Federal Corporate Tax

 Introduction of Federal Corporate Tax; what to expect?

The ministry of finance declared from the coming financial year, the profitable businesses are obliged to pay federal corporate tax. As compared to the competitive internal market, the UAE govt. has already applied 9% standard statutory tax for companies. According to the Tax Foundation in Washington DC, the average corporate tax rate in the EU27 countries is 21.3 percent. However, foreign taxes will be paid against any payable UAE corporate tax, hence; fortunately, there will be no double taxation.

 

 

 

In fact, to support small and medium-sized businesses the govt. has set a different rule. Companies with profits of Dh 375,000 fall under the regulation and are subjected to this competitive tax regime. Moreover, there will be no tax on employment income, real estate, and other potential investments. Apart from the clear regime, there are a few exceptions. Well, does your business fall under the federal tax system? Let’s find out in the next section.

 

Objective of the Federal Corporate Tax

The competitive CT or corporate tax regime is based on the best practices of the international market. In addition, the introduction of CT will eventually consolidate UAE’s position amidst the leading global hub for businesses and investments. In fact, it will accelerate the financial development with strategic objectives. Take a quick glance at the prime objectives of CT in the UAE.

·         To consolidate UAE’s position in the international marketplace. Hence, the initiative is largely supported by an extensive double tax treaty network

·         To acquire the strategic ambition and incentive from businesses and MNCs and expand their activities in UAE

·         Assuring the commitment of UAE to meet international business standards for tax transparency and prevent unlawful tax practices

Key aspects of Corporate Tax regime in UAE

The ministry of finance started this initiative in a progressive way. In fact, to encourage small and medium-size businesses they haven’t charged any tax. As proposed by the govt. the taxation regime would follow the table mentioned below:

 

Net accounting profit	Proposed UAE CT rate
0-375,000	0%
375,000 and above	9%

 

 

 

Well, the UAE CT is differently structured for multinational entities that fall under OCED (Organisation for Economic Development).

Businesses that fall under the CT regime

This is the prime focus of businesses that have acquired a net profit of more than Dh 375,000. So, let us have a look at the businesses that are obliged to pay CT.

 

·         This taxation system is applicable for all UAE business and commercial practices. In addition, it also covers all the legal entities that exercise financial activities. However, organizations that are undertaken by any natural resources will be subjected to Emirate level taxation.

·         Individuals with a business license to obtain any commercial and professional activities in UAE. However, people having their income from employment, investment, interest from bank deposits, any personal income outside UAE trade activities and real estate are not related to this regime.

·         Foreign organizations and individuals based on their trade in the UAE. However, CT is not applied for foreign investors’ income from royalties, investment returns. Dividends and capital gains.

How GULF CFO can help you out in clearing CT?

Gulf CFO is a leading accounting organization. In fact, the company is backed by strong financial experts and accounting professionals. From financial advisory to VAT, from tax services to ESR, we have a wide range of accounting services. In addition, we bring together world-class capabilities and quality services to align with a strong financial model. With government reporting to compliance, our models help businesses to consolidate their financial strength. Well, as a top-rated tax advisor our tax services include:

 

·         We can help you to have a clear understanding of the proposed CT regime. In fact, we can also arrange financial strategies to clear the tax system smartly and lawfully.

·         We can also identify and restructure your business opportunities and make you strong financially.

·         Identify the gap of the required changes and implement a better method to support CT legislation.

·         Offering day-to-day support that concerns report assessment and compliance and advisory services.

Over to you

Business already involves a lot of expertise. Moreover, the core business operations are so daunting that business owners hardly have the time to manage their tax regime. Hence, it is better to get a professional accounting service that promises better financial health.