Business Setup in Abu Dhabi

Corporate Tax

corporate tax

In simple terms, on January 31, 2022, the United Arab Emirates (UAE) changed its tax rules. The Ministry of Finance said they will start a new kind of tax for companies, called corporate tax, from June 1, 2023. This means companies in the UAE, except for Bahrain, will have to pay a small amount of their income as tax. The special thing is that the UAE set the tax rate at 9%, which is the lowest among the countries in the region. So, starting from June 2023, companies in the UAE will need to keep this new tax in mind when they calculate their finances.

Corporate tax registration in the UAE is a fee imposed on a company’s profits, set at a rate of 9%. Given the UAE’s status as a major business and commercial center, it’s crucial for businesses to grasp the local corporate tax landscape.

The government imposes this tax on businesses, with the amount contingent on factors like company size, profits, and type. The importance of corporate taxation stems from several reasons.

Firstly, it serves as a vital revenue source for the government. This income aids in covering the expenses of essential public services such as education, healthcare, and infrastructure.

Secondly, corporate tax registration promotes fairness among businesses. By ensuring that all businesses contribute their equitable share of tax, it creates a level playing field. This prevents larger businesses from gaining an unfair advantage over smaller counterparts.

Calculating Corporate Tax in the UAE: A Step-by-Step Guide

In the UAE, corporate tax is like this: if a company makes money, the government takes a small cut. It’s 9% of the profit the company makes according to its financial records. But, here’s the thing – they only start taking this 9% if the profit goes beyond 375,000 AED. Anything up to that is tax-free.

So, if a company makes 575,000 AED in profit, the tax is 18,000 AED (that’s 575,000 minus 375,000, then 9% of that). Simply put, the first 375,000 AED is off the tax radar, and only the extra amount gets a 9% tag.

The latest news says that companies will start paying corporate tax from the financial year starting on or after 1 June 2023. If a business has its financial year starting on 1 January 2023 and ending on 31 December 2023, they’ll begin paying corporate tax from 1 January 2024.

Getting Ready for Corporate Tax in June 2023: A Simple Guide for Businesses

As we head towards June 2023, when corporate tax kicks in, businesses have plenty of time to prepare. The new tax law is a bit complicated, but one thing is clear – financial statements are now super important. These statements, showing how much money a business makes, will determine how much tax it has to pay.

To get this right, businesses need accurate data, and that’s where business management software like TallyPrime comes in handy. It can quickly generate key financial reports, making your business tax-ready in no time. So, with the right tools, businesses can breeze through the changes that come with corporate tax in a straightforward way.

In the UAE’s tax system, a business’s starting point to figure out its tax is its accounting net profit, basically, what’s in its financial statements.To make this calculation, things like financial reports, accounting books, and statements are really important. The money a business makes from selling things, service fees, commissions, interest, and more all count towards its taxable income.

Now, to make life easier, there’s business management software. It not only does all the math but also takes care of records, transactions, accounting, inventory, and financial reports. Whether you’re planning, budgeting, reporting, auditing, or dealing with taxes, this software is like your reliable helper, making sure everything is in order.

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