Importance of Audit for the upcoming Corporate Tax in UAE

November 9, 2022Dated:  | |

Significance of Audit and its influence on the Business

For the development of a country thus the state’s revenue Tax can be known as acompulsory contribution that is imposed on the employee’s income, or business profit or has been added to the cost of some goods, services, and transactions by the government. Governments tend to back their expenditures through taxation by imposing particular charges on businesses and citizens.  Hence the major purpose of the taxation system is to pool resource funds for the effective functioning of the government machinery to serve the community and to work towards the development of the country. Eventually, the benefits of development projects and government machinery are delivered to the citizens and business entities.

In UAE the CT law will come into effect from 1 June 2023 onwards given that all companies across the UAE must ensure that their department is ready and confident to take this new change. The major discussion would be the updating and upgrading of the accounting software of the organization including the adaptation of laws related to VAT accounting. Accounting systems should be reviewed so that there is no discrepancy with the recorded transactions.

Nevertheless, the ministry of finance hasn’t published the final law regarding corporate taxes as of October 2022. However, there are rates already published through the document of Public consultation by the Ministry of Finance for the UAE Corporate tax and this still has to be reconfirmed with the final law that is to be published by the ministry before taking any kind of decision. After the effective date that has been mentioned before, this will be applicable across all emirates contexts to be applied to all business and commercial activities.

Hence,UAE CT will be applicable at the following rates on Taxable income.

AED 0 – AED 375,000                       0%
Above AED 375,000                       9%

What should businesses need to do to comply with Corporate Tax Law?

  • It is required for all businesses to maintain financial and other records explaining all the related information of the CT return and other documents to be submitted to the FTA.
  • For some particular exempted persons will have to maintain records allowing FTA to ascertain the person’s exempt status.
  • If a business wants to benefit from the 0% CT regime, it would require a Free Zone Person to have audited financial statements.
  • It is required to have clean records through audits on books of accounts, comply with any kind of law,and withstand financials. Furthermore, it will provide a clear understanding of the profit or loss and the financial position of the company.

How Tax audit can benefit an organization?

  • Tax audit ensuresmaintaining books of accounts and all the other relevant records properly in the way it helps to avoid panic and sudden rush when there is a requirement.
  • It ensures that total income and related deduction claims are done properly by the businessman.
  • Helps in restricting the chances of any kind of fraudulent activities or a mistake.
  • This adds credibility to the published information for relevant and interested stakeholders.
  • It helps in the presence of accuracy in accounts figures to review by the shareholders.
  • For the purpose of taxation Government authorities accept audited statements as true and fair.
  • Build up the reputation of the organization.
  • Auditors are in the position of providing concrete suggestions related to the further improvements of the organization based on the finding of the records.

Why Flying Colour?

According to the requirements of the Commercial Companies Law, all VAT-registered companies must have their financial audits done by a Chartered Accountant who is registered with the Ministry of Finance. A professional tax accountant can ensure that everything is in order, without missing anything, to meet all requirements so that the organization does not attract negative attention from FTA.Flying Colour Tax Consultant LLC, provides audit assistance in resolving tax issues, as auditors can make concrete suggestions for improving the company based on the findings of their records. Additionally, we partner with over 18 agents who are authorized to conduct audits in various jurisdictions, depending on the needs of our clients. Our experts analyze, identify and resolve your business and tax issues. We promise quality and timely support all year round. We provide quality, hassle-free services including Bookkeeping Services, Financial Advisory Services, Consulting Services, Company Registration For VAT in UAE, VAT return filing, Audit assistance, and a lot more.

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