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How to Reduce Your Small Business Tax Burden

A small business may end up paying more taxes because they are not aware of tax laws and regulations in the UAE.  By acquiring proper knowledge of tax laws, there are chances that a small business can reduce the tax burden.

Some of the ways to reduce the tax burden of a small business in Dubai are as follows:

Minimize deductions

Some of the ways to minimize deduction are to maintain excellent records and receipts of tax payments with professional guidance.

Some of the expenses of a small business that can be considered as write-offs are as follows:

  • Startup costs
  • Office supplies
  • Furniture
  • Education and/or training of staff
  • Travel
  • Insurance

Read More: VAT Registration Threshold Calculation in UAE

Contribute to a Retirement plan

When you start making profits for your business, it is better to invest in some retirement plans for staff members. Retirement plans are tax-deductible, specifically the monthly contributions your business makes. Make payments to retirement plans to reduce income. If you have not started a retirement plan for company admin and staff members, then talk to a financial advisor to determine which plan could be best.

Structure of the Business in a proper way

One of the most important factors to plan your taxes is to plan and structure the business properly. If the business is structured in an ideal way, then you can claim tax advantages just from the structure of the business.

Choose the right Tax advantages

When selecting the right tax deductions, it’s very important to be smart. For instance, rather than deducting the cost of acquiring machinery and equipment in full, it would be better for your overall tax situation to spread the purchases across several tax years instead of deducting the full purchase price in one fiscal year.

Find more details: VAT on Residential Real Estate in the UAE

Make contributions to charities

Contributions to a charitable organization are good for a small business. Take note: there is no need for you to provide money. For goods or services, it is very important to claim deductions based on fair market value. Make sure you furnish the proper documents and receipts.

Keep a tab on carryovers

There are some deductions that are not fully written off in a single tax year and are eligible to be carried forward to future years. Business expenses such as capital, net losses, office expenses and charitable deductions can be treated for coming years.

Defer income and accelerate expenses

There are many small businesses who operate on the method of cash accounting. This method is where income is recognized when the cash is actually received, and expenses are organized when they are actually paid.

This method also offers the small business owners the opportunity to defer income and accelerate expenses at year-end, which can help decrease their tax burden.

Keep a tab on all the receipts

Keep all receipts as doing so can help to get a close view of all the money spent throughout the year. The receipts can be of goods and services that can be deducted on the taxes. There are different rules of the deduction for different business structures so we suggest you seek the advice of an accountant.

Increase Travel Expense

If your business requires a lot of travelling, then you may be able to reduce your business taxes. Taxes regarding business travels can be fully deductible. If you combine personal expenses with business travel expenses, then you can get an increase in your tax deductibles.

You should know: VAT Return Filing Issues In UAE

Tax Consultants in UAE

If you are looking for ways to make sure your business has proper tax planning, then contact VAT consultants in UAE. Our experts help to plan the tax liability of a business and also outline the different methods and strategies to reduce the tax burden. At Farahat and co, we help you understand the best options for starting and operating a business in the UAE. Contact us today for further information.

What are other ways of saving money on small business Tax?

Other ways a business owner can ease the burden from taxation include using accounting plans, keeping a keen eye on the adjusted gross income of the business, considering benefits of completely abandoning property instead of selling, and using tax-free ways in extracting income from the business.

How do Small Businesses Pay Tax?

In the United Arab Emirates, the Federal Tax Authority requires all tax registered businesses to file tax returns on time and accordingly. As the process of tax return filing is complex, it is often a task that is given to the tax specialists, which are regulated tax agents in Dubai. If you have concerns regarding taxation in Dubai, it is a good idea to seek their help. Experts also help ensure your business remains compliant to UAE taxation legislation.

Read more about How to Find VAT Consultants for VAT Deregistration in UAE

Ervee is a CPA with international experience in Tax and Accounting. He has over 12 years of experience in accounting and bookkeeping and over a year in VAT implementation, registration, and accounting in UAE. He regularly drives out inefficiencies in company operations and loves the challenge of helping clients find additional ways for an easier and improved compliance and verification of transactions.