The Power of Compliance: Why Registering for Corporate Tax in UAE is a Game Changer

The UAE has introduced a Corporate Tax Law, which applies to financial years beginning on or after 01 June 2023. This law requires companies to register for Corporate Tax, and non-compliance can lead to penalties and legal consequences. 

Why Register for Corporate Tax in UAE?

Registering for Corporate Tax in UAE is crucial for several reasons:

Legal Requirement: The UAE Federal Tax Authority (FTA) has mandated that all companies are required to register for the Corporate Tax Law.

Preventing Penalties: Non-compliance with the Corporate Tax Law can result in penalties and legal consequences.

Corporate Tax Registration Benefits: 

• Legal Compliance
• Business Credibility
• Access to Government Incentives 
• Eligibility for Government Contracts

How to Register for Corporate Tax in UAE

Registering for corporate tax in the UAE can be done through the EmaraTax portal, designed based on international best practices to facilitate seamless tax registration, tax return filing, and payment.

Key Priorities for 2024

Ensure QFZP Compliance: Businesses must meet all conditions to qualify as a Qualifying Free Zone Person (QFZP) to benefit from a 0% Corporate Tax rate.

Review Legal Entity Structure: Evaluate the legal entity structure to identify any inefficiencies or opportunities related to Corporate Tax.

Review Accounting Policies: Assess accounting policies that could impact tax outcomes, such as items recorded in Other Comprehensive Income, provisioning, depreciation, and amortization.

Compliance with Transfer Pricing Rules: Ensure compliance with transfer pricing rules and regulations to impact the effective tax rate and income allocation within the Group.

Identify Foreign Company Activities: Identify foreign company Directors or senior management operating from the UAE and critical commercial activities carried out by employees or related parties.

New Timeline for UAE Corporate Tax Registration

The UAE Federal Tax Authority (FTA) has specified timeframes for Corporate Tax registration, effective March 1, 2024. Businesses are obligated to register for Corporate Tax within a designated time frame. The registration application should be sent to the FTA, and businesses must submit their tax return to the FTA within nine months following the conclusion of the fiscal year. Late registration will be levied a fee of 10,000 AED.

Resident Persons

Juridical persons who are Resident Persons incorporated, established, or recognized before March 1, 2024, must apply to register for Corporate Tax within the following timeframes:

 

Month of License Issuance

• January or February: May 31, 2024
• March or April: June 30, 2024
• May: July 31, 2024
• June: August 31, 2024
• July: September 30, 2024
• August or September: October 31, 2024
• October or November: November 30, 2024
• December: December 31, 2024

Non-Resident Persons

The Federal Tax Authority (FTA) has provided the criteria for identifying Non-Residents subject to Corporate Tax in the UAE. In general, Corporate Tax applies to:

 

Non-Resident Juridical Person

• Deriving income from its permanent establishment(s) in UAE
• Who has a ‘nexus’ in the UAE
• Deriving state-sourced income

 

Non-Resident Natural Person

• Deriving income from his permanent establishment(s) in UAE
• Deriving state-sourced income

 

Non-resident persons deriving state-sourced income

Any non-resident who receives state-sourced income is currently subject to withholding tax at the rate 0%.

 

Non-resident juridical person that has a nexus in the UAE (derives income from UAE Immovable Property)

Corporate Tax is also applicable when there is a nexus between a non-resident juridical person and the UAE. This nexus serves as the linking factor for Corporate Tax purposes.

 

According to Cabinet Decision No. 56 of 2023, if a non-resident legal entity earns income from immovable property in the UAE, it establishes a nexus in the UAE. Consequently, non-resident legal entities are liable to pay Corporate Tax on income derived from immovable property in the UAE.

Natural Persons

Residents who surpass the turnover threshold must register by March 31st of the following year. Non-residents who meet the same criteria must register within three months of becoming liable for taxation.

New Juridical Persons

Juridical persons incorporated, established, or recognized on or after March 1, 2024, must apply to register for Corporate Tax within three months of incorporation, establishment, or recognition.

Conclusion: 

Registering for Corporate Tax in UAE is a game-changer for businesses, as it ensures compliance with the law, prevents penalties, and provides strategic planning opportunities. By following the steps outlined in this blog, companies can effectively register for Corporate Tax and take advantage of its benefits. Late registration and non-compliance with these regulations result in a penalty of AED 10,000.

 

If you need help with corporate tax registration, ADEPTS can help you with Corporate tax registration and ensure compliance with the FTA and other tax authorities in the UAE.