Corporate Tax Dubai is a regular 9%. It is now in effect in the UAE for qualified businesses whose taxable income exceeds AED 375,000. Making wise decisions regarding your company’s structure, income distribution, and spending control is necessary for corporate tax Dubai to abide by tax regulations and lower your tax obligation. To understand this corporate tax consultant Dubai can be quite beneficial. This blog will focus on the essential elements and methods of efficient corporate tax planning to lower it.
Selecting the Appropriate Company Structure for UAE Corporate Tax
It matters how your company is set up for UAE corporate tax. Qualifying groups and tax groups are the two primary categories of organizations for corporate tax filing purposes.
Qualifying Groups
A group of businesses that control at least 75% of each subsidiary through a common parent company is known as a qualifying group. Each company in the group is required to file its corporate tax return; but, to minimize taxes and make effective use of their losses, they may assign their losses to other group members to balance their profits.
Tax Divisions
A tax group, in which the parent business owns at least 95% of each subsidiary, is a more sophisticated version of a qualifying group. In this instance, the parent business alone is required to submit a corporation tax return and bears the tax liability on the group’s combined income.
Handling Tax Deductibles
Managing the deductible expenses to lower the business tax burden that is subject to limitations or restrictions is another crucial component of corporate tax planning. To deduct your expenses, you must be aware of the guidelines and requirements and maintain accurate records and supporting paperwork for your claims.
Typical Deductible Costs
For business tax reasons, a few typical deductible expenses are:
Interest Charges: Subject to a ceiling of 30% of your earnings before interest, tax, depreciation, and amortization (EBITDA), you can deduct the interest costs you pay on loans or borrowings utilized for your company operations. There are some exceptions, though, like interest on loans from family members or loans used in a scheme to evade taxes.
Entertainment Expenses: If you can show that your company’s entertainment costs are fair and essential, you can write off the costs you incur for clients, partners, workers, and suppliers. The deductibility rate, however, changes according to who receives the entertainment. For instance, you can deduct all your employee’s leisure costs, but only 50% of the costs incurred by your clients, vendors, and business associates.
Limitations on Taxable Income
The following are some limitations on deductibility that you should be aware of:
Interest Charges on Affiliated Parties Loans
Deals Including Affiliated Parties
Utilizing Incentives in Free Zones
Operating in a free zone is among the most alluring choices for corporation tax planning. A free zone is an area that has been declared and provides firms operating inside its borders with a range of financial benefits and exemptions.
Making a Small Business Relief Application
Assuming you own a small company or SME in a free zone, it’s possible that you qualify for small business relief, which you can obtain after meeting specific requirements. The purpose of this exemption is to assist the state’s small companies’ and SMEs’ expansion and development.
Making Use of Business Restructuring Assistance
Business restructuring relief permits you to transfer your assets to other group members without incurring any tax implications if you are going through corporate restructuring inside a qualifying or tax group. The goal of this relief is to increase your efficiency and competitiveness by helping you rationalize and reorganize your business activities.
Requesting Tax Loss Reduction
Using a technique known as tax loss relief, you can lower your tax liability in the following years by offsetting current tax losses against your future taxable revenues. In a difficult fiscal year, it will help to increase cash flow and liquidity. To claim tax loss relief, you must, however, adhere to a few guidelines and restrictions.
How can ebs Chartered Accountants help?
Corporate tax registration is the first step towards the smooth process of corporate tax filing. ebs Chartered Accountants is among the top consultants in Dubai who are providing these services. Corporate tax calculator helps you have an insight into your corporate tax. the experts at ebs can help you with this calculation and making strategies that can lead to lower corporate tax. Our keep is constantly updated of the rules and regulations by FTA which can prove to be beneficial for your tax. You can also gain important information regarding corporate tax from CorporateTaxation.ae and uaetaxgpt.ae, the information available is valuable and updated. Contact us today and avail ourselves of our services.
FAQs
How can I reduce my tax in UAE?
There are several deductions and credits available to businesses in the UAE, such as expenses incurred on research and development, training, and charitable donations. Time your income and expenses wisely. By deferring income and accelerating expenses, you can reduce your tax liability in the current year.
Who is exempted from corporate tax in UAE?
Public pension and social security funds in the UAE are exempt from Corporate Tax once an application has been made to and approved by the Federal Tax Authority.
What is the 9% corporate tax in Dubai?
All annual taxable profits above AED 375,000 shall be subject to a 9% rate. ALL MNEs that fall under the scope of Pillar 2 of the BEPS 2.0 framework (i.e. consolidated global revenues more than AED 3.15 billion) shall be subject to different rates as per OECD Base Erosion and Profit-Sharing rules.