A new corporate law in UAE that would replace the existing Companies Law and other legal instruments is expected to be effective from 1 June 2023. The draft law is finalized by the Federal National Council’s legislative committee, and the process will continue until it is sent to the cabinet for final approval.
Aspects of the New Corporate Law
1. It is a federal corporate tax, which means it will be levied on businesses across the UAE.
2. It is said to have a standard rate of 9, which is considered the lowest in the GCC region.
3. It is designed to minimize the compliance burden on businesses.
4. Target audiences are businesses who have a fiscal year starting on 1 June 2023 and ending on 31 May 2024
What Businesses Need to do to Prepare for the New Corporate Tax in UAE
Businesses in the United Arab Emirates (UAE) can prepare for corporate tax by taking the following steps:
Know in Detail About the Tax Structure
Familiarize yourself with the UAE’s corporate tax laws and regulations. This includes understanding the tax rate, taxable income, and any tax exemptions or incentives that may apply to your business. This will empower you and prepare you to understand the system.
Have Solid Financial Records
Financial records, such as invoices, receipts, and bank statements, provide the documentation needed to support the income and expense figures reported on a business's tax return. So, keep accurate and up-to-date financial records. This will help you accurately calculate your tax liability and ensure that you comply with the tax laws.
Keeping proper records can lead to errors on tax returns or an inability to provide the documentation needed to support the figures reported to the government, which can result in penalties.
Professional Tax Consultant to your Rescue
The tax system in the UAE can be complex; with new tax laws and regulations, it would take a lot of work for businesses and individuals to grasp it. A tax consultant can help your business navigate the system and comply with all relevant tax laws and regulations.
This can allow you to focus on running your business or other essential tasks. Most importantly, a tax consultant can help you mitigate the risk.
Create a System For Tax Payment
Establish a system for tracking and paying corporate tax. This may include setting up a separate bank account for tax payments or setting aside funds to cover your tax liability.
Having a system for tracking and paying corporate taxes also helps create transparency and accountability in the business world. By providing detailed records of a business' taxes, stakeholders and investors can better understand a business’s financial situation and make more informed decisions.
Prepare And File Your Tax Returns On Time.
Filing a tax return on time is a legal requirement, and failure to do so can result in penalties and interest charges. Moreover, preparing and filing a tax return on time can help a business ensure that its financial records are accurate and up-to-date, which can be useful for budgeting and forecasting.
If a business is due a refund, filing a tax return on time can help ensure that it receives that refund promptly.
Overall, it is essential to stay informed about the UAE's corporate tax laws and take steps to ensure that your business complies with these laws. JAXA auditors have much experience in tax filings and returns, so for any tax-related query, Contact us.