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It’s the government’s share of a company’s earnings.
Activation of CIT Accounting
Administration → Settings: Taxes → Enable CIT Accounting.
2. New GL Accounts
Ensure that the correct GL accounts are available in the system.
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Deferred Tax Asset - This is used when a company records tax losses that can be carried forward to offset future tax liabilities. It also works with Other Expenses documents to allow accrual of the loss now and deduction against taxes in later periods.
3. Set up the CIT return template
CIT Return templates are added to the master data of Taxes.
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Wizard: Use guided questions (recommended for the UAE) to prepare the template quickly. The CIT Wizard guides companies through essential questions to configure their UAE Corporate Income Tax return template. It adapts to each company’s chart of accounts and expense allocation rules, producing a return that closely matches the tax portal.
4. CIT Return
Once the CIT Return Template is set up, the system generates a return that looks almost the same as the UAE tax portal form. The amounts are taken directly from the company’s accounting data, so the return is accurate and consistent. At the end of the year, the user only needs to create the return, choose the period, and the system will calculate all amounts, including the tax liability. The process works in the same way as the VAT return.
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The CIT Return can be printed, and the printed document reflects the structure defined in the template, with all amounts populated automatically. This ensures that the printed version matches the system-generated return.
5. Tax Losses and Limited Expenses
Certain tax losses and expenses are subject to legal limits and may be carried forward to future periods. For example, interest expenses can be deferred for up to ten years. Reports in the Taxes section track these items, showing the period of origin, carry-forward expiration, and amounts used or available for future periods. Tax losses are similarly monitored to track utilization over time.
If a tax loss exists, other expenses can be generated based on the CIT Return per registered tax laws. Users can select the applicable CIT rate, and the system calculates deferred taxes using this rate rather than the standard statutory rate. An Other Expenses transaction is then created, recognizing the expenses corresponding to deferred taxes, which can be adjusted in future periods.
6. Tax Transactions and Prepayments
The Tax Transaction Changes section allows generating tax transactions based on the final CIT Return. These transactions recognize the calculated tax as an expense and as a payable to the government.
In addition, the system supports prepayments of taxes and pre-estimated taxes. Estimated taxes can be allocated to an estimated account and later offset against the final tax calculation.
While these activities are typically performed once per year and are largely manual, the system simplifies the process by automatically retrieving amounts from the CIT Return. All transactions can be tracked within the system for reporting and reconciliation purposes.
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