VAT and Corporate Tax Compliance in the UAE

Navigating the world of taxes can be overwhelming, especially in a dynamic economy like the UAE. Whether you’re a new business owner or an established enterprise, staying compliant with VAT and Corporate Tax laws is crucial for smooth operations. Let’s break down what you need to know to ensure that your business stays on the right side of the law.

1. What is VAT in the UAE?

Introduced in 2018, Value Added Tax (VAT) is a 5% tax applied to most goods and services in the UAE. Businesses generating an annual turnover above AED 375,000 are required to register for VAT, file returns, and remit taxes accordingly.

Key VAT Facts:

1. Mandatory for businesses with taxable supplies over AED 375,000 per year.
2. Voluntary registration is available for businesses with supplies between AED 187,500 and AED 375,000.
3. VAT-exempt sectors include healthcare, education, and residential real estate.

Registering for VAT early helps avoid penalties and ensures you’re compliant from day one.

2. Corporate Tax in the UAE

Starting in 2023, the UAE introduced a federal Corporate Tax of 9% on business profits exceeding AED 375,000. While Freezone businesses enjoy tax benefits, companies operating in Mainland UAE must adhere to these new regulations.

Corporate Tax Overview:

1. Taxable profits: Corporate Tax is only applicable to businesses with net profits above AED 375,000.
2. Freezone exemptions: Companies in Freezones may continue to enjoy tax benefits if they meet regulatory requirements.
3. Compliance: Filing accurate returns and paying on time is key to avoiding fines and ensuring legal operation.

3. Filing VAT and Corporate Tax Returns

Both VAT and Corporate Tax returns must be filed regularly to stay compliant. Here’s how to ensure your tax filings are accurate and on time:

VAT Returns:

• Filed quarterly or monthly, depending on the size of your business.
• Businesses must record all taxable sales and expenses, and file them through the Federal Tax Authority (FTA) portal.

Corporate Tax Returns:

1. Filed annually, with financial records submitted to the FTA.
2. Ensure that your financial statements are in line with the requirements and updated for accurate reporting.

4. Avoiding Penalties and Staying Compliant

Non-compliance with VAT or Corporate Tax regulations can lead to hefty fines. To avoid this, it’s important to keep meticulous financial records and submit your returns on time. Insource Prime ensures that businesses stay on track with timely filings and accurate reporting.

Missed deadlines or incorrect tax filings can lead to penalties ranging from AED 500 to 300% of the tax amount owed.

5.How Insource Prime Can Help

Insource Prime offers a full suite of VAT and Corporate Tax compliance services, from registration and filing to advisory and auditing. Our team of experts stays up-to-date with the latest tax regulations, ensuring that your business remains compliant without the headache of managing complex tax laws on your own.

Our Services:

1. VAT & Corporate Tax Registration
2. Filing and Reporting
3. Advisory on Tax Deductions and Benefits
4. Audit and Compliance Checks