Section 4 – DEDUCTIONS & CALCULATIONS
Regardless of their location, businesses and multinational corporations must consider the extensive implications of the UAE’s corporate tax law. This change has the potential to have an interesting impact on the national economy, given the UAE’s status as a tax-free haven with advantageous rates, which has attracted a wide range of trade and investment opportunities.
UAE companies will now have to comply with strict regulations as a result of the new tax law. It is still to be seen how this change will affect the business environment and whether it will have any unanticipated effects on the stability and growth of the national economy.
Several groups are free from corporate tax because of their operations and contributions they make to society. Governments hope to enhance these organisations and their public good by exempting these categories.
- Natural resource extraction enterprises are excluded from CT because they will continue to be subject to the present Emirate level corporate taxation.
- CT will not apply to dividends and capital gains made by a UAE company from its qualifying shareholdings.
- Providing the necessary conditions are met, qualifying intra-group transactions and reorganizations will not be subject to CT.
- Salary and other employment income received by an individual, whether from public or private sources.
- Individuals’ interest and other income from bank accounts or savings plans.
- A foreign investor’s income from dividends, capital gains, interest, royalties, and other investments.
- Individuals investing in real estate on their own behalf.
- Individuals who own shares or other securities in their own capacity get dividends, capital gains, and other income.
DEDUCTIBLE EXPENSES
General accounting regulations state that some expenses are not deductible from corporate taxes. The taxable income is determined by adding these costs back to the accounting income. By keeping businesses from taking use of tax breaks to lower their tax obligations, this promotes equity and openness in the tax system.Some are :
- Depreciation or amortization expenses for Capital Assets.
- Business setup, license renewal, and other government fees and charges that are paid entirely or primarily in the course of business.
- A value-added tax that is not recoverable under VAT legislation.
- 50% of the client’s leisure costs.
- Interest costs on debt funding up to 30%.
- Loans to related parties are deductible only if they serve a legitimate business purpose.
- Payments made to a mainland branch of the Free Zone entity may be deductible.
NON – DEDUCTIBLE EXPENSES
Taxable income is computed in accordance with numerous accounting principles. The UAE Corporate Tax regime may, however, occasionally forbid or restrict the deduction of particular costs. Ensuring that only expenses necessary to produce taxable income are eligible for relief helps prevent instances of abuse or excessive deductions.Some are :
- Any expense that was not paid in the course of the taxable person’s business.
- Any expense incurred in order to receive exempt income
- Losses not incurred as a consequence of or related to the taxable person’s business
- Any extra spending authorized by a Cabinet decision in response to a minister’s recommendation
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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