Companies in the UAE are now looking for ways to potentially lower the amount of corporate tax that they have to pay. Even if it is essential for companies to pay their corporation tax in accordance with the law, this does not imply that they should pay an amount that is greater than what is required. Although the tax system in the UAE can be difficult to understand, there are several lawful ways to reduce the amount of corporation tax you will owe to the UAE Federal Tax Authority starting the 1st of June 2023. In order to effectively organize your company finances, all you really need is some organization skills and some knowledge of how UAE corporation tax works.
How to Reduce Corporation Tax Bill in UAE
Corporation tax in the UAE will be at a standard rate of 9%. There are ways to reduce the amount, which means it is possible that your corporation tax bill may be lower. Let's discuss the top approaches to lower your tax bill:
Claim even the smallest business expenditures
Remember to submit a claim for every one of your business's expenses. Even though it may be difficult for you to keep track of each and every taxi ride, car parking ticket, or minor purchase of stationery, it is crucial that you document everything. The sum of all these seemingly small expenditures can add up quickly to a large amount over the course of one year.
It's possible that you will lose money if you won't claim all of your expenses during corporate tax return filing in UAE. This is because whenever you claim expenses that are for business operations, you are cutting into the profits of the company. As such, the total amount of UAE corporation tax that you will be required to pay will wind up being lower. To stay on top of the costs incurred by the company, regardless of how much they are, requires nothing more than a little bit of organization, which, in the long run, will be beneficial to the company. Hiring a tax accountant in UAE can make this procedure simpler for you. Simply delegate the task.
Keep in mind that the definition of what constitutes a legitimate business expense can differ from one organization to the next. A need for one business could be considered an expensive expense by another, depending on the nature of the business. The requirement that all business costs must be used totally and solely for business purposes, rather than for personal use, is the most important point to keep in mind regarding UAE tax regulations.
You should read: How to calculate your corporation tax bill in UAE
Seek corporation tax relief on mileage
Another claim that is simple to overlook is automobile mileage. When it comes to taxes, it may be more beneficial for business owners and employees to drive company cars and submit claims for mileage reimbursement.
Take note: we are still waiting for further clarification on the allowable mileage and fuel costs that businesses are eligible to claim. The amount that the firm spends on its employees will be subtracted from its profits in the form of a tax deduction. You can consult with your corporate tax advisor in UAE to know more about the business expenses that are considered tax deductible.
Use the company phone
If you or any or all of your employees make a significant number of business calls using personal mobile phones, you should think about switching to utilizing corporate phones instead. There's no tax liability for the employee for the cost of using the phone, and the business receives a corporation tax deduction for the expenses related to providing the employee with a phone.
Pay yourself
This is if you're a business owner. The ability to determine your own compensation in a manner that best suits your needs is one perk of serving as the director or owner of your own company. Directors have the option of accepting either salary or dividends as a form of payment for their services. Because the tax authorities consider salaries paid to staff (including directors) to be a tax-deductible business expense, taking a salary would be an effective approach to decrease the amount of corporation tax that your company must pay.
Corporate Tax Advisors in UAE
If you want to know more about how to reduce corporation tax due to UAE FTA, it is advised that you consult with tax experts in UAE. As your company grows, remember that there may be more deductions and allowances that your business qualifies for. Don’t miss out on benefitting from these tax relief schemes of the UAE Federal Tax Authority. The seasoned tax accountants of Corporate Tax in UAE will help you maximize your tax savings and help clarify any corporation tax issues you may be unsure about. Call us today!
Source:
https://u.ae/en/information-and-services/finance-and-investment/taxation/corporate-tax
Abrar Ahmad holds a Master’s as well as an MPhil in Finance and has an extensive experience of 10+ years in managing all aspects of Taxation, VAT Consulting and Accounting. He also carries with him a working knowledge of corporate tax and has helped drive value and growth to the businesses of numerous clients.
