Prashant Ganti, the Head of Product Management for Zoho Finance and Operations Suite, speaks about the newly introduced corporate tax in the UAE and how companies and businesses can stay compliant
What changes in terms of compliance do companies need to go through with the introduction of the new Corporate Tax in the UAE?
The Federal Tax Authority has implemented corporate tax in the UAE as per Organisation for Economic Co-operation and Development (OECD) global standards. Since this is a new regulation that is being introduced in the country, businesses would need to make significant changes to be compliant.
As the first step, businesses must seek professional advice from an accountant or a tax consultant to understand their tax obligations and the implications of the law, and plan strategies for compliance. This will ensure that they are fully prepared for the new regulations.
As the next step, all taxable businesses including companies in the free zone would need to register with the Federal Tax Authority (FTA) for corporate tax and obtain the corporate tax registration number. Businesses would need to have an accounting system in place to track their transactions, calculate taxes and generate necessary reports.
Businesses with a taxable income up to AED 375,000 will be subject to 0% tax, and entities with a taxable income above AED 375,000 will be subject to 9% tax. Qualifying entities in the free zone will be subject to 0% tax. Additionally, the FTA guidelines also state that businesses must store relevant accounting records and documents for a period of 7 years. Having a proper system in place would automatically help companies determine their tax obligations, help them file taxes within specified deadlines, and help maintain organised financial records securely.
It is advisable for businesses to stay informed about any changes or updates made to the regulations. Typically, the official government websites provide the information you need to stay current. Based on the changes introduced, businesses can train their employees on the regulations and procedures to be followed to stay compliant.
Additionally, conducting regular internal audits of the compliance processes followed, and documentation maintained will be helpful in identifying discrepancies. This approach will ensure that potential risks and penalties are avoided.
Where does the UAE stand in terms of the introduction of corporate tax, compared with other economies in the GCC region?
Other countries in the GCC such as Saudi Arabia, Qatar, and Oman have already implemented corporate tax. Kuwait imposes a corporate tax on foreign-owned companies. The UAE is a recent addition to this list and has in fact imposed the lowest tax rate in the GCC. As per recent news reports, Bahrain is considering the introduction of corporate tax.
What sort of challenges do companies face when it comes to regional laws and compliance requirements?
One of the main challenges that businesses face with the implementation of new laws is understanding its intricacies, applicability, and how it affects them. In fact, a recent survey that we conducted among our customers revealed that over 85% of the respondents felt that understanding the corporate tax law and its requirements might be challenging in becoming compliant. This also outlines the need for guidance on regional laws and their requirements.
To help with this, the government publishes helpful guides and FAQs that provide a simple law overview. Zoho Books also offers various resources like comprehensive guides, FAQs, expert-led webinars, and events such as workshops and customer meetups that businesses can use to educate themselves on tax laws like VAT and corporate tax. More importantly, it is best to consult with an accountant or a tax expert to understand the compliance requirements such as the applicable tax rate, exemptions, filing procedures and deadlines. This approach would ensure that a proper framework is set up for compliance.
How can Zoho help such companies stay updated with these compliance requirements?
Zoho Books, an FTA-accredited tax accounting solution introduced its UAE edition when VAT was implemented in the country. We recently launched corporate tax capabilities in the application, enabling businesses to automate tax calculations, track their tax obligations, and ensure accurate tax filings. Companies can also instantly generate corporate tax reports in real-time in the format that the FTA will introduce, allowing them to simplify the tax filing process, and reduce the manual workload.
Additionally, Zoho Books allows businesses to securely maintain supporting documents and organised financial records on the cloud. Furthermore, Zoho Books provides a unique collaboration feature where businesses can work with their accountants and finance teams in real time. This capability allows them to quickly identify, and solve any discrepancies in their finances, ensuring compliance, and improved data accuracy. Overall, we are committed to helping businesses in navigating and comply with any tax regulations introduced.
Tell us about the Zoho Finance and Operations Suite. What sort of value-add does it bring to the table?
Zoho Finance and Operations Suite include solutions for accounting (Zoho Books), inventory management (Zoho Inventory), billing (Zoho Invoice), subscriptions management (Zoho Subscriptions), and travel and expense management (Zoho Expense). These applications are built on the same technology stack which means the data can flow between applications automatically and seamlessly. This allows businesses to not only manage every part of their finances but, also ensure the unification of their data across systems without the manual effort.
Beyond the suite, businesses can benefit from a strong ecosystem of payment gateways, banks, travel partners, and shopping carts. Businesses can also connect with any third-party applications with APIs and Zoho Marketplace. This reduces the need to invest in IT resources and offers businesses the flexibility to go to market with any change.