VAT & Corporate Tax Consulting

The UAE VAT was introduced in Jan 2018 and corporate tax in June 2023. Tax compliance becomes one of the most important parts of businesses. Whether you are a holding company or a branch company or a standalone one you need to do the proper mapping of transactions and the impact of taxes on your business. VAT is the indirect tax that implies that the business needs to collect from the end user and submit to the FTA whereas corporate tax is a direct tax and it will impact the business bottom line directly by 9%.

Non- compliance with both taxes results in heavy penalties. VAT Laws have given exemptions to healthcare industries. There have to be special considerations requires while assessing the applicability of VAT. There are many factors we need to consider while assessing the impact of VAT which is the structure of the Company, the Location of the Company, the flow of transaction, the booking of transactions, and which goods/services you are dealing with.

Applicability of Corporate Tax depends on the financial year you are following or mentioned in your MOA. Advanced assessment of corporate tax is required to prepare the businesses, as it will directly impact your bottom line. Know the allowable and disallowable expenses under the corporate tax, Know the taxability of your foreign income, and how you can claim the foreign tax credit. Treatment of income sourced from UAE and being a representative office in UAE, the corporate tax is unavoidable. Being a free zone company doesn’t imply the exemption from corporate tax.

Your company may be covered under Transfer Pricing regulations after the implementation of corporate Law.

Audit of Financial Records

As per the governing free zone authority, the companies that are registered within those respective free zones may or may not submit Audited Financials within the time frame that would be addressed to the companies by their respective authority. As per the FTA guidelines, every company whose turnover is more than 50 million and eligible to claim a qualifying free zone person is compulsorily required to audit their books of accounts.

Economic Substance Regulations

To be in line with the International Standards and requirements and UAE’s commitment to International tax Cooperation and Transparency made the introduction to Economic Substance Regulations in 2019. There are nine activities covered under ESR which include Holding companies and distribution of goods and service center business.
There are levels of compliance under ESR first submit the Notification in 6 months then file the Economic Substance Regulations report within 12 months of your financial year-end.

Ultimate Beneficial Owner (UBO)

As per the recent regulations, it is mandatory to hold a UBO Register or register of shareholders whether it’s a mainland company or a free zone company. An Ultimate Beneficial Owner is a person who is holding, owns, or has the power to control and vote more than 25% of the share capital