UAE Corporate Tax: How to Calculate the Tax Payable?
Businesses need to learn how to calculate the tax payable so that they can better prepare for the UAE corporate tax regime. Corporate tax consultants in Dubai can offer business owners robust solutions to comply with the corporate tax requirements. Seeking expert help from corporate tax advisors in Dubai is essential to accurately calculate the amount of corporate tax you are liable to pay to the government.
Even though the UAE Corporate Tax Law is yet to be finalised, businesses can refer to the Public Consultation Document that provides information on the key aspects of corporate tax. However, it is advisable to wait for the issuance of the UAE Corporate Tax Law before making any tax-related decision. Now, let’s delve deep into the calculation of the payable corporate tax in the UAE:
Key Things to Remember Before Calculating Tax Payable
Businesses must be aware of the basic aspects of corporate tax to determine the payable tax amount. The following points must be considered before calculating the amount of payable tax:
- Corporate tax in the UAE will be levied on the annual taxable income of a business
- The corporate tax rate will be 0% for taxable income not exceeding AED 375,000
- The UAE corporate tax rate will be at 9% for taxable income exceeding AED 375,000
- Businesses must use the accounting net profit (or loss) as stated in their financial statements for determining the taxable income
Basis of Calculating the Payable Tax Under the UAE Corporate Tax
The amount of corporate tax payable will be based on the taxable income for the relevant financial period (tax period). Corporate tax consultants in Dubai can assist businesses in determining their taxable income.
How to Calculate the Payable Corporate Tax in the UAE?
The UAE Corporate Tax Public Consultation Document has set out a method for calculating the payable tax. Business owners can seek the advice of corporate tax advisors in Dubai to calculate their tax liability in line with the methods prescribed by the consultation document. Use the below table to determine the payable corporate tax in the UAE:
|Final taxable income|
|Final taxable income amount between AED 0 – AED 375,000||CT @ 0% (A)|
|When the final taxable income is above AED375,000, the difference between the final taxable income and AED 375,000||CT @ 9% (B)|
|CT liability||A + B|
|Less: Foreign Tax Credit|
|Final CT Payable|
UAE Corporate Tax Relief for Small Businesses
The corporate tax regime involves a certain level of complexity which is unavoidable, especially in a diversified economy like the UAE. However, the UAE government has made provisions to keep the UAE corporate tax regime as simple as possible, which may help businesses to minimise their compliance costs. In line with this policy, the UAE corporate tax regime will provide relief for small businesses in the form of simplified financial and tax reporting obligations. The provision for small business relief is significant as the relative burden of tax compliance is disproportionately higher for small and medium-sized businesses across the world. Small business owners can consult with corporate tax advisors in Dubai to know further about the relief for small businesses under the corporate tax regime.
Applicability of Foreign Tax Credits
UAE resident companies will be subject to UAE CT on their worldwide income, which includes foreign sourced income that may have been subject to a tax of a similar nature to CT by another country.
To avoid double taxation, the UAE CT regime will allow a credit for the tax paid in a foreign jurisdiction against the UAE CT liability on the foreign sourced income that has not been otherwise exempted. This is known as the “Foreign Tax Credit”.
The maximum Foreign Tax Credit available will be the lower of:
- The amount of tax that is paid in the foreign jurisdiction; or
- The UAE CT is payable on the foreign sourced income.
Any unutilised Foreign Tax Credit will not be able to be carried forward or back to other tax periods, nor will the FTA refund any unutilised Foreign Tax Credit.
Hire the Best Corporate Tax Consultants in Dubai, UAE
Corporate tax agents in Dubai such as Jitendra Chartered Accountants (JCA) can advise business owners on critical tax matters such as the calculation of payable tax. JCA has a team of corporate tax advisors in Dubai who can help the businesses to comply with such complex provisions in the corporate tax regime.
Our services at JCA as Corporate Tax Consultants include CT Assessment & Advisory Services (one-time or retainer basis), CT Compliance Services & CT Agent Services to Represent to Federal Tax Authority (FTA) of UAE in case of any notices served by FTA. Ensure corporate tax compliance and avoid relevant penalties by availing of JCA’s corporate tax services in Dubai, UAE. JCA offers customised tax solutions to allow businesses to comply with the UAE corporate tax hassle-free.