Corporate Tax

Corporate Tax Introduction in the UAE:

UAE Authorities Introduced the new UAE corporate tax on 1st June 2023, a development sparking interest among businesses. While not all enterprises are feeling its impact, understanding its implications is key for those navigating these changes.

FTA – UAE Cabinet Decision No. 49:

On May 8, 2023, the UAE Cabinet of Ministers enacted Cabinet Decision No. (49), imposing a 9% federal corporate tax on businesses. This measure is perceived as a strategic initiative aimed at broadening the UAE’s revenue streams beyond oil, while simultaneously upholding its position as a pivotal commercial center in the region.
As per Ministry of Finance, Federal Corporate Tax rates are:
  • 0% for taxable income up to AED 375,000
  • 9% for taxable income above AED 375,000
  • Effective date of Corporate Tax in UAE:

    Corporate tax is effective from the financial year starting on or after 1st June, 2023

    Corporate Tax Law:

    Full details of UAE Federal Corporate Tax by Ministry of Finance is on the below Link https://mof.gov.ae/corporate-tax/
    Corporate Tax Calculation Example:
    To illustrate, if your net profit at the end of the financial year amounts to AED 800,000, the calculation proceeds as follows:

    Net Profit: AED 800,000 
    Less: Standard Exempted Amount: AED 375,000
    Taxable Amount: AED 425,000
    Corporate Tax (9% of AED 425,000): AED 42,750
    The corporate tax payable to the government is AED 42,750.

    Financial Statements for Evaluating Taxable Income:

    In Fresa, financial statements such as the Profit and Loss Account and Balance Sheet are utilized to assess taxable income and determine corporate tax liabilities.

    Profit and Loss Account:

    Profit and loss account reveals the performance of the business in terms of profit or loss for a specified period. Using this financial statement, net profit is calculated after considering the gross profit and all other indirect expenses or incomes. Corporate tax will be calculated on the net profit from this financial statement as below at 9 percent and related configurations are explained below with final output:

    Balance Sheet:

    Balance sheet summarizes the company’s assets, liabilities and the amount owned by the business owners. This financial statement broadly consists of assets and liabilities. A balance sheet helps the stakeholders to evaluate the efficiency in working capital, asset portfolio and the financial strength of the company. This will show the Corporate Tax liability if payable to FTA.

    What is Corporate Tax and How to generate Profit and loss Report with UAE Corporate Tax in Fresa Application

    Here’s how to generate the report in Fresa Application:
    Step 1: Login to Fresa Application and navigate to the Accounts Module.
    Corporate Tax
    Fig 1
    Step 2: Click on the “Profit & Loss Reports” menu.
    Corporate Tax
    Fig 2
    Step 3: Here, select the “Profit and Loss Summary Report.” menu
    Corporate Tax
    Fig 3

    Step 4: Choose the desired Date Range and select the check box of “Corporate Tax Applicable,” then click the submit button.

    Corporate Tax
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    Step 5:Now, Select the Report menu.
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    Step 6: Choose the Profit and Loss Summary AE – Jasper format2 Report.
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    Step 7: In that Report we can able to view the details of Corporate Tax Calculation.
    Corporate Tax
    Fig 7
    Hope you got an idea about What is Corporate Tax and How to generate Profit and loss Report with UAE Corporate Tax in Fresa Application.
    Understanding the process of corporate tax in the UAE and utilizing tools like Fresa Application for generating reports is essential for businesses to comply with regulations and manage their financial obligations effectively.
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