The UAE is ready to bring new changes in 2023 with new laws to modernize the legal system. These new changes include strengthening workers’ rights, modernizing the legal system, and boosting Emirati partnerships in the private sector.
Life will be affected after the implementation of the new policies in the UAE in 2023 from divorce, governing marriage, child custody for non-Muslims, and inheritance to the Corporate Tax. One of the major changes in taxation is corporate tax implementation in 2023.
Implementation of Corporate Tax
Federal Tax Authority has already introduced the enforcement of corporate tax in UAE. According to the Federal Decree-Law No.47 of 2022 on taxation, UAE corporation tax will be implemented for financial years starting on or after 1st June 2023.
The life of businesses is going to change as they are obliged to calculate and report their corporate tax in 2023 to FTA. The goal of introducing the corporate tax in the UAE is to make its position a leading hub for investment and business. The business will have to pay corporate tax if its taxable income is exceeding AED 375,000. All the businesses that fall under this condition will have to pay a 9% corporate tax rate which is lower as compared to other countries.
Businesses will have nine months period from the end of each financial year to pay their corporate tax bill. The legislation will come into implementation on 1st June 2023. The UAE federal has already issued a federal decree on the taxation of businesses and corporations on December 9.
Profits below AED 375,000 will have zero corporate tax rates and will provide support to start-up companies and small businesses.
Companies can prepare for the corporate tax regime
As the legislation will come into force in June 2023, in the meantime companies can start preparing to analyze the impact of this new taxation regime on their businesses. Every business has its own profit and its own planning for the year, after the implementation they must start preparing to register for the corporate tax
The Ministry of Finance introduced this corporate tax because the Arab Gulf nation was blacklisted by the EU as a non-cooperative tax jurisdiction. It was important to normalize the UAE tax policy in UAE.
Flexibility for startups and early-stage businesses
Early-stage enterprises and startups have got sufficient leniency about the eligibility for corporate tax. Corporate tax updates suggest that the new start-up businesses incurring costs and having initial losses in the starting years can move forward their losses which can turn into profits in the later years.
Nimish Goel, Partner at WTS Dhruva Consultants indicated, “There is also a provision that will allow small companies whose turnover is below a threshold – to be defined later – to be exempt from corporate tax,” and further added, “This is in addition to the general provision of 0 percent rate of tax for taxable income up to Dh375,000.”
Nimish remarked that this is one of the great initiatives by the Ministry of Finance to introduce the exceptions of corporate tax for companies having a net profit of less than AED 375,000.
If you have not considered the impact of Corporate Tax in Dubai, connect with ebs for a consultation with our tax experts. We can help you to get 100% ready to comply with corporate tax once it is effective.
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