Structure of the Corporate Tax Law
Some important provisions include:
- Tax Groups: Favorable tax treatments can be grouped into tax group benefits that are formed by businesses.
- Group Relief: This is because tax relief can be split among the members of a group relieved from tax or among the members of a group liable to tax.
- Carrying Forward Losses: Business entities are allowed to transfer tax losses to future periods.
- Business Restructuring: Structural adjustments do not leave companies unprotected, because there are mechanisms for easing the tax burden in the process.
Compliance and Tax Return Filing
Within nine months of the conclusion of the organization’s financial year, the tax returns must be filed with compliance before the Federal Tax Authority. To avoid penalties, staying compliant with corporate tax laws is crucial. Following is mandatory for businesses under corporate tax:
- Federal Tax Authority Registration to get a TRN (Tax Registration Number)
- Submission of return for corporate tax within prescribed period (nine months) from the tax year conclusion.
- Keep financial records for a stipulated period (seven years)
Small Business Relief and Tax Incentives: -To support small and medium-sized enterprises (SMEs), the UAE offers various relief programs as if your company’s total revenue is under AED 3 million, you can opt for a relief program that treats you as having no taxable income for a specific period. This option is available until 2026, but businesses choosing it won’t be able to carry forward tax losses. We work closely with SMEs to determine if these relief programs are right for them, helping them minimize their taxes and reinvest savings into their business.
UAE Corporate Tax Calculation: - UAE Corporate tax calculation is based on business profits by using the GAAP (generally accepted accounting principles). Adjustments are made for things like unrealized gains or losses, exempt income, and allowable expenses. Here’s what’s taken into account:
Business revenues and profits
- Exempt income, such as dividends or capital gains from qualifying investments
- Adjustments for items like depreciation or interest deductions
Deductions/Expenses: -
- Interest Expense: Interest expenses are deductible, though they are capped at 30% of taxable profits. Our team helps you structure your financing to maximize this benefit.
- Entertainment Expenses: Up to 50% of expenses related to entertaining clients or suppliers can be deducted.
Advantages of New Corporate tax
Income subject to tax is resident income, which is all income from UAE sources and income from foreign sources received during one’s residency in the UAE, based on accounting rules. The UAE also has mechanisms for not taxing business on the same income more than one time. The Corporate Tax Law offers some great advantages:
- Tax Refunds: Companies can actually get tax credits which mean they can be paid money by the government as it is regarded as an expense.
- Lower Corporate Tax Bills: The current law provides provisions where the corporate tax responsibilities can be lowered.
- Tax Deferrals: Some taxes can be prepaid indicating they can help companies in regard to cash flow.
- Avoiding Tax Payments: In some cases, corporate tax is not payable by the business organization and hence they do not have to pay any amount at all.
- Compensation for Losses: When a business makes losses it can recover those losses by adjusting them against future gains. Until 75% of future taxable income can be offset and any unused of it can be taken forward into future years.
Transfer Pricing Regulations
Companies are bound by transfer pricing regulations that allow for the setting of a correct price between associated parties. The law also complies with other nations’ rules to avoid eradicating profits belonging to a business entity to minimize taxes.
- The companies have to report related party transactions.
- Interests of related parties have to be disclosed and documented to show the details of the transactions.
Why Choose Our Corporate Tax Consultancy?
- In-depth Knowledge of UAE Tax Laws: Our team is conversant with all UAE tax laws, right from the complexities of corporate taxation and exemptions to compliance.
- Customized Tax Solutions: We realize that each business works differently. The strategies we design are based on the nature of business, industry, and financial goals.
- International Expertise: We advise on cross-border international taxation matters to ensure that a treaty benefit is claimed to eliminate double taxation for each country in respect of which a given type of income arises.
- Proactive Tax Planning: Our consultants go well beyond just advising you on how to comply with the applicable law but also provide tax-planning advice to help you secure a solid future within the company by taking advantage of every possible opportunity for tax savings and efficient financial structuring.
Seek the Expert Services of Top Tax Consultants in UAE
Businesses are advised to seek the expert services of premier Tax Consultants in UAE to effectively meet corporate tax requirements and ensure compliance. Contact us today and we shall be glad to assist you.