Implementation of Corporate Tax in the UAE

The process of implementation of the corporate tax in the UAE 2023 has been designed to incorporate best practices globally and minimize the compliance burden on businesses. The Ministry of Finance declared the introduction of Corporate Tax in the UAE  on January 31, 2022, on the profits for the financial years from June 2023.

The UAE presently has not implemented the federal corporate tax scheme. At the Emirate level, the UAE has imposed corporate tax only on oil and gas companies and branches of foreign banks. Moreover, the UAE would get advantages from over 40 free zones, which follow their own rules and regulations. There is no corporate tax imposed on employment-based income. 

Corporate Tax in UAE

Corporate Tax refers to the tax on the profits of a business or an organization. Taxes are paid on the company’s income, including revenue, minus the Cost Of Goods Sold (COGS), General and Administration (G&A)expenses, marketing and selling, Research & Development (R&D), and related operating costs. Corporate tax is a direct tax imposed on the net income or profit of organizations and related business groups. 

Are you ready for UAE Corporate Tax 2023? Let us get you ready for this! BMS Auditing will guide through the pre and post-implementation of Corporate Tax, its effect on the business for both long and short-term, and ensure 100% compliance with the Corporate tax. 

The impact analysis at BMS comprises 4 phases:

• • • Initial business review
    • Deep analysis of Corporate tax
    • Transition and Implementation
    • Post-implementation support
      
      

The Corporate Tax rate in the UAE is distributed as follows:

• • • 0% for the profit up to AED 375,000
    • 9% for the profit above AED 375,000

How to implement Corporate Tax in the Business?

It is necessary to understand the procedure to be followed before implementing Corporate Tax. Here are the steps you need to take:

1. Businesses should consider the review of the accounting books and verify if the accounting policies are accurate to follow the Corporate Tax liabilities
   
   
2. The businesses should determine the expenses and revenue items of the financial statements to apply for Corporate Tax
   
   
3. The business should analyze the filing methods or reporting models, which means- if you would choose a Tax group or a separate Corporate Tax return for every entry, considering the tax benefits from any reporting methods
   
   
4. It is ideal to identify the restructuring requirements for legal and capital structures. System and technology infrastructure is one of the major areas to be considered
   
   
5. The existing system and technology should be relevant enough to address the requirements of the Corporate Tax policy
   
   
6. With the launch of Corporate Tax, transfer pricing is focused broadly. There are various requirements related to transfer pricing documentation, that is to be taken care of by the flouring businesses 

How BMS Auditing UAE can help?

The corporate tax in the UAE will change the tax landscape of the UAE Significantly and international groups with businesses in the UAE are advised to evaluate the impact of such development. At BMS Auditing UAE, our team of experts can help you in assessing the challenges and opportunities that the introduction of a Corporate Tax will bring.

   A. Corporate Tax Advisory services:

• • • Impact assessment of Corporate Tax on business and applicability thereto

• • • Analysis of the impact of Corporate Tax on Free Zone (including Financial Free Zone) entities

• • • Advise on whether any exemption can be availed

• • • Advise on Group Corporate Tax and how to minimize potential risks

• • • Advise on potential Corporate Tax risk areas and challenges faced by taxpayers

• • • Assist in restructuring the business/operational model from the Corporate Tax perspective

• • • Advise on availing Foreign Tax Credit paid by taxpayers in other countries

• • • Advise on withholding taxes.
      
      

   B. Corporate Tax Compliance Services:

• • • Assist in registration for Corporate Tax before the relevant authorities

• • • Computation of taxable income and corresponding Corporate Tax in UAE.

• • • Preparation and filing of tax returns.
      
      

   C. Corporate Tax Representation services:

• • • Preparing the written submissions to be furnished before tax authorities

• • • Assisting in filing the response against the notices received from tax authorities

• • • Filing of written appeal against the adverse tax adjustments made or penalty imposed by the tax authorities

• • • Representing the taxpayers before tax authorities and arguing on behalf of taxpayers.