Corporate Tax

Corporate Tax (CT) Complied ERP in UAE

In adherence to our commitment and responsibility to customers, partners, and prospective ERPNext users, Craft Interactive Technology LLC consistently strives to align our solutions and ERPNext with the latest guidelines and comply with regulatory requirements.

Our team has recently enhanced the ERPNext software to align with the latest UAE Corporate Tax (CT) law, ensuring compliance with regulatory guidelines.

What is Corporate Tax (CT) in United Arab Emirates ( UAE )

The United Arab Emirates (UAE) released the federal Decree law No. 47 of 2022 on taxation on 9th December 2022, essentially taxation on corporation and business. CT Law was published in official Gazette on 10th October 2022 and became effective on 25th October 2022 and will apply to taxable persons for financial years commencing on or after 1st June 2023.

The Corporate Tax law lays a foundation for UAE to align with GMTI ( Global Minimum Tax Initiative) as proposed under Pillar Two of OECD (Organisation for Economic Cooperation and Development) BEPS (BaseErosion and Profit Shifting ) project.



The CT is applicable for financial years

Starting on or after 1 June 2023.

Any company that adopts a fiscal year starting on 1 June 2023 and ending 31 May 2024  will be subject to CT starting 1 June 2023. The first tax return filing is likely to be due towards theend of 2024. Any company that adopts a calendar year starting 1 January 2023 and ending 31 December 2023 will  be subject to CT starting 1 January 2024 and filing is likely to be due towards mid-2025. 

Rate Slabs

Announced UAE CT regime introduces a tier system with 3 rates:

Exempted Persons

·   Government Entities: Federal and local Govt.

·   Govt. Controlled entities: Directly or indirectly wholly or partly owned by govt.

·   Person engaged in an Extractive business (Natural resources-exploration)

·   Person engaged in Non-Extractive Natural resources Business 

·   (Separating, treating, refining, processing, storing and transporting of natural resources)

Free Trade Zone.

The UAE intends to honour its commitment to businesses registered in Free Trade Zone to the extend that such businesses do no conduct business with main land shall be subject to zero percentage tax (Or be extend as the case may be).

Tax Computation.

Some of the incomes are exempted and few expenses are deductible as per CT framework. E.g.

Revenue:

·   Dividend and Profit distribution

·   Other Income

·   Foreign Exchange gain or loss

 Expenses:

 ·   CAPEX 

·   Expenditure incurred in related to exempt income

·   Limitation of Interest on business loan (I.e. 30% of EBITDA)

·   Entertainment expense – 50% 

·   Penalties and Fines

·       Donation, Grand and Gift to Known public benefits. 

·       Related Party Transactions on carry forward losses/Intra group transfer of losses.

 What capabilities ERPNext possesses.

Indicate whether your company is subject to Corporate Tax (CT) or not!

Our engineers took the initiative to highlight the significance of the Corporate Tax flag, opting to incorporate it right from the company creation stage. Users now have the ability to indicate whether the company is subject to Corporate Tax regulations and falls under the relevant jurisdiction. 

Establish the Tax Slabs.

We acknowledge the importance and critical impact of various tax rates on tax calculations. Therefore, these rate slabs are established independently and managed within ERPNext.

Mark the Account with either CT Percentage or CT Value.

As certain items are exempt from Corporate Tax valuation, the team at Craft Interactive Technology has chosen to implement specific flags for each account. Additionally, users are now allowed to manage tax numbers in both absolute values and percentages.

Utilizing the provided inputs, ERPNext will endeavor to ascertain the applicability of net profit for Corporate Tax (CT) and subsequently generate the corresponding CT amount.

Disclaimer: Craft Interactive has generated this article using the industry’s available information and data. It should not be regarded as authentic, and Craft Interactive disclaims responsibility for any potential damage resulting from its content.