Corporate Tax Calculator in UAE

To keep the corporate tax regime simple, the tax structure proposed at present is as under:

a. Accounting profit or loss

• It has been proposed that the accounting profits or losses of the company shall be considered as a base for deriving the taxable income to compute the corporate tax in UAE.
• Such accounting profits or losses can readily be available from the financial statements of a business.
• As globally accepted accounting standards would be used across the businesses, the net earnings referred from financial statements would offer consistency.
• Taxable income supported by the accounting profits would ensure that no unnecessary differences exist between the books of accounts and the tax returns, without any hassle of maintaining two different sets of records.
• Reference to the financial statements would also reduce the cost and complexity of putting additional efforts into deriving the starting point for corporate taxable income separately.

b. Easy adjustments

• Adjustment for unrealized gains or losses: Sometimes, the appreciation in the value of an item or devaluation may be recorded in the books of accounts, even though the transaction has not concluded to result in any realizable gains or losses. Such gains or losses appearing in accounting profits need to be adjusted. Accordingly, the rules for such adjustment have been prescribed, wherein the unrealized gains/losses on capital assets would not be considered for computing the corporate taxable income. At the same time, unrealized gains/losses on revenue items must be considered for deriving the taxable income.

• Exemption to certain income: To avoid dual taxation, certain exemptions have been proposed, specifically for the investment income of multinational companies. The corporate tax exemption is also proposed for income earned by the foreign branches of the UAE companies, as the profits of the foreign branch would be subject to corporate tax in such other countries. It may also be by way of the tax credit towards the taxes paid in a foreign land.

• An offset of losses: The fundamental principle of UAE CT is to tax the business’s total profit over the entire life cycle rather than a particular financial year. Thus, the net loss incurred in one financial year can be carried forward and knocked off against the subsequent financial years’ profits (subject to a certain threshold).

• Deduction of expenses: Most business expenses have been proposed to be treated as allowable deductions for computing taxable income. However, there are certain expenses like recoverable VAT or donations to unrecognized institutes, for which no deduction would be allowed. The Ministry has tried to keep the expenses deductions picture clear – yes or no, except for very few expenses (like interest), where a threshold limit has been prescribed for claiming only a portion of expenses as a deduction.

c. Simple corporate tax rate slabs

• The corporate tax rate and the slabs proposed at present are very simplified and straightforward, as under: