Corporate tax planning and role of financial accountants

Corporate tax planning is a strategic process through which companies minimize the tax liabilities utilizing various legal and ethical methods to manage their financial affairs. Tax planning helps companies to structure their transactions and operations in such a way that optimizes their tax benefits by taking advantage of available tax incentives whilst remaining compliant with relevant tax laws and regulations. In UAE, corporate tax is calculated as per the applicable tax rate of 9% in accordance with the UAE Corporate Tax Law (Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses).

There is no doubt that financial accountants play an important role in corporate tax planning with their expertise and insights into a business’s financial information.

The role of financial accountants in corporate tax planning is discussed below in detail:

1. Taxation Reporting: Financial accountants have the important role of accurately reporting financial information related to taxes in the company’s financial statements. They must make sure that the tax-related disclosures are accurate and in accordance with IFRS – International Financial Reporting Standards and UAE Corporate Tax Law.

2. Compliance: Financial accountants have a role in ensuring that businesses adhere to UAE Corporate Tax Law and reporting requirements. They calculate the business’s taxable income, prepare tax returns, and submit required documentation, financial statements, tax returns to federal tax authority accurately and in a timely manner.

3. Transfer Pricing: UAE is a financial hub and home of various multinational companies. In multinational corporations, financial accountants play a role in setting transfer pricing policies that determine the prices at which goods, services, or intellectual property are transferred between different related entities within the business. Financial accountants ensure that these prices are as per market rates and also comply with international tax regulations.

4. Defining Strategies: Financial accountants coordinate with tax professionals to develop tax-efficient policies and strategies to align with the business’s overall objectives. They may suggest changes in accounting policies & procedures including inventory valuation methods, depreciation schedules, and other financial decisions that can have an impact on the business’s taxable income.

5. Analysis of Financial information: Financial accountants examine a business’s financial statements, supporting documents, transactions, and other financial information to identify potential opportunities for tax planning. Their role also includes the assessment of the impact of different accounting methods on tax liabilities and identify tax-efficient strategies.

6. Risk Management: Financial accountants has the ability to assess the potential taxation risks associated with business decisions and transactions. They suggest the business avoid activities that could lead to any tax controversies or legal issues, ensuring that the business operates within the boundaries of UAE corporate tax law.

7. Communication with Authorities: Financial accountants can assist in communicating with taxation authorities. They may provide the necessary documentation and explanations to support the business’s tax positions and ensure transparency in dealings with tax authorities.

8. Tax Incentives: It is the job of financial accountants to identify tax credits, allowed deductions, and incentives that the business may be eligible. They assist in gathering the necessary documentation and completing the application process for these benefits.

9. Ongoing Monitoring: Financial accountants has to staying up-to-date with the latest developments in tax legislation to ensure that the company remains compliant and can adjust its tax planning strategies accordingly.

There is no doubt that financial accountants play a crucial role to help businesses manage their tax liabilities while maintaining ethical and legal standards. Their expertise in financial reporting, analysis, and compliance is essential for effective corporate tax planning.

Who We Are?

RAA is a leading UAE audit firm with a strong presence in the Middle East business community and is well known for its quality service delivery. We strive to provide not just audit, but proactive advice on how to improve your business.

With our unique approach, we have the requisite expertise and experience to help our clients grow and develop. Through our technical excellence, combined with our personal commitment, we deliver high-quality services to large corporate clients and SMEs alike. We are also fully aware of the prime importance of providing the highest quality independent auditing for our clients.

Author

Asif Mahmood
Associate Director – Audit