Impact of Corporate Tax on Business

To understand the effects of corporate tax UAE on business in the UAE, first, you need to understand what corporate tax is. Corporate tax is a tax levied on the business profit. If eligible, companies across the UAE have to pay the corporate tax on their qualifying income.

The definition of the qualifying income for corporate tax purposes is typically referred to in the applicable corporate tax laws and regulations. However, it generally includes the earnings minus all types of deductible costs (e.g., costs of goods sold, general and administrative expenses, selling and marketing, financial expenses and all other operating costs involved in business operations, etc.).

Before the introduction of the corporate tax regime in the UAE, corporate tax was levied only on qualifying oil corporations and foreign banks. In the UAE. There have been also almost 45 free zones, where the registered UAE businesses are relieved from paying taxes and can extend for a duration.

The establishment of corporate tax in the UAE is to facilitate foreign direct investments by adopting tax measures that are aligned with international standards in terms of consistency and transparency. This will foster community growth where businesses can contribute to enhance the growth and value of the local economy.

What Are the Effects of Corporate Tax in the UAE on local businesses?

The establishment of corporate tax in the UAE has many impacts on businesses across various industries. However, one of the main impacts will be the need for businesses to pay corporate income tax on profits. This eventually increases the operational costs
of businesses and somehow affects the net profitability of the companies. Every business will be required to invest in systems and processes to analyse and make financial reports to the FTA (Federal Tax Authority) to comply with tax laws in the UAE. This necessitates the need for additional resources and expertise for businesses which may lead to higher expenses.

Even so, there are some positive effects in the introduction of corporate tax in the UAE. For instance, it may facilitate a level playing field for companies, as a result of the unique tax laws subjected to every company. Furthermore, it may enhance the transparency and accountability of businesses since companies will be requested to share certain financial and non-financial information with the FTA.

Conclusion

In conclusion, the establishment of corporate tax in the UAE will likely have both positive and adverse effects on businesses across the UAE. Organizations must accommodate the new laws and regulations which may lead to the need to accommodate additional resources and processes to comply with them. Hence, business owners in the UAE need to solicit assistance from top tax advisors in the UAE like “The Tax Point” to make sure that their business comply with all applicable tax laws and regulations.