As we all know, for many years, the United Arab Emirates has served as a favorable tax environment or we can say as a “heaven” for investors & businesses due to its 0% tax rate policy. But in December 2022, the UAE government unveiled its first corporate tax system with a corporate tax (CT) rate of 9%.
Corporate tax in UAE- Definition
- The Corporate Tax in the UAE is a direct tax imposed on the profit or net income generated by corporations and other entities through their business operations.
- This tax is also referred to as corporate income tax or business profits tax.
- The Ministry of Finance introduced Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses in the UAE on 9th December 2022, implementing a Federal Corporate Tax.
- This law applies to all individuals and businesses with a commercial license operating in the UAE, unless eligible for exemption.
Corporate tax in UAE- When to file
According to Article 48 of Federal Decree Law 47, businesses in the UAE must ensure that their corporate tax returns are submitted within 9 months of the end of their fiscal year unless an alternative timeline is indicated.
The forthcoming corporate tax return due dates for the fiscal year 2024 are as listed below:
- For the financial year of July 2023 to June 2024, the deadline for filing your corporate tax return is 31 March 2025.
- For the financial year of January 2024 to December 2024, the submission deadline is 30 September 2025.
Corporate tax in UAE- Registration
The process ofUAE corporate tax registrationinvolves business owners registering for tax purposes with the Federal Tax Authority (FTA). The steps required for corporate tax registration are as follows:
Step-1 Eligibility for corporate tax registration
The first stage of the corporate tax registration procedure involves determining whether the person or company is required to register for corporate tax UAE or not. As per article 11 of the corporate tax law, the entities listed below are liable for corporate tax:
- Legal individuals, including corporations, that are registered in the UAE or foreign entities that are under the effective management and control in the UAE.
- Foreign entities that have established a permanent establishment in the UAE, but are not residents.
- Individuals who are not residents but earn income from the state.
- Non-resident legal entities with ties to the UAE through receiving revenue from real estate in the country.
- Individuals engaging in business or business activities in the UAE with an annual turnover exceeding AED 1,000,000 are required to comply with the regulations.
Step-2 Prepare the documents
After determining eligibility for corporate tax registration, the next stage involves preparing your essential documentation. The required documents for corporate tax registration are as follows:
- A copy of your trade license.
- Passport copy of the owner who owns the license.
- Memorandum of Association.
- Contact details (Phone number and e-mail ID) of the concerned person.
- Contact details (Address) of the company.
- Emirates ID copy of the authorized signatory.
- Legal entities have to provide documentation confirming the authorization of the designated signatory for the corporate tax registration UAE Acceptable forms of authorization include a power of attorney, board resolution, or any other relevant documentation.
Step-3 Submit the application
The submission of the corporate tax registration application can conveniently be done online via the FTA’s e-Services portal. The necessary details that must be included in the application are as follows:
- Name and legal structure of your business.
- Tax Registration Number (TRN) if already registered for Value Added Tax.
- Contact information (address, phone number, email).
- Financial Year start and end dates.
- Details of business activities.
- Estimated annual revenue.
- Details of the authorized signatory.
Corporate tax in UAE- Filing process
If you are a taxable person, you need to submit a corporate tax return annually in UAE. This must be done electronically via the FTA’s e-Services portal. The steps required for corporate tax filing are as follows:
- The first step of the corporate tax filing procedure involves preparing the financial statements for the tax period, ensuring accordance with the International Financial Reporting Standards (IFRS).
- The next step is the calculation of taxable income which involves modifying accounting income through some adjustments such as deducting permissible expenses and excluding exempt income.
- The calculation of corporate tax liability involves applying the relevant corporate tax rate to the taxable income. Remember that the corporate tax rate is 0%, if you have taxable income up to AED 375,000, and 9% for any amount exceeding AED 375,000.
- The corporate tax return must be submitted electronically using the FTA’s e-services portal. The following details are required in the corporate tax return:
- Taxable income.
- Corporate tax liability.
- Tax payments made during the tax period.
- Any available tax credits.
- Any tax losses carried forward from previous tax periods.
Summary
The introduction of corporate tax in the UAE tax system is a significant and recent change that has affected all businesses in the country. Businesses need to have a thorough understanding of corporate tax laws and comply with their obligations to avoid penalties and risks. This detailed guide will assist you in UAE corporate tax registrationprocess with ease and confidence.
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