Have we been truly freed from the tyranny of professional subject matter area specialists or are we enroute to that destination?
Does the digital equivalent of the sea basin trawler, the artificial intelligence software that scrapes the online universe for mentioning a topic, offer that kind of independence? It depends on the questions you ask.
Some say the future belongs to those who can ask not the best questions, but with those who have the skills to format them. I wish I could say the same. But some things are about angles, especially in complex areas such as corporate tax.
The first entities eligible for the tax in the UAE close out their first fiscal year next month. In nine months, they will settle any outstanding liabilities.
Just because you don't owe any tax doesn't mean you don't need to file your financials. Not only do you need to file a tax return, but the numbers you provide must follow the mandated treatment as outlined in the various decisions issued by the three regulatory bodies in the country.
I still haven’t seen the AI platform that shows all the humility of humanity when it doesn’t know or isn’t sure of an answer. It’s like kids, these software solutions, sometimes they just make stuff up to fill in the gaps in their knowledge. There’s a word for it, it’s called hallucinations.
For more than a year now, my articles haven’t relied solely on my observations. I’ve passed my final draft off to a group of peers who, without bias, review and comment on it. It is then sent off to editorial and finally to you, the reader.
Humans have spent centuries building and validating how they push the limits of knowledge using critical thinking.
The bizarre conversations I’m having with search engine-informed business people is concerning and shows that we’re moving backwards.
In what ways can we expect tax compliance? Below are some unfortunately real examples. We recently received an invoice from a client. It was from a supplier. The invoice stated that VAT was charged at 5 per cent. On three levels, the invoice stated that corporate tax was charged at 5 per cent as well.
If you thought that the rate was 9 per cent, you would be right. You would also be right if you thought that VAT was the last tax charged on an invoice.
For example, excise duty is charged on an amount first and then VAT on top of that new total. This particular supplier charged corporate tax at the same rate as the VAT.
UAE corporate tax: What you need to know
The most egregious error was charging corporate tax at all. VAT is a levy that your business charges to your customers on the goods and services you provide. This is reported quarterly to the Federal Tax Authority.
Basically, you’re acting like a tax collector, and you’re doing it for free. What’s interesting is that if you make a mistake, you’ll be penalised. On the other hand, corporate tax is a tax on your business’s profits.
The next question I’m asked is, “can we help you prepare your entity’s accounts for reporting within three months?” VAT is reported quarterly, not corporate tax.
We still don’t know what form that reporting will take. The last date for reporting and settling corporate tax is February 28, 2025. There’s still time, but no one should be complacent. Understanding through a compliance exercise goes a long way in getting ready for this work.
What does a compliance project look like? First of all, it’s not something you can do on a search engine.
We’ve needed to do this in the past, during VAT introduction, or at least we should have. Please remember that there is never a bad time to rectify poor behaviour.
The first step is to understand all the different functions of your business. This is in the standard operating procedures manual and you may find that you need to do this first. Encourage each team member to write down what they do. Don’t just write three words per line. Push for paragraphs.
Why for each function? It’s inevitable that there’s an element that’s cost-related. By now you’ve probably figured out that most of this focus is on cost. You want to be able to correctly claim all the allowable expenses. You want to make sure you’re paying as little tax as possible within the rules.
You want to match the tax rules with your processes. Document it.
There’s an added benefit to doing this as a business owner. You’ll have a new understanding of your business. What could be more important?
David Daly is a partner at the Gulf Tax Accounting Group in the UAE
