Finance & Accounting
The UAE has always been an attractive investment destination for investors, with one of the reasons being the ease of doing business in the country. However, with the introduction of corporate tax in UAE, many businesses are getting worried about the possible consequences and impact on their businesses. To help you out, they’ve compiled this guide to help you understand how the regulations impact your business and how you can get around them. Corporate Tax in UAE is a form of direct tax levied on the net income or profit of corporations and other businesses. It’s one of the taxes imposed by the UAE federal law on all legal entities, including limited liability companies (LLCs) and partnerships that are either incorporated or registered in any emirate.
Beginning on 1st January 2018, corporate tax in UAE has been reformed and is now a form of direct tax levied on the net income or profit of corporations and other businesses. In order to assess the impact of these regulations and undertake necessary compliance, licensees operating in UAE will be required to obtain a Tax Residency Certificate from the Department of Economic Development (DED). The Tax Residency Certificate certifies that the company is registered in Dubai, where corporate tax rates are lower than in other emirates. It also provides information about applicable taxes for companies with foreign ownership. If a company has already obtained its Tax Residence Certificate before 1st January 2018, it should contact DED to re-register itself at least one month before this date.
A corporation is a legal entity separate from the people who own it. Corporations are subject to corporate tax and the tax impacts their businesses in different ways, depending upon how their business is structured. The following topics will be explored:
–How does corporate tax affect businesses in UAE?
–What are the benefits and disadvantages of corporate tax?
–Should you establish your company as an LLC or C Corp?
Businesses operating in UAE will have to pay corporate tax if their net income reaches a certain threshold. This tax is levied regardless of whether the business is based domestically or abroad. The corporate tax rate for domestic corporations is 20% and for foreign corporations, it’s 25%. As such, companies will have to factor this cost into their budget and make necessary adjustments to ensure that they are not paying more than what they are required to.
The corporate tax also affects other aspects of businesses. For instance, when a company pays its dividends, the beneficiaries of the dividend will be liable for corporate taxes on their share of dividend income.
A tax residency certificate is a document issued by the government to non-UAE nationals and companies that own a majority stake in a business. This certificate is required to issue work visas for employees and open bank accounts, among other things. For firms operating within the UAE, this certificate is issued by the Department of Economic Development. A tax residency certificate allows a company to deduct up to 50% of its annual taxable income from its taxable profit.
Forthright Consultancy is excited to announce its new comprehensive corporate tax assessment service. This service will provide corporations operating in the UAE with a detailed breakdown of their tax liability and facilitate compliance. It will also assess the impact of regulations going forward. This service will be available to all new and existing clients by contacting us today.