If you are a business owner in UAE, getting yourself acquainted with the nuances of Corporate Taxes in UAE is of immense importance. In this article, we would like to give you some valuable information regarding how you can prepare for corporate taxes in UAE.
You can avoid any last-minute rush for funds if you can prepare for payments in advance as corporate taxes tend to be due annually in UAE. Setting aside money for taxes, developing a payment plan, forecasting the company’s tax liabilities, etc, should be part of your ‘preparation’. By having a comprehensive and clear plan in place, companies can make sure that they have the financial stability to meet its obligation and grow operations in time and also minimize the uncertainty and stress associated with tax season. Read further to understand more about how you can prepare for corporate tax in UAE.
Preparation for Corporate Taxes in UAE: How to?
Depending on whether one’s business is in a Free Zone or on the Mainland, the industry type and line of business, different types of business in UAE have different tax regulations. Seeking the advice of any tax consultants in UAE can be a good way to ensure that your company’s tax affairs are in order and you are given the best value for your time and monetary investment. Regarding preparing for corporate taxes, this is how you can get started.
1. Determining the Tax Liability of your Business
First and foremost, you need to identify which taxes your company need to adhere to. It will vary based on the business type, the location of your business (Free Zone, Mainland, Emirate, Line of Business, Resident or Non-Resident Status) and many more. Some of the most common taxes in the UAE for all businesses are income tax, corporate tax and value-added tax (VAT). The next step you need to take once you have identified the taxes that apply to your business is to calculate your company’s tax liability such as:
- Taxable income
- Tax credits.
- Tax deductions
Staying updated and informed regarding the various tax laws and regulations in UAE is necessary as it changes over time. By working with an experienced and professional corporate tax consultant you can be assured that your company is in full compliance with all tax obligations and that all the work about tax preparation and planning is well taken care of.
2. Obtaining Necessary Licenses and Permits
You may need to obtain certain permits and licenses before you can register for taxes in UAE depending on the nature of your business. Although obtaining permits and licenses depends on your business and industry type, below given are some of the most common permits and licenses.
- Business License – Free Zone or Mainland License
One of the very important and foremost licenses that you need to obtain to operate a business in UAE is a Business License. Depending on where you want to register your company and the company type you can obtain a license from the Department of Economic Development (DED).
- Trade License
You may need a trade license depending on the nature of your business. By obtaining a trade licence you can carry out commercial activities in UAE.
- Work and Residency Visas
You need to obtain residency and work visas for your employees for them to work for you.
3. Determining your Company’s Tax Residency
Determining the tax residency status in UAE has a significant effect on each company’s tax obligations and liabilities. The status as a no resident or tax resident is understood from the tax residency status of a company. Looking into the tax residency status of a company determines whether the company is taxed only on its income derived from other sources and also whether it is subjected to tax on its worldwide income. If a company has an effective place of management within the UAE, or if it has controlled or managed one from UAE, then the company is considered a tax resident of the UAE. On the other hand, a company is said to have a tax residency status if it is controlled and managed from outside UAE and is only taxed based on UAE-sourced income. The location of the company’s management and control, the location of its registered office, etc, determine a company’s tax residency status.
4. Register for a Tax Registration Number (TRN) or Tax Identification Number (TIN)
After determining your company’s tax residency status, the next step to do would be to register for Tax Registration Number (TRN) and also the TIN (Tax Identification Number) which can be done through the Federal Tax Authority (FTA) in UAE or online. The registration involves submitting information such as type of business, tax residency status, etc.
5. Register for Value Added Tax (VAT)
It is mandatory for every business with an annual turnover of more than AED 375,000 to register for VAT. You can register for Value Added Tax (VAT) once you have obtained your necessary licenses, TRN and permits. You can get it done by filling out an online application and providing necessary information such as your company history, operations part, etc.
6. Read the Corporate Tax Law
It is very important to make sure that you understand what the current corporate taxes are and where your business stands by going through supporting information that is available via the website of the Federal Tax Authority and the Ministry of Finance. If it proves to a difficult for you, employ expert tax consultants in UAE.
7. Get Clarity on Dates and Procedures
Getting the updated and right information regarding what taxation your business will be subjected to is very much necessary. Given below are some of the important questions for which you need to have good clarity.
- Whether your business needs to be registered for Corporate Tax in the first place or not?
- What is the Accounting/Taxation period for your business?
- To file your Corporate Tax Return, when is the deadline?
- For your business for Corporate Tax Purposes which applications are relevant?
- Which financial information is required for corporate tax preparation and how should it be documented?