Section 2 – BUSINESS PREPARATIONS & ADAPTATIONS
UAE’s corporate tax law will apply to businesses & multinational corporations operating in the country, regardless of their location. This impact on the national economy will be fascinating to monitor, as the tax-free environment & favourable rates have made the UAE a hub for trade and investment. The new tax law will also introduce significant compliance requirements for UAE businesses. This change will require companies to adapt their operations, organizational structures, and accounting systems. The tax will only apply to financial years beginning on/after June 2023. Businesses with a January to December financial year will have more time to prepare, as they must file their corporation tax returns by September 2025.
Tax planning is crucial for corporate strategy, and an updated accounting system is essential for accurate tax data recording. UAE corporate tax law will require extensive compliance obligations, including transfer pricing paperwork, company registrations, tax return files, record retention, and intercompany transaction mapping. This will impact the supply chain, organizational structures, IT, and financial operations. Audit experts can suggest how the new tax will benefit the economy & guide what businesses can do to ensure proper implementation.
Upgradation of UAE
- This will place the UAE among the 182 countries that have embraced it as having one of the lowest corporation tax rates.
- Public services, infrastructure improvement, and investments in important areas will all be funded by the proceeds.
- International corporations joined forces to solve the matter of the shifting of profits, which resulted in the BEPS 2.0 frameworks.
Some measures that business entities can take to reduce their tax obligations are :
- Increase asset depreciation costs for the business.
- Invest in tax-efficient assets such as corporate bonds and diversify contributions to tax-efficient account types to reduce tax liabilities.
- Consider other tax-efficient investments like tax-efficient mutual funds, zero-coupon bonds, inflation-protected bonds, and others.
- Choosing long-term assets to invest in.
- The business entity can claim the costs it incurred.
- Incentive programs boost employee morale, reduce tax obligations, and increase returns can be introduced.
Some measures that business entities can take before tax filing are :
- Before filing taxes, the company should give the authorities accurate and pertinent information for record-keeping.
- The company must be knowledgeable about both the application of tax law and relevant judicial decisions.
- UAE’s finance ministry has emphasized that tax planning must be done following the established law.
- Tax planning should examine the firm’s commercial objectives as well as the flexibility of future incorporations and changes for tax benefits and future repercussions.
- Before filing taxes, careful tax planning is needed as a lack of planning results in paying more than the taxable amount.
The UAE introduced company tax as a significant change, but businesses can adapt with careful preparation and execution. Companies must get more familiar with the details of the tax regime, including the tax rates, applicable deductions, and compliance requirements, as corporate tax is still a relatively new idea in the UAE.
Numerous changes are happening in workplaces.The enormous progress in using technology results in a high degree of automation, transparency and acceleration. In a global business hub where the use of technology is in full momentum, there is no choice, except to adopt the changes for businesses to become successful in this era of constant change.
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