How you can prepare to comply with Corporate Tax

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The Corporate Tax will be implemented in UAE from 01st June 2023. Since most of the companies in the UAE are following the Gregorian calendar as the financial year, Corporate Tax will be applicable for those companies from 01st January 2024.

In light of the Corporate Tax Law published by the Ministry of Finance, UAE both companies and individuals who are conducting business or business activity must be prepared for Corporate Tax in the below aspects:-

  • Jurisdiction of the company/business

Currently clarified in the Corporate Law that only Free Zone persons, which are qualifying free zone persons will be eligible for 0% Corporate Tax on their qualifying income. This gives an indication that mainland companies will fall under Corporate Tax irrespective of the source of income other than participation Interest.

Maintaining Books of accounts

Corporate Tax is the first direct tax that will be levied on the income of the persons in the UAE. In order to calculate the taxable income for the financial year, maintaining the books of accounts as per the approved accounting standard, which is the International Financial Reporting Standard (IFRS), will be mandatory. Even though the company law specifically mentioned the importance of maintaining the books of accounts, most of the government entities are not asking to make any submission of Financial Statements, except few free zone authorities. Companies that are not maintaining proper books of accounts should be ready with financial statements because registration for Corporate Tax registration and filing will be mandatory for all the natural and juridical persons who are conducting business or business activity in the UAE, irrespective of their income/business turnover, except those who are not specified under the Corporate Tax Law.

  • Auditing

As per the Corporate Tax Law published (Article 54), Ministry will issue the decision regarding the requirement of an audited financial statement which has to be maintained by the taxable person.

  • Record Keeping

All the taxable persons must keep the records for at least 7 years after the end of each financial year. The tax authority can ask to submit any documents which support the details mentioned in the tax return.

  • Related Party and associated enterprise Transactions

All the related party and associated enterprise transactions must be on Arm’s Length Price. Authority will issue clarifications regarding maintaining the transfer pricing document, master, and local file for related parties and associated enterprise transactions.

  • Group Registration

Each taxable person should understand the criteria for registering as a group, the benefits, and the disadvantages of group registration if any.

For further details and detailed consultancy on Corporate Tax, kindly contact us.

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