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Financial records and permission to keep unaudited statements
According to the corporate tax, every taxpayer must make and keep financial statements in order to figure out their taxable income. He must also keep records that are used to submit the Esr Dubai return and any other related paperwork that the Authority requires. You are required to keep all records that demonstrate your exemption status and clearly demonstrate why you are exempt, even if your company is a member of the group or individuals exempt. The Authority requires that all relevant records and documents be kept for at least seven years, beginning at the conclusion of the tax period.
Tax group
According to UAE corporate tax law, you can use consolidated financial statements to prepare corporate tax returns if you have applied for and been approved to form a tax group. Only resident entities in the UAE are affected by this. In Connecticut, businesses can only apply for a tax group if they meet the following requirements: Every company’s share capital and voting rights are at least 95% owned by the parent company. In accordance with corporate tax law, your business must prepare individual financial statements if it is not a member of a tax group.
Who is affected by auditing?
It isn’t required for each element exposed to corporate duty to have its budget reports reviewed. Only those individuals who are included in the Minister’s decision will be required to prepare audited financial statements for corporate tax purposes and to keep these records in accordance with the corporate tax law. For the rest of the businesses, unaudited financial statements are sufficient and should be kept for as long as necessary. Financial statements may need to be submitted with the return if requested by the Federal Tax Authority.
Anti-avoidance provisions
Although the general anti-avoidance provisions have been included in the corporate tax regime, specific anti-avoidance provisions have not yet been stated. The tax authority has seven years to conduct audits and implement anti-avoidance measures. Businesses will be subject to penalties based on the degree of deviation from reality if the tax authority discovers any discrepancies or issues at this time. Most of the time, these come in the form of interest and other fees that the business will have to pay over a certain period of time.
The significance of anti-avoidance provisions
Anti-avoidance or anti-abuse provisions or rules (AAR) are enacted to prevent businesses from taking advantage of a specific tax system. To use the law in an unintended manner, it prevents businesses from presenting a financial situation that is different from what it actually is. To gain an unfair advantage over other taxpayers, businesses can, for instance, try to lower their tax bill, avoid paying tax withholding, increase their tax refund, or defer corporate tax. Even though the AAR is relatively new to the UAE tax system, it has already taken effect and prevents all of these.
How does the Authority put AAR into practice?
When determining whether a company is engaging in unfair practices to obtain tax advantages, a variety of factors are taken into consideration. When the transaction took place and how it was carried out will be determined by the Authority. For instance, the AAR would be alerted to any sudden shifts in operations. The AAR has the right to question the business owner about his or her actions if the owner of the business begins to withdraw or transfer money from the business account to his or her personal account, particularly if such transfers did not occur previously.
Provisions for influencers, freelancers, and business
People, A natural person is referred to in the UAE corporate tax system. In accordance with UAE regulations established by Cabinet Decision, individuals engaged in business activities are subject to corporate tax. The corporate tax system does not apply to those who do not fall into this category. If an entity is allowed to operate as a civil company or sole proprietorship, it will fall under the definition of a natural person. A single corporate tax return must be filed for each business activity covered by the CT if a person is involved in more than one business activity.
What kind of income is considered taxable?
The CT will not affect a person’s salary or any other income from employment. This includes money earned by an individual whether they work in the public or private sectors. As long as the business activity was entirely carried out in the UAE, the individual’s earnings from outside the UAE are included in their DIFC approved auditors. The entirety of the individual’s earnings while operating that business in the United Arab Emirates constitutes taxable income. Individual investments and interest earned by the individual are exempt from corporate tax. Additionally, investment returns are exempt from corporate tax.
Provisions for influencers and freelancers
Independent contractors and freelancers are regarded as self-employed individuals. Only if they are engaged in a taxable business or a business activity that has been specified by the Cabinet Decision are they subject to the UAE corporate tax. The specifics of the business activity that would subject these individuals to corporate tax have not yet been disclosed. If they meet the Authority’s requirements, self-employed individuals can apply for small business relief. The FTA will provide additional information in due course.
