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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.
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:
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.
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.
Why Register for Corporate Tax in UAE?
Registering for Corporate Tax in UAE is crucial for several reasonsLegal 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
- Deriving income from his permanent establishment(s) in UAE
- Deriving state-sourced income
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.