Learn how to manage the company tax registration process in the UAE and how ERP solutions may help to expedite and simplify the process. Discover the advantages of adopting ERP for company tax registration in the UAE.

All you have to know about the new UAE corporate tax to be prepared.

The United Arab Emirates (UAE) recently passed a law that sets the corporate tax rate at 9% for businesses earning taxable profits of more than AED 375,000. Businesses will be liable for UAE corporate tax at the start of their first financial year commencing on or after 1 June 2023.

It is important for organizations to take advantage of this opportunity and use UAE Corporate Tax 2023 to their advantage in order to achieve the best results. Throughout this blog, we’ll explore some important tactics and insights that can help companies navigate the UAE’s changing corporate tax environment in order to maximize profits and grow.

Understanding UAE’s 2023 Corporate Tax

In order to understand some tactics which can benefit companies during the upcoming corporate tax, lets take a closer look at UAE’s corporate tax history and what the corporate tax will be in 2023.

The History

The United Arab Emirates (UAE) has operated as a country with very low taxes for a very long time. Businesses have never paid corporate taxes, and citizens do not pay income taxes on their earnings. Most of the state’s revenue was derived from fossil fuel extraction businesses, which paid on average 50% of their earnings in taxes.

In 2018, the United Arab Emirates (UAE) became the first country to implement a VAT tax, which imposed a 5% tax on all consumer purchases. The government then addressed in January 2022 that a 9% corporate tax would be brought into effect the following year.

What is it about?

For all businesses in the UAE with profits over AED 375,000 (about $100,000 USD), the corporate tax rate will rise to 9% in 2023. Businesses with annual revenue below this threshold are not subject to taxation.

Major multinational corporations with income of more than EUR 750 million will be subject to a 15% tax in addition to the corporate tax, in accordance with the Global Minimum Corporate Tax Rate agreement.

Businesses whose financial year starts in January won’t be required to pay tax on earnings made prior to January 1, 2024.

Why do we need it?

We need the corporate tax to combat tax evasion and bring the country into accordance with international standards. The UAE’s 9% tax rate is still far lower than the average rate in most other developed countries which is often over 20% ! Some expenses may be deductible before calculating the payable tax, reducing the financial burden on taxpayers.

Role of FactsERP Software in Corporate Tax

When it comes to maximizing profits and seizing opportunities in the context of UAE Corporate Tax in 2023, ERP software is essential. FactsERP system offer useful tools and features to assist tax optimization strategies and improve financial performance in light of the changing tax landscape and the necessity for businesses to react to changes. Here are some ways that FactsERP software can help you maximize profits and take advantage of changes to UAE corporate tax in 2023:

1-Real Time Financial visibility:

FactsERP software provides organizations with continuous access to financial data in real-time, allowing them to monitor their tax position. Organizations can detect possible tax savings possibilities and take well-informed decisions to minimize their tax liability thanks to this visibility.

2-Streamlined Reporting and Analytics:

FactsERP software offers advanced reporting and analytics capabilities, which are useful for taking advantage of changes in the corporate tax landscape in the UAE. Businesses can use these tools to generate detailed financial reports, examine tax information, and spot trends and patterns. By utilizing these insights, businesses can be proactive in their decision-making, maximize their tax planning, and take advantage of any new tax breaks or incentives that the UAE tax authorities may propose.

3-Data Accuracy and Integration:

FactsERP software reduces mistakes and irregularities in tax calculations by combining financial data from numerous sources, including company sales, procurement, and payroll. This accuracy ensures effective use of tax incentives and credits as well as preventing companies from paying too much or too little in taxes.

4-Compliance Management:

To avoid fines and legal problems, businesses must abide by UAE corporate tax legislation. By automating tax calculations, producing precise tax paperwork, and simplifying on-time tax filing, FactsERP software ensures compliance. We assist businesses in staying current with regulatory changes and guaranteeing compliance with UAE tax laws thanks to built-in tax rules and updated tax rates.

Conclusion

ERP software is crucial in assisting companies to improve profits and take advantage of changes to UAE Corporate Tax in 2023. FactsERP system give businesses the tools they need to successfully navigate the UAE’s tax environment, improve financial performance, and take advantage of tax-related opportunities.

Click the link below to book your free demo of FactsERP.

https://www.dynamicsaxis.com

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.