The storm had already claimed the lives of at least two people in China's Hainan and 16 people in the Philippines
asia11 hours ago
The UAE’s corporate sector has geared up their efforts to comply nine per cent corporate tax that will be effective in June 2023, however majority of the businesses are not yet ready to keep their accounting and auditing process up to date, experts say.
The proposed nine per cent new levy will be applied on companies generating more than Dh375,000 net profit per year from June 2023, which requires thorough accounting and auditing process. More businesses and investors are getting the commercial and trade licences to set up their base in the UAE as the government launched visa and business reforms to diversify its revenue sources.
More trade licences issued
The UAE’s National Economic Register’s latest data indicates that the total number of registered active business licences in July 2022 rose 1.9 per cent to 665,246 compared to 652,885 licences issued in December 2019.
Pratik Rawal, managing partner at Ascent Partners, said the new visa reforms, ability to obtain 100 per cent ownership with LLC setups and budget free zones have enabled startups and established businesses to build presence in UAE.
“The coming years, businesses in the UAE will have a lot to look up to and evolve as each segment will need to thrive to meet the consumers needs,” Rawal told Khaleej Times on Sunday.
The data showed that over 81 per cent of licenced businesses are located in Dubai, Abu Dhabi and Sharjah. Dubai accounts for some 46 per cent of the country’s total licenced businesses while Abu Dhabi and Sharjah accounted for 23 per cent and 14 per cent, respectively.
The largest percentage of issued licenses were for limited liability companies, accounting for 40 per cent, followed by individual companies accounting for 33 per cent, according to the UAE’s National Economic Register data.
Corporate tax debut in 2023
In January, the UAE government announced that it will introduce nine per cent corporate tax on businesses with net profits of more than Dh375,000 starting from June, 2023, about five-and-a-half years after the introduction of the five per cent value-added tax (VAT) in January 2018. This requires companies to make provision for proper accounting system and issue annual financial audit reports, based on which the Corporate Tax will be calculated and filed with the UAE Federal Tax Authority (FTA).
About 80-85 per cent of the 665,246 registered active businesses fall under the micro, small and medium enterprises (MSME) and remain below the mandatory VAT threshold of Dh375,000 annual net profit range. Therefore, most of them do not maintain formal accounting practice, let alone publish audited financial reports every year, due to a prolonged non-tax regime in which they used to operate till now.
“All registered businesses, especially those coming under the purview of the corporate tax, will have to start formal accounting and auditing process from now on to establish their financial credentials for tax calculation and subsequently file tax returns,” Sheetal Soni, partner of MI Capital Services, said.
“The transition to a tax regime from a non-tax environment is not an easy one and requires a drastic change in the corporate culture that needs proper documentation, accounting and auditing in addition to transparency and accountability built-in the system,” he said.
Accounts, tax experts in demand
Private businesses will need to strengthen accounting, auditing and tax compliance. They will either have to hire accounts and tax professionals or outsource these to accounting, auditing firms and tax advisors.
Hatem El Safty, CEO, Business Link, said the corporate sector is getting ready for corporate tax to be implemented in 2023.
“In my opinion, this new rule will help businesses upgrade their book-keeping and accounting practices, whether you are a big firm or fall under the micro SME category. I believe that businesses will benefit from the new regulations and implement better practices in their businesses. Additionally, at Business Link we will ensure to be well-prepared in advance to be in line with the new rules,” El Safty told Khaleej Times on Sunday.
Its time to act
Prateek Tosniwal, director at MI Capital Services, said once the new UAE corporate tax law is issued, companies will scramble to start auditing process. However, the tax community might not be able to manage the rise in demand for corporate tax filing in short notice.
“So, private businesses should start the consultation process and strengthen the internal accounting and book-keeping process that are crucial for external audit and taxation,” he said.
Karishma Suwarnakar, head of Tax and Compliance at MI Capital Services, said MI Capital Services understands the challenges and the burden of additional tax and compliance for startups, SMEs and MSMEs.
“We strive to provide cost-efficient one stop solution specially designed for startups, SMEs and MSMEs in the region including complete accounting, tax return filing, and other compliance requirements under one package,” she said.
Key takeaways
> The UAE has more than 665,246 active businesses registered with various licensing authorities including 45 free economic zones
> The total number of registered active business licences in July 2022 amounted to 665,246, a 1.9 per cent increase compared to 652,885 licences issued in December 2019, according to the UAE’s National Economic Register
> About 80-85 per cent of the 665,246 registered active businesses fall under the micro, small and medium enterprises and remain below the mandatory VAT threshold of Dh375,000 annual net profit range
> Most UAE businesses are not yet ready for the nine per cent corporate tax that will be levied on companies generating more than Dh375,000 net profit per year from June 2023
> Over 81 per cent of licensed businesses are located in Dubai, Abu Dhabi and Sharjah
> Dubai accounts for some 46 per cent of the country’s total licenced businesses while Abu Dhabiand Sharjah accounted for 23 per cent 14 per cent, respectively.
— muzaffarrizvi@khaleejtimes.com
The storm had already claimed the lives of at least two people in China's Hainan and 16 people in the Philippines
asia11 hours ago
Dubai Police have asked drivers to be extra cautious
transport11 hours ago
The former all-rounder has returned to cricket during the past year after a horrific car crash at the end of 2022
cricket11 hours ago
Dubai Police have asked drivers to be extra cautious
emergencies12 hours ago
The country has set a new Guinness World Record by creating the largest falcon hood, beating the previous record of 1.65 metres
uae13 hours ago
Hamas' health ministry said that 94,616 people have been wounded since the conflict began on October 7
mena13 hours ago
In most Islamic countries, including the Gulf countries, the Prophet's birthday is observed on 12 Rabi’ Al-Awwal 1444
uae holidays14 hours ago
Traffic will be diverted to the opposite side during this period
transport14 hours ago