Businesses Need Not to Be Alleged with Tax Evasion since Free Zones are There

Due to increase in prices of inputs for production, the resultant output is also cost enhanced. This results in either decreasing margins or if the mark-up is to be remained constant then the selling price is required to be increased. Companies with strong financial assets and low liabilities can resist to any such inflation by making a slight cut in margins. Companies that operate on small scale would not find it meaningful to absorb the cost since they have weak cash flows and so they pass on the effect of increase in prices to the consumers.

Business in Dubai tries to find means and methods of operating business that could reduce their costs. This can be done by finding ways to reduce tax liabilities, production efficiencies, procurement effectiveness and overall smooth functioning of the organisation. Tax liabilities are reduced when the financial managers work in coalition with other departments especially with the department that is responsible for the procurement of fixed and noncurrent assets. There are some assets which are allowed to be deducted in half or even in some cases in full on the first year of their recognition in the financial statements. This means that the profits for the year are reduced by depreciation charge that is equivalent to the cost of the asset. Such assets are of significant values which mean that they can have the ability to reduce the profits or in some extremely rare cases the profit can be turned out into a loss in the context of laws and regulations governing the tax structure.

Free zone in Dubai is an area where government gives complete tax exemption for the production of goods carried out. Such places are usually the suburbs or the outskirts of the city where population is very low or in some cases reduced to zilch. This means that the real intention of the government of setting up free zones is to have some business presence in those areas. This is handy because Dubai city is already filled up with so many projects and companies so the new entrants in the market are finding it difficult to have their physical presence. In free zones, the companies who produce or manufactures goods are not allowed to give any sort of tax or levies to the government strictly restricted to goods that are manufactured in that zone. This option is normally feasible for those companies who already have good establishment in the Dubai city and is running some sort business in the non free zone area. As they understand the trends in the market and the rules and regulations which govern the proper conduct of the business they find it easy to locate their existing set up to free zones in order to avoid the loss of income that incur due to payment of heavy tax. Companies are alleged to evade tax and this is one of the reasons why governments in any country provide free zones where business can be carried out without paying any tax on profit after interest as shown in the income statement.