From 1st June 2023, a new 9% corporate tax rate will be implemented in the UAE, which was announced by the government on January 31, 2022. In the past, only a few industries, such as resource extraction and foreign banks, were subject to corporate tax, but now many more companies operating in the region will be required to pay the tax from the start of the 2023 financial year.

The UAE’s 2023 corporate tax – what is it?

The UAE will implement a 9% corporate tax in 2023 on the profits of all businesses generating more than 375,000 AED (approximately USD $100,000). However, small businesses and start-ups will not be required to pay any corporate tax on profits below the AED 375,000 threshold. All categories of profits and net income, prepared in accordance with internationally accepted accounting standards, will be subject to the tax rate. Some expenses may be deductible before calculating the payable tax, reducing the financial burden on taxpayers.

According to the Federal Tax Authority, large multinational companies that meet specific criteria, set with reference to “Pillar Two” of the OECD Base Erosion and Profit Shifting project, will be subject to a different tax rate.

Starting from June 1st, 2023, the new UAE corporate tax will be implemented, and most companies will need to prepare to pay taxes from that date. However, businesses whose tax year begins in January will not be required to pay tax on revenue earned before January 1st, 2024.

Now lets see how an ERP software takes a role in corporate tax 2023

FactsERP is an ERP software that can offer several benefits to companies during the upcoming corporate tax. Here are some ways in which a company can benefit by using FactsERP:

Streamlined tax management: FactsERP can help companies streamline their tax management processes, such as tax calculation, tax reporting, and tax filing. This can help save time, reduce errors, and ensure compliance with tax regulations.

Accurate financial reporting: FactsERP can generate real-time financial reports, which can provide insights into a company’s financial performance, helping them make informed business decisions and ensuring accurate tax reporting.

Enhanced data security: FactsERP can help ensure that financial data is secure, which is essential when dealing with sensitive tax records.

Inventory management: FactsERP can help companies better manage their inventory levels, minimizing errors and optimizing inventory levels, leading to cost savings and tax benefits.

Efficient process management: FactsERP can help companies streamline their business processes, improve communication, and manage departments and teams, leading to cost savings and tax compliance.

In conclusion, by using FactsERP, companies can streamline their financial and tax management processes, improve their financial reporting accuracy, enhance data security, manage inventory levels, and improve their overall efficiency. These benefits can lead to cost savings, tax benefits, and compliance with the upcoming corporate tax regulations.

The corporate tax in UAE will be effective from 1st June 2023 and the Ministry of Finance will soon release the official draft on the new tax law. Is your company ready for the new major change in UAE tax compliance? 

There are various questions yet to be clarified with regards to the compliance, tax payments and administration. However, businesses should start planning and preparing for the new regulation from NOW. 

Recommended steps to follow: 

Start NOW: The best time to start planning and preparation is NOW. 

Upskill your employees: As this is the first time a direct tax is introduced in UAE, employees should learn various principles and acts to comply with the new regulation. 

Internal controls/Audit: Have internal controls set to track all the transactions as per the compliance required. 

Documentation: Store all the business related documents and make it accessible at any time as it will become mandatory to produce documented proofs while auditing. 

Period end processes: To be compliant with the filing of returns on time, the books period-end closing books should be done on time. Have the right processes in place to record all transactions on time for early closing of books.

Cash Flow management: The primary concern of any business is management of cash flow. With the new addition of corporate tax, it directly impacts the cash flow and hence the cash flow should be carefully managed. 

Business Software: This is one of the most important steps as having a right ERP system will make the whole process of compliance and return filing easier. FactsERP is FTA accredited and locally developed software which accommodates the timely statutory updates from government authorities. Also both the technical and support team of FactsERP is based in the UAE. 

Multi Location & Currencies: Companies having branches in multiple locations and dealing in multiple currencies should update the currencies as per the filing requirements set by authorities in local currency. FactsERP supports multi-location, multi-currency, multi-companies and multi-departments. 

Inter-company transactions: With the impact of taxation on inter-company transactions, the system should be able to identify the type of transactions and support reconciliation. This is where software like FactsERP helps companies with Corporate Tax ready systems and processes.

To know more information or for a Quick DEMO of Facts ERP, call now on 052 640 3949.