Running a business that imports and distributes all types of construction materials like cement, cables, tiles, bathroom fittings etc. is extremely hard work. But registering your company’s warehouse and offices strategically in Sharjah’s tax-advantageous Airport International Free (SAIF) zone unlocks major cost savings through legitimate tax planning.
This easy-to-understand guide shares the top 5 corporate tax reduction strategies. Building material traders operating in SAIF areas can use these strategies. By doing so, they can retain an extra AED 550,000 or more in additional yearly profits!
Learning Applicable SAIF Zone Tax Rules & Rates
If you are in the SAIF region, your building material supply firm needs to follow specific tax and regulatory guidelines.
Corporate Income Tax
- 0% if total annual revenues are less than AED 375,000
- 15% flat tax rate applies on all earnings above the AED 375,000
Mandatory VAT Registration
- SAIF companies must register and account for collecting 5% VAT on any sales invoices to UAE-based customers (B2B or B2C)
- But also eligible to reclaim input VAT paid on business expenses
Clearly understanding the preferential SAIF tax structures applicable is key to legally minimizing outgo.
Strategic Customs Duty Exemptions on Imported Raw Materials
Construction materials like steel rods, cables, adhesives, tools, or wall tiles originating overseas often have substantial customs duties levied when importing them into the UAE. This makes procurement expensive.
Full or Partial Customs Duty Exemptions
Luckily, many items frequently imported by building material traders qualify for partial or even 100% customs duty relief if certain conditions are met:
- Using imported goods exclusively for active building projects or construction works in the UAE
- Importing stock strictly for re-exporting later without local sales
Documentation Filing Protocol
The key is efficiently completing admin processes for approvals:
- Secure and submit end-user certificates from ongoing construction customer contracts in UAE in advance
- Proactively file re-export declarations with authorities on time
Following correct procedures maximizes import cost savings from lower customs duties – adding directly to your bottom line!
Deducting Staff Learning, Compliance and Licensing Costs
Common administrative running expenses involved in operating a building material supply company like:
- Regular training seminars purchased from third-parties to educate warehouse or sales staff
- Legal consultancy fees paid to law firms to ensure trade compliance
- Government fees paid annually to renew key trade licenses or permits
Also qualify as valid tax deductible costs at the time of filing corporate tax returns!
Documentation Required
Be sure to safely store and maintain original digital/printed invoices paid to external partners for these types of charges to be able to substantiate the expenses later if asked by authorities during a routine audit.
Accelerated Tax Depreciation of Core Warehouse Equipment
Imported assets like forklifts, pallet trucks, tools and delivery vehicles used daily within warehouses or in supply operations inevitably erode in monetary value slowly as they face wear-and-tear over time.
Tax guidelines recognize this concept of deprecation – which refers to an asset losing value while still being in use. Rules allow building material companies to claim accelerated depreciation, which means special deductions to account for higher than expected losses in early years following new equipment purchase- clearly a benefit!.
Claiming accelerated depreciation rates where permissible lowers current year tax liability.
Hiring Experienced Third-Party Tax Advisory Consultants
While it may seem simple to handle all tax filing, documentation and even planning obligations internally using existing staff, consider leveraging specialized external tax consultants for superior results:
Unbiased Expert Assessment
Qualified professionals objectively identify many more legitimate tax saving opportunities specific to your SAIF-registered building material trading operations that staff locked into day-to-day work often overlook.
Personalized Strategies & Ongoing Optimization
Bespoke tax plans created annually also perfectly match your company’s unique business needs each financial year for maximum efficiency. With external consultants, tax reduction is not a one-time activity but an ongoing focus refined incrementally each period.
Over time, the savings generated greatly outweigh all consulting fees – making the ROI case compelling.
Conclusion
In summary, Sharjah’s Airport International Free Zone provides building material importers and distributors significant tax advantages compared to operating in standard mainland areas.
Optimizing across incentives like targeted customs duty exemptions on procured construction goods based on end-use, writing off ancillary staff learning and licensing costs, accelerated depreciation of warehouse assets as well as relying on external consultants together can help SAIF-based companies reduce effective tax outgo by over AED 500,000 every year.
Sector players focused on profitability growth must implement the right strategies from commencement itself by partnering with accredited accounting advisors specialized in the construction and building materials domain.
FAQs
You must furnish valid customs export declarations, overseas buyer invoices and gate pass copies to avail zero VAT benefits on re-exported construction goods as per rules.
While not overtly illegal, tactical inventory shuffling and partial activity reductions to minimize regulatory fees around permit renewal should be very carefully evaluated in terms of operational impact.
Duty savings are based on applicable exemption rates per goods category, import shipment value declared to customs and origin country. Logistics providers can determine estimated savings figures.
