22 August, 2023

Will the Corporate Tax Replace VAT in the UAE

corporate tax vs vat in the uae

The UAE is the hub for business and investment globally. People from all over the world come here to get started with their dream companies and achieve their goals and make their dreams come true. This place has been one of the most beneficial locations for business setup in the UAE, especially due to the tax benefits that one can avail by setting up a business here.

The country has recently introduced the corporate tax in the UAE. This has been done to keep the money laundering practices at bay. The tax is intended to help the economy of the nation grow manifold in the coming years. Know your taxes better by reading this blog. Get all the insight you need as a business owner in the UAE.

Corporate tax

The New corporate tax in the UAE has been introduced by the government on all the entities trading in the nation. The tax has been set lower than that in other countries. The rates are 0% for incomes below AED 375,000 annually, 9% on more than the mentioned amount and a different tax rate for MNCs and big enterprises operating in the nation. None of the personal incomes are taxable. Many people have been exempted from the taxes and the small businesses relief scheme has also been introduced to relieve the burden on the businesses setup in the nation.

The government has taken all the steps to make the transition as smooth as possible for the companies operating in the nation. Every business is required to register for corporate tax and get a corporate tax registration number. This is essential for the identification of their business in the country.

Value Added Tax

This tax is based on the consumption or use of the goods and services by the customers. VAT is a common tax prevalent worldwide. The VAT rate in the UAE is set at 5% and all the companies need to register if the taxable supplies, imports or exports are over AED 375,000. The free zones are however free from paying this tax.

What are the key differences between both the taxes?

The key differences between both the taxes are easy to understand. The corporate tax depends on the profit of a business whereas the Value Added Tax is centred around the consumption of goods and services. The companies themselves pay the corporate tax whereas the value added tax is paid by the customers and is thus borne by them. The VAT is charged by the businesses and then the remission is done to the Federal Tax Authority, however in case of the corporate tax, the businesses need to get themselves registered first then file for the tax and pay it.

Whether your business is in the UAE or outside it, having an in-depth knowledge of the taxes is essential to function efficiently in the nation. Without a proper knowledge of the same, you may have compliance issues in the UAE.

Will the UAE corporate tax replace VAT in the UAE?

The corporate tax and the value added tax are two separate taxes in the UAE. Introduction of one tax does not mean discontinuation of the other. Both the taxes will be prevalent in the nation. Every business needs to register for both the taxes separately to ensure that they comply with the laws and order related to both the laws. Introduction of corporate tax in the UAE does not mean that the value added tax will be replaced or be influenced by the former. Both the taxes will prevail independently.

How can RadiantBiz help?

RadiantBiz is one of the most sought after and trusted business setup consultancy in the UAE. People from all over the world have trusted us to help them get started with their business in the UAE.

The introduction of new corporate tax in the UAE has been one of the most confusing inclusions for people new to the nation or those with less experience. This is where our expertise can help you sail through. Contact us today and get help from our experts. We ensure that your business complies with the tax needs according to the laws. This can help you stay away from all the future hassle. Get started with the tailor made strategies from RadiantBiz today.