The United Arab Emirates (UAE) is home to many vibrant businesses and is an attractive option for many foreign and regional organizations looking to set up business. Tax incentives make the UAE a great place to start a business. As such, business owners should be aware of the process involved in filing corporate tax returns in the UAE.
Tax System in UAE
The UAE’s tax system is based on the ‘Pay As You Earn’ principle, meaning businesses are required to pay taxes in advance before their profits are made. Businesses pay taxes according to the regulations of the local emirate in which they are located. In general, the UAE does not have any federal or Gulf Cooperation Council (GCC) tax regulations that business owners must abide by. Profits and earnings from outside the UAE are exempt from taxes, unless they are banked in the UAE.
Types of Taxes Applicable to the UAE
There are two different types of taxes applicable to businesses in the UAE:
1. Value Added Tax (VAT): This is a 5% flat rate imposed on the import, sale, and lease of goods and services.
2. Corporate Tax (CT): This is a rate of 9% imposed on companies’ profits. This rate is subject to change depending on an individual company’s location and operating sector.
Steps Involved in Filing Corporate Tax Returns
To ensure that corporate taxes are paid properly, here are the steps that business owners should take when filing corporate tax returns:
Step 1 : Determining the taxable Income
The first step is to assess the taxable income based on the business profit. Taxable income will arise after considering the necessary adjustment.
Step 2: File a Tax Return
Filing a tax return, which should take into account all relevant information on the company’s activities, income, and profits.
Step 3: Provide Financial Documentation
It is necessary to provide financial documentation such as a copy of the audited financial statements and bank statements. These documents should be submitted to the local tax department or to the respective firms for audit.
Step 4: Pay Taxes
Once the company’s information is validated, taxes should be paid to the local authority or through the online portal specifically for this purpose.
Tax returns are an important part of the business process and should be completed responsibly. Business owners should be aware of their local tax regulations so that their taxes are paid on time and in full. Following the five steps outlined above should help to ensure that taxes are paid properly and compliantly. By adhering to the UAE's tax regulations, businesses can reap the full benefits of the UAE tax system and maximize their returns.