Commencement of UAE Corporate Tax Law

Major Milestone: Commencement of UAE Corporate Tax Law on June 1, 2023

In a significant move, the UAE government unveiled its corporate tax law, marking a pivotal milestone in implementing corporate tax in the country. The detailed regulations are accessible on the official website, reinforcing the government’s commitment to transparency in tax matters.

According to the newly established rule, businesses and corporations with taxable profits exceeding AED 375,000 ($102,000) will be obligated to pay a standard 9% corporate tax, effective from June 1, 2023, in line with the earlier announcement at the beginning of the year. Notably, profits below the specified threshold will be subject to a 0% corporate tax rate. The UAE Ministry of Finance anticipates that this corporate tax framework will position the nation as a leading global hub for business and investment, aligning with developmental goals and international tax standards.

The corporate tax law, designated as ‘Federal Decree-Law no. 47 of 2022,’ is readily available on the Ministry of Finance website for download, providing businesses with a comprehensive reference.

When Does Corporate Tax Come Into Effect?

As the Ministry of Finance UAE outlines, the new tax regulations will be applicable for financial years commencing on or after June 1, 2023. Specific timelines for tax payment are as follows:

• For businesses with a fiscal year starting on July 1, 2023, and ending on June 30, 2024, the corporate tax will be due on July 1, 2023.
• Entities with a financial year beginning on January 1, 2023, and concluding on December 31, 2023, will be subject to UAE Corporate Tax from January 1, 2024, marking the onset of the first financial year after June 1, 2023.

Key Considerations and Measures for Business Preparedness:

With the corporate tax law now in effect, businesses are urged to take proactive measures to navigate this new fiscal landscape. Key considerations include:

• Strategic planning to adapt to the implications of the corporate tax rule on business operations.
• Reviewing previous financial records to assess eligibility for corporate tax.
• Implementing robust accounting software to ensure accuracy and compliance in the era of heightened financial statement importance.
• Providing training and updates to teams to ensure understanding and adherence to corporate tax regulations.
• Evaluating the impact of corporate tax on contractual obligations with customers and suppliers.
• Understanding the implications of corporate tax on books of account and financial statements for compliance.

Enhancing UAE Corporate Tax Compliance:

As businesses prepare for the corporate tax era in the UAE, having the right tools is paramount. Tally Prime, a comprehensive business management software, offers a diverse range of modules to meet the evolving needs of businesses. Its powerful features include the instant generation of accounting, inventory, and financial statements such as profit and loss accounts and balance sheets, streamlining business operations.

Notably, TallyPrime not only aids in corporate tax preparation but also provides full support for UAE VAT, from creating tax invoices to accurately filing VAT returns.

For businesses seeking a seamless transition into the corporate tax landscape, TallyPrime stands out as a versatile solution. Explore its capabilities by booking a free demo, and experience firsthand how TallyPrime can seamlessly adapt to your business requirements.