Part of running a business is knowing how to handle your tax obligations. Now that the corporate tax in UAE has been rolled out. It has become crucial for entrepreneurs like yourself to maximize tax outgo without breaking the law. With the proper approach, you can manage compliance and achieve better financial outcomes for your business.
In this blog, we will help you understand how to legally and effectively reduce your tax bill in the UAE.
Know the Corporate Tax System
The first step is to comprehend the workings of the new corporate tax system. In the UAE, corporate tax is imposed on a business’s net profits. Your business’s existing tax rate is 9%, with taxable income exceeding AEC 375,000. Businesses that make less than that aren’t taxed. There may be variations in the rules applied to free zone companies based on their composition and adherence to regulatory standards.
You can even make good financial decisions with a good knowledge of the rules. Hence, it is crucial to understand what is taxable, what is non-taxable, and how profits are determined.
Maintain the Accuracy of Your Financial Records
After all, good bookkeeping is a necessity when you’re dealing with taxes. Get all your income and expenditures recorded accurately. Good record-keeping will allow you to estimate your taxable income more accurately and prevent you from paying more than you should.
It’s simple to claim deductions and prepare your return when you have good, clear records. This minimizes the possibility of mistakes, penalties, or audits in the future.
Take Every Deduction Allowed
There are a few ways to reduce your tax liability other than taking full advantage of available deductions. When calculating your tax liability, you can deduct these business expenses under UAE tax law from your total income. Typical deductible costs include:
- Salaries and wages
- Rent and utility bills
- Sales and marketing expense
- Professional service fees
- Business travel costs
You’ll want to occasionally monitor your business expense deductions to ensure you’re not forgetting anything.
Keep Personal and Business Expenses Separate
Combining personal and business expenses may create confusion and complexity in your taxes. It may also result in incorrect deductions. You put both of your bank accounts and credit cards in separately. This adds transparency to your financial reports and keeps you from tax complications.
Take Depreciation on Business Assets
If you have equipment, vehicles, or other fixed assets that your business owns, you can take depreciation as a tax write-off. Depreciation enables you to allocate an asset’s cost over time. That will lower your taxable income for each year the asset is in service.
Ensure accurate records of all assets and use the proper depreciation method as required by UAE tax law.
Consider How Your Business is Organized
The legal structure of your company determines how your taxes are calculated. Some business structures may have certain tax advantages regarding the distribution of income and expenses. For example, operating through an investment holding company or setting up in a specialized free zone can offer tax advantages when done correctly.
Monitor Change in Tax Laws
The laws and regulations constantly change, so it’s important to stay up to date. You’ll be able to act promptly to avoid penalties and turn new challenges into opportunities for improving tax savings. Updates are published on government and tax-related websites.
You can also sign up for business newsletters or take tax-related workshops to get up to date.
Plan for Tax Filing
Don’t wait until the last minute to prepare your taxes. By sitting down and planning your tax return, you give yourself a chance to accumulate required documents, figure out any deductions, and fix any mistakes. It also gives you extra time to contact professionals if you decide to.
Think About Outsourcing Tax and Accounting
Doing taxes in a company can be draining and overwhelming, especially if you don’t know much about the UAE tax rate. Arranging for an accountant or tax preparer to work for you can enable you to keep better records, file accurate returns, and lower your total tax bill.
It can also help you delegate the minutiae of taxes to the professionals while you manage your business.
To Conclude
You can minimize your tax exposure provided you follow the guidelines and plan well for your taxes in the UAE. From keeping track of your expenses and taking deductions to reviewing your business structure and staying up-to-date on ever-changing tax topics, every little bit helps. When you do it correctly, you can stay compliant and keep more of your profit.
A trusted tax consultant in Dubai can also make the process much easier. Reflechir Consultancy is a well-reputed company that provides corporate tax planning, financial reporting, and compliance expertise. We provide personalized services that are designed for your particular business and guarantee that your work requirements are taken care of correctly and in a timely manner.
Don’t wait for a tax audit or a filing deadline to consider your tax strategy. Join hands with Reflechir Consultancy and steer your finances in the right direction before it’s too late. The faster you move, the more you save!
