Following the issuance of the UAE corporate tax law, it is essential for businesses to consider possible mechanisms for reducing tax liability. This article seeks to confer top tips to reduce business tax liability in the UAE.
Top 7 Tips to Reduce Business 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.
1. Maximize Deductions
It is essential for businesses to consult tax experts to clearly establish the scope of deductions applicable for business costs. Expenses that are "ordinary and necessary" 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 to have detailed records to deduct expenditures and to acquire tax credits accurately.
2. Seek the Expert Services of an Accountant
Hiring an expert accountant is a key way to save businesses from paying extensive tax. Accountants assist to check overall taxes and net profits, cash flow, and expenses to ensure that companies don't run into probable problems.
3. Record Keeping
In order to file a correct tax return of corporate tax in 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.
4. Improve the Business Structure
The majority of your taxes won't be covered by an employer if you're a sole proprietor. Thus, it is essential to reevaluate the business if operating as a partnership or a single proprietorship. The limited liability company structure is popular, it's a "pass-through entity," meaning your business income can be taxed in a variety of ways. Even if your company files as an LLC, you then have to pay general insurance taxes; however, in some cases, they may indeed be able to waive the employer share of these taxes. There are several companies that 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 making the transition, including paying yourself an acceptable income and other dangers.
5. Evade Consequences from late payments
There are numerous methods available to avoid payment delays. Businesses can avoid a rushed tax return and any additional costs by gathering paperwork well in advance of 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.
6. 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 total tax situation to stretch the expense of purchasing machinery and equipment out over a few tax years rather than deducting that complete purchase price in a single financial year.
Avail Corporate Tax Advisory Services from Top UAE Tax Consultants
For businesses to seamlessly establish mechanisms of reducing tax liability, it is essential to seek the expert services of accredited and reputable tax consultants in UAE. Thus, contact us today and we shall be happy to assist you!