For many businesses in the UAE , Corporate Tax will kick in on 1st January 2024. As such there are many topics that businesses need to consider to be adequately prepared for the Tax implementation. These range from understanding how it impacts your legal, financial and operation aspects , to how your people, processes and systems will need to comply with the new rules.
With so many things to consider, we highlight some of the key areas businesses should prioritise by the end of 2023.
1. Free Zone Entity – Consider your profile
Free Zone businesses can take advantage of a 0% Corporate Tax (CT) rate but will need to meet the conditions to become a Qualifying Free Zone Person (QFZP) . Businesses will need to review their profile and ensure they meet the conditions to ensure compliance by 1 January 2024.
CRESCO Accounting assists with:
- Evaluating the advantages and disadvantages of maintaining status as a QFZP vs remaining with the standard 9% CT regime. Taking into consideration the requirements to comply and maintain the QFZP status.
- Assist you plan whether updates are required for transactions, pricing, inter-company agreements and documentation to ensure you meet conditions of QFZP.
2. Review Group Structure
The tax profile of a Group is influenced by its holding, financing, investment and operating structure. Significantly, these structures can also affect the Group’s capacity to make specific elections, such as grouping, and influence the taxation of certain income streams like dividends and gains.
CRESCO Accounting assists to:
- Review legal entity structure and assess whether it leads to any CT inefficiencies or restricts opportunities such as groupings.
- Evaluate funding structure and assess whether it presents opportunities or risks like limits on interest deductions or non-deductible capital.
- Identify and execute updates as required (or based on the above). This can include streamlining unnecessary entities or structures.
3. Evaluate Financial Profile
The Corporate Tax profile of taxpayers in the UAE will be influenced by the financial profile of their businesses. As such, accounting policies or entries which are not carefully considered can result in unintended tax consequences.
CRESCO Accounting assists with:
- Evaluate accounting policies which impact key areas of tax such as items recorded in P&L, provisions, depreciation, revaluation and amortisation.
- Review expense categories to ensure they meet tax deduction requirements – specifically those regulated by the tax legislation (entertainment, exempt income expenses etc).
- Evaluate whether deferred tax needs to be provided in the financial statements for FY2023.
Preparing for UAE Corporate Tax Implementation may require updates your legal structure, financial profile, operations and processes.
As an FTA certified Tax Agency we are equipped to support your business on all of the above.
Additionally, we have within our Group a legal firm – CRESCO Legal, who will be available for any legal consultations should you require.
You can contact us for a consultation on [email protected] or +971 4 406 9680
