VAT classification for Universities and higher edu...
VAT classification for Universities and higher education institutions
30 May 2021Here we will discuss how you can calculate your tax liability or the amount of tax payable to the authorities. The UAE UAE CT (corporate tax) regime as explained in the consultation document, released by the MOF has made an attempt to make the calculation as simple as possible.
The corporate tax payable calculation and reporting obligations are simplified because the authorities wanted to reduce the administrative burden on small and medium-sized businesses.
Why you should know this
We have already discussed earlier how the taxable income is calculated. This is basically the net profit in the financials. There are obviously some adjustments that need to be taken into consideration -
1) Remove Exempt income
2) Add back non-deductible expenses
3) Adjust for unrealized gains or losses
We need to remember that the threshold for 9% Corporate tax is AED 375,000.
So simply 9% on any taxable income above AED 375,000 must be paid after deducting foreign tax credits.
An example of Corporate Tax Payable calculation
Let's assume the following-
Taxable income - AED 1,000,000
Foreign Tax credit - AED 6,250
Therefore we can calculate as below -
Corporate Tax Liability = (1,000,000 - 375,000) x 9% = AED 56,250
Corporate Tax Payable = 56,250 - 6,250 = AED 50,000
From this we can see clearly that the tax calculation is fairly simple. There will surely be complicated scenarios that may arise, considering the complex business transactions that occur in the UAE.
However, we hope that after reading this you have got a fair idea of how this calculation works.
For professional tax advice book an appointment with our tax experts.