Since its declaration, the introduction of corporate tax in the UAE has generated significant interest and discussion among businesses and tax experts. The inception of corporate tax positions the UAE among the other GCC countries to implement a federal corporate tax.
As of the 1st of June 2023, both individuals and businesses crossing the profit threshold will need to pay a 9% corporate tax. Considering that corporate tax is a new paradigm in the UAE, it’s crucial for businesses to understand and play by the rules of the game.
This article is your GPS to navigating the world of corporate tax in the UAE as a Motor Dealer.
Let's dive into it!
1. What is corporate tax in UAE?
Corporate tax is a tax charged on the net profit generated by businesses operating in the UAE. As of 1st of June 2023, 9% of your dealership’s profits will be taxed under the new corporate tax laws if you have passed the threshold.
2. When was corporate law decided by UAE authorities?
The corporate tax legislation was officially announced by the authorities on December 9th, 2020. The UAE corporate tax regulations are accessible through the official website via 'Federal Decree-Law no. 47 of 2022'. To learn more about the corporate tax law please visit the website of the Ministry of Finance.
3. Do Motor Dealers Need to pay corporate tax in the UAE?
All businesses with a taxable net profit exceeding 375,000 AED are subject to corporate tax regulations and must pay 9% of their net earnings as corporate tax.
4. What is the rate of corporate tax for Motor Dealers in the UAE?
As of 1st of June 2023, the corporate tax rate stands at 9% of a businesses' net profit.
However, as a measure to provide assistance to small businesses and start-ups, the UAE Government is supporting small businesses and startups by waiving off the corporate tax completely if profits stay within the 375,000 AED limit.
5. When does Corporate Tax take effect in the UAE?
Corporate tax will take effect from the commencement of the fiscal year beginning on or after June 1st, 2023.
6. Are any Motor Dealerships Exempt from Corporate Tax?
To avoid corporate tax, dealerships must not exceed a profit threshold of 375,000 AED. However, certain types of businesses are exempt from corporate tax all together. The following list outlines the specific cases where corporate tax exemptions apply:
Individuals: Corporate tax does not apply to individuals. Therefore, any income earned from employment, real estate, investments in shares, and other personal income unrelated to a trade or business in the UAE will be exempt from corporate tax.
Foreign Investors: Corporate tax is not applicable to foreign investors who do not conduct business activities within the UAE.
Free Zone Businesses: Currently, corporate tax incentives are offered to free zone businesses that meet all regulatory requirements. These incentives will continue to be provided.
Capital Gains and Dividends: UAE businesses are exempt from corporate tax on capital gains and dividends received from their qualifying shareholdings.
Qualifying Intragroup Transactions and Restructurings: Corporate tax does not apply to transactions and restructurings that meet the criteria for being classified as qualifying intragroup activities.
7. How is corporate tax in UAE calculated for Motor Dealerships?
In the UAE, companies are required to pay corporate tax at a rate of 9% on their net profit as shown in their financial statements. However, this tax is only applicable if the taxable net profit exceeds 375,000 AED. Any net profit below this threshold is not subject to any tax.
8. How can Motor Dealerships in the UAE manage corporate Tax?
With the introduction of the new corporate tax law, it is really important that your dealership thoroughly understands its complexity to ensure that you trade compliantly. Large penalties will apply for Motor Dealerships that do not comply to the new corporate tax laws.
To help your dealership manage corporate tax it is important that you maintain accurate financial statements. Your Dealerships financial statements will serve as the basis for calculating the corporate tax that you need to pay. The accuracy of your dealerships data will directly impact the correctness of your financial statements, ensuring that the correct amount of corporate tax is paid and applied.
The EasyCars advantage: Navigate Corporate Tax with Confidence
At this point, you might already realize the significant benefits of using a dealer management software. EasyCars is a comprehensive dealer management software solution that offers a wide range of modules to cater to the evolving requirements of operating a motor dealership in the UAE. It provides various powerful functionalities, including the ability to generate instant reports like vehicle inventory, and vehicle profit statements.
On top of this, EasyCars goes beyond simply aiding in dealership management by providing full automation for UAE VAT. EasyCars enables you to effortlessly generate tax invoices and accurately file VAT returns, ensuring that you are well-prepared for tax obligations.
EasyCars features include Simple Stock Management, Automated Advertising, Automatic VAT Calculations, Xero Accounting Integration, Facebook Automotive Inventory Ads, Dealer Websites and Business Reporting in the one central management software.
Still on the fence about EasyCars? Why not take it for a test drive? Schedule a FREE, no-obligation demo of our software today. We're confident that you'll be floored by how effortlessly EasyCars adapts to the unique contours of your dealership's needs.
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The information provided in this article is for general information purposed only and does not constitute legal or professional advice. The content of this article is based on publicly available information up to and including the knowledge cutoff date mentioned above. UAE Corporate Tax laws may change, we recommend you always use the official UAE Government Website as a source of current information. Please consult with qualified professionals for personalised advice.