A company and other entities are subject to taxes on their income. The taxable income of a business is subject to taxes. A corporation must pay corporate tax, just like an individual is paying income tax.

The net income or taxable income of the business is the basis for calculating corporate taxes. Another name for net income is net profit or net earnings. You must figure out how much money comes in from each and every revenue source. The company's expenses, which include interest on loans, amortization, depreciation, and operating costs, must also be computed. Financial data, including balance sheets, are readily available using business management software.

In the UAE, corporation tax will be 9%, with a few exclusions. This new tax will apply to businesses with net income or taxable income of AED 375,000 or more. Naturally, this means that the tax rate will stay at 0% for small firms whose taxable income does not exceed AED 375,000.

The accounting net profit position in a company's financial statements should be used as a starting point for determining the taxable income, according to the new corporation tax law.

The most crucial documents for this kind of evaluation will be the company's accounting records, financial statements, and financial reports.

A federal tax was introduced by the UAE and is now imposed on all companies and economic activity carried out within the seven emirates. There are, however, a few exceptions, such as:

Companies engaged in the extraction of natural resources shall continue to be governed by the tax decrees issued by the relevant Emirate.

Individuals' income from real estate investments, provided that they are made in a personal capacity, are exempt from registration requirements for businesses in free trade zones as long as they meet all regulatory requirements and do not operate businesses with Mainland UAE Individuals' income, unless the employment income comes from business/commercial/professional engagement, freelancing, or any other economic activities that require a permit or license.

Income, capital gains, and dividends received by individuals from their own personal shares and securities investments

Interest and revenue received by individuals from savings and deposit accounts.

The Ministry of Finance informs that the new company tax rates are as follows:

It is 0% for taxable income up to AED 375,000.
It is 9% of taxable income over AED 375,000.
Large multinational corporations that satisfy certain requirements will pay a different tax rate as part of Pillar Two of the OECD Base Erosion and Profit Shifting Project.

The new company tax will be administered, collected, and enforced by the Federal Tax Authority (FTA).

As long as foreign entities maintain a business or engage in regular trade within the United Arab Emirates, they will be liable to the new corporate tax.

Dividends, interest, royalties, capital gains, and other investment returns received by a foreign investor will not be subject to the new corporate tax.

A free zone's created entities that satisfy the requirements will be referred to as "Qualifying Free Zone Persons" and will pay corporate tax at the following rates:

0% on qualifying Income

9% on taxable income that does not meet the qualifying income definition

The 'Tax Period' must be specified because corporate tax is levied annually. Generally, the tax period is the Calendar year, which starts from January 1 to December 31. However, if the company uses a different 12-month period to prepare its financial statements, then this period will apply. For instance, the tax period would run from April 1 to March 31 if your company has a fiscal year that begins on April 1.

VAT and CT must be paid separately if your company is registered for VAT. Even if your company isn't registered for VAT, you can still be required to pay federal corporate tax.

For CT purposes, only irrecoverable input VAT may be deducted. In any other case, the amount of VAT incurred (in purchases) and charged (in sales) would not affect the determination of taxable income.

Here are some tips to help get your company ready for corporate tax:

Utilize the law and supplementary materials that are accessible on the websites of the Federal Tax Authority and the Ministry of Finance to gain an understanding of corporate tax.

Examine your company's corporate responsibilities, including:

If your company has to register for corporate tax in the United Arab Emirates

What is your company's accounting and tax period

When is your company required to submit its UAE corporate tax return.

Companies in the United Arab Emirates (UAE) have nine months from the end of the applicable tax period to file their tax return and pay the Federal Tax Authority (FTA) the Corporate Tax. A corporation whose first tax period begins on June 1, 2023, for instance, has until February 28, 2025 to meet this deadline; in contrast, a company whose first tax period begins on January 1, 2024, has until September 30, 2025.

This action is a result of the UAE's commitment to making sure that corporate tax law is implemented correctly. Filing corporate tax returns has advantages such as effective cost and time management, as well as a single tax return.