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The Technical Aspects of Taxation Rates Applicable on the Profits of a Corporation


As the pressures for expansion is mounting over companies all over the globe and with depression being set in which is required to be handled, cost consideration should be properly taken into account. For this purpose it is necessary that before choosing new countries for investment there must be some sort of fact finding exercise. This means that a market survey should be carried out first in the country where investment is proposed to be made. The survey result should be analyzed and processed in order to generate meaningful information. This information is used by executives at top levels to make decision whether or not it would be feasible or viable to invest in that particular country.

companies in Dubai can avail the advantage of keeping with them all the profits that have been earned. Profits are derived by deducting expenses for conducting business from the revenue earned from operation. After making such deduction, a further deduction is made in respect of taxation. The tax is applied as a percentage on profit before tax which ranges from country to country but it usually is between twenty to thirty five percent. If we take this matter to a step further, there pops up an issue in which there is a company with various subsidiaries in different countries. The profits earned by each subsidiary are repatriated back to the holding company. As specified earlier that different countries have different tax rates to levy. When profits are repatriated by a subsidiary that has lower tax rates that the country in which holding company is situated then the further taxability depends upon the fact whether there is a double tax treaty or double tax agreement between the two countries. Such an agreement or treaty is between the governments of two countries that are entered into to ensure that an income that is earned in a particular country is not taxed again when repatriated to the country of holding country. For this purpose if there is one such agreement then only the excess percentage applicable in the holding company’s country is levied as tax on the repatriated profits. For example if a company in country A has a subsidiary in country B and both countries have tax rates applicable of thirty five percent and thirty percent respectively. The profit earned in country B would be taxed at the rate of thirty percent. This profit when repatriated to the country where the holding company is situated will again be taxed but since there is assumed to be a double tax treaty only the differential tax rate will be applicable. Therefore the profits repatriated to Country A will be taxed at the rate of five percent only.

There are companies of Free zone in Dubai. Such companies are carrying on businesses from locations that have been declared at government level as free zones. The simple rule is that whatever the business is conducted from such locations, profits earned would be charged at a rate of zero percent. This is a great advantage to companies who think that they have to give a large percentage of their profits to the federal revenue reserves of the country and by using this opportunity and establishing business in the free zones. The saved profits can then be invested by the company in profitable ventures.