Corporate Tax

With the introduction of corporate tax in the UAE, many businesses will be facing the challenge of dealing with corporate Tax for the first time. The Tax and Finance team should be ready to initiate conversations with the various departments that should be implicated to foresee the impact of Corporate Tax. In order to comply with the new tax regime businesses should have correct understanding to avert any error or penalties in the future.

To get businesses ready for the Corporate Tax we have a multistage action plan ready to start with:

Stage 1. Inceptive CIT Assessment

  • Evaluation of various revenue and expense transactions with respect to corporate tax relevance.
  • Review of technical aspects such as deductibles, intra-group transactions/related party transactions, transfer pricing and its impact on corporate tax regime.
  • Build a preliminary roadmap for change.

Stage 2. Structured Assessment - Planning & Strategy Stage

  • Validate the high-level impact assessment and perform a more detailed assessment.
  • Perform a quantitative impact assessment.
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Stage 3. Implementation support

  • Developing and reviewing integrated turnaround/ business plans, including the capital structure, debt capacity and key financial ratios.
  • Assessing and implementing tax reductions measures (Interest, Depreciation, Director’s Compensation)
  • Monitoring the restructuring progress as well as periodic reporting.

Stage 4. Post Implementation support

  • Provide ongoing tax advisory/implementation support.
  • Assist with the preparation and submission of tax returns.
  • Communicate with the tax office.
  • Assist with the preparation of appeals.

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The UAE has decided to introduce the corporate tax on business profits. It is expected to come into effect on 1st June 2023. With this, new upcoming tax regime businesses will require proper support from the tax team. It is important that businesses evaluate the impact of the introduction of UAE CT early on and proactively plan for a smooth implementation.

Corporate Tax In The UAE: Synopsis 

 

A corporate tax is a tax levied on the profit of a business. The taxes are paid on the company’s taxable income, using the below-simplified formula:

Taxable Income = Gross revenue – COGS – Tax allowable Expenses (Deductions)

When the deduction (expenses) claimed is more than the total revenue earned by the business, the result is taxable loss.

Expected Date: On/After 1st June 2023

Proposed Rate :

Taxable Income 

UAE CT Rate 

AED 0 – AED 375,000

0%

Above AED 375,000

9%

What will be exempted?

  • Capital gains and dividends earned from qualifying shareholdings.

  • Qualifying intra-group transactions and restructurings.

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