Worked Example
Scenario
ABC Trading LLC — a UAE mainland company with the following financial data:
Financial Data
| Item | Amount (AED) | |---|---| | Revenue | 5,000,000 | | Cost of goods sold | (2,500,000) | | Operating expenses | (1,200,000) | | Fines | 20,000 | | Entertainment | 50,000 | | Dividends received | 100,000 | | Net profit | 1,370,000 |
Tax Computation
Net profit: AED 1,370,000
Add: Fines (non-deductible): 20,000
Add: Entertainment (50% of 50,000): 25,000
Less: Dividends (exempt): (100,000)
Taxable income: AED 1,315,000
Tax calculation:
First AED 375,000 @ 0%: AED 0
AED 940,000 @ 9%: AED 84,600
Corporate Tax payable: AED 84,600
Key Observations
- The 0% threshold benefits small businesses
- Only profit above AED 375,000 is taxed
- Non-deductible expenses increase taxable income
- Exempt income decreases taxable income