Top 5 Corporate Tax Saving Tips for Businesses in the UAE

Taxable persons must comply with the relevant tax regulations and standards to reduce their corporate tax liability in the UAE. There are several things that businesses can use to reduce their company tax burden; this includes utilizing deductions, depreciating assets, or using tax-efficient structures. Therefore, taxable persons must seek the expert services of top tax consultants in UAE to avail of tax deductions and to stay compliant with the Federal Tax regulations and standards to which noncompliance accrues hefty fines.  

Maximize Deductions

To avail of tax reductions, it is imperative to understand the types of deductions or credits that apply to respective taxable persons. Tax deductions include local and regional taxes, energy costs, employee salaries and benefits, and advertising expenses. It’s important to note that the UAE does not allow any deductions related to interest payments or charitable donations. 

Seek the Expert Services of an Accountant

An experienced tax accountant can help taxable persons to understand the applicable tax deductions to business conduct and how to maximize them in compliance with local regulations. In addition, UAE tax experts advise on setting up a corporate structure that benefits corporations from double taxation agreements and advice on other tax-saving strategies such as taking advantage of certain thresholds or reducing taxable income with various methods like stock options or incentives.

Record Keeping

Effective record-keeping is an essential facet of tax reduction. Taxable persons need to keep and maintain all relevant documents, receipts, and invoices in a secure place that is easily accessible. This assists taxable persons in staying organized and better understanding the tax implications of business activities.

Improve the Business Structure

There are various legal ways to lower corporate taxes, by choosing different corporate structures or setting up offshore entities in countries with lower tax rates. A good accountant can help you explore these options and decide which suits your business needs.

Evade Consequences from late payments.

Unpaid taxes or late payments can result in fines and other consequences; thus, taxable persons should meet all payment deadlines as required by law. Additionally, taking insurance on unpaid taxes is advisable, as this can help you protect your business finances in case of unforeseen events.

Tax advantages should be carefully chosen.

Taxable persons should weigh up all relevant options before making a decision. Some benefits may offer short-term relief but cost more in the long run. An experienced accounting professional or financial advisor can help you evaluate the pros and down of different strategies to make an informed choice.

How to Reduce Corporate Tax in the UAE?

Following the corporation tax issuance, businesses need to consider possible mechanisms for reducing tax liability. This article offers top tips to reduce business tax liability in the UAE. 

Top Tips to Reduce Corporate Tax in UAE

For businesses to save money, accelerating income is an ideal strategy. Income that would be anticipated for a subsequent year can be claimed early. 

Maximize Deductions Businesses must consult tax experts to establish the scope of deductions applicable for business costs. “ordinary and necessary” expenses can be deducted from taxable income. This includes everything from travel costs to advertising costs, also the credits work in the same way. However, companies would need detailed records to deduct expenditures and acquire tax credits accurately.

Seek the Expert Services of an Accountant

Hiring an expert accountant is key to saving businesses from paying extensive taxes. Accountants check overall taxes, net profits, cash flow, and expenses to ensure companies are safe from potential problems. 

Record Keeping

To file a correct corporate tax return in the UAE, it is essential to maintain thorough records throughout the year. Further, obtaining and retaining the appropriate documentation of the company’s spending is an important aspect of record-keeping.                                    

Improve the Business Structure for Corporate Tax UAE

An employer will only cover some of your taxes if you’re a sole proprietor. Thus, it is essential to reevaluate the business operating as a partnership or a single proprietorship. Although the limited liability company structure is popular, it’s a “pass-through entity,” meaning your business income can be taxed in various ways. Even if your company files as an LLC, you have to pay general insurance taxes; however, in some instances, they may be able to waive the employer’s share of these taxes. Several companies would benefit greatly from making this change. It can be a good approach to lower your taxable responsibilities. Yet, there are numerous factors to consider in the transition, including paying yourself an adequate income and other dangers.

Evade Consequences from late payments on your corporation tax. 

There are numerous methods available to avoid payment delays. Businesses can avoid a rushed tax return and additional costs by gathering paperwork well before the year’s end. To avoid penalties and interest charges, business owners might consider applying for a short-term working capital loan or a loan to consolidate tax debt.

Tax advantages should be carefully chosen.

It’s crucial to make a well-informed decision when seeking tax deductions. For instance, it would be more advantageous for your entire tax situation to stretch the expense of purchasing machinery and equipment out over a few tax years rather than deducting that total purchase price in a single financial year.

Corporation Tax Planning in UAE: Some More Tax Saving Strategies for Businesses

How to Reduce Corporation Tax Bill in UAE 

Corporation tax in the UAE will be at a standard rate of 9%. However, there are ways to cut back the amount, which means 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 hard to keep track of every taxi ride, car parking ticket, or minor purchase of stationery, you must document everything. The sum of all these seemingly small expenditures can add up quickly to a large amount over one year.  

You may lose money if you don’t claim all your expenses during your corporate tax return filing in the UAE. This is because whenever you claim expenses for business operations, you are cutting into the company’s profits. As such, the total amount of UAE corporation tax you will be asked to pay will be 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 will benefit the company in the long run. Hiring a tax accountant in the UAE can make this procedure simpler for you. Delegate the task.  

Remember that the definition of 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. 

Seek corporation tax relief on mileage. 

Another claim that is simple to overlook is automobile mileage. Regarding taxes, it may be more beneficial for business owners and employees to drive company cars and submit claims for mileage reimbursement. 

Please note that people are still waiting for further clarification on the allowable mileage and fuel costs that businesses can claim. However, the amount the firm spends on its employees will be subtracted from its profits as 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 of the employees make many business calls using personal mobile phones, consider switching to 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 compensation in a manner that best suits your needs is one perk of serving as the director or owner of your own company. Directors can accept 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, a salary would be an effective approach to decrease the amount of corporation tax your company must pay.

Corporate Tax Advisors in UAE 

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. Take advantage of benefitting from these UAE Federal Tax Authority tax relief schemes. The seasoned tax accountants of Corporate Tax UAE will help you maximize your tax savings and help clarify any corporation tax issues you may be unsure about.

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