Beginning in 2024, the UAE is introducing a new corporate tax for businesses, a significant change from the tax-exempted environment we all got used to. But don’t worry; this change does not have to cause any panic! With some prior measures, you can ensure your business is ready for the new system. If you start the game now, you won’t squeeze yourself into the pressure when tax season arrives.
To rescue you, here are five simple steps you can follow to get your business ready for the UAE’s corporate tax. Let’s unrig it!
UAE Corporate Tax: A Complete Guide to Your Business
1. Stay updated with the New Rules
First, the key to getting prepared is understanding precisely what’s evolving. The UAE is raising a 9% corporate tax on business profits over AED 375,000. If your business makes less profit, you’re safe for now and won’t need to pay the tax. But if your income exceeds that threshold, you have to remunerate.
So, what does it even mean for you? Knowing how this corporate tax works in your specific situation is essential. Is your business in an industry that qualifies for liabilities? Are there any time limits or particular filings you must look out for? These are all things you should get familiar with as early as possible. It’s like doing your homework beforehand—you’ll feel way more prepared and confident when the time comes to file. For better understanding or clarity, you can consult corporate tax services near or online to guide you.
The UAE government may also update the regulations or unveil new guidelines leading up to 2024, so it’s a good idea for any changes. Staying informed will ensure you’re always a bit ahead of things.
2. Assess Your Finances
Now that you know how corporate tax plays, it’s time to keenly observe your business’s finances. Taxes are calculated based on net profit, so you should know how much your business is making profits after all the expenses are depreciated.
Review your financial records from the past year. Check whether your income and expenses are recorded. Are your books up-to-date? This is your chance to make everything perfect. Suppose your financial records are unorganised, and it's time to make them up. You’ll need precise records to calculate your taxable income and ensure you’re not paying taxes more by missing out on potential deductions.
Deductions are your friend here. Every legitimate business expense, from rent to office supplies, can help you reduce your taxable income, meaning less tax to pay. Ensure all your costs are properly recorded so that when tax time comes, you pay only what you owe, not more.
3. Start Saving for Taxes
Once you know how much tax you will likely owe, it’s time to start setting money aside. Think of it as a preparation so you’re not caught unwary later. Saving up a portion of your profits priorly can save you from unnecessary pressure down the road.
Having a separate account for tax savings can make things easier. This ensures you have enough tucked away and won’t worry about extracting cash from other parts of your business when the playtime comes.
4. Look at How Your Business is Structured
This is the perfect time to assess your business structure, as it can significantly impact your tax obligations. Companies operating in specific free zones may benefit from tax breaks or exemptions, while others might reduce their taxable income through innovative market restructuring.
For example, if your business works in that type of free zone offering corporate tax exemptions for a specific period, ensure you know how that works for your business. On the other hand, if you’re not taking advantage of such benefits, You can consider whether changing your business structure can help you reduce your tax burden.
This is especially useful for businesses with complex setups or multiple revenue streams. If your business operates across different sectors or locations, there might be ways to enhance your set-up to minimise your tax liability.
5. Get Expert Help
Tax laws can be ticklish most of the time, and the corporate tax system is no anomaly. This is why it is always essential to have a professional business advisor or consultant who knows all aspects of all the regulations. A tax advisor helps you position the new corporate tax rules, corroborate your compliance with all the laws, and even identify tax-saving opportunities you might have missed.
They will guide you through creating a long-term tax strategy to make things suitable for the present and planning for the future. A good tax strategy can significantly affect how much you pay and how smoothly your business runs.
You can be calm by consulting with an expert or an advisor, knowing everything is handled correctly. You don’t have to worry about missing any essential particulars, and you’ll be prepared for the tax season.
Introducing corporate tax in the UAE might feel like a big deal, but with some preparation, it doesn’t have to be so. If you understand the rules, plan your finances, start saving early, review your business setup, and get expert advice, you’ll be in perfect shape when the new tax comes into effect. Start planning now, and you can handle this change without sweat!
