Corporate Tax UAE

Corporate tax is a form of direct tax levied on the net income or profit of corporations and other entities from their business. The UAE has introduced a federal corporate tax law that will be effective for financial years starting on or after 1 June 2023. The corporate tax rate is 0% for taxable income up to AED 375,000 and 9% for taxable income above AED 375,000.

The corporate tax law applies to all businesses and individuals conducting business activities under a commercial licence in the UAE, including free zone businesses. However, some businesses and income are exempt from corporate tax, such as extractive businesses, dividends and capital gains from qualifying shareholdings, qualifying intra-group transactions and reorganizations, and certain public benefit entities.

The documents required for corporate tax registration in the UAE are not yet specified by the Ministry of Finance or the Federal Tax Authority. However, based on the existing VAT registration process, some of the possible documents are:

• Trade licence

•  Certificate of incorporation

• Articles of association

• Passport copy of the owner or manager

• Bank account details

• Financial statements

• Business activity details

These documents may vary depending on the type and nature of the business. It is advisable to consult a tax professional for more guidance on the corporate tax registration process.

According to the Federal Tax Authority, all taxable persons are required to register for UAE Corporate Tax and obtain a Corporate Tax Registration Number as per the UAE Corporate tax law and following implementing decisions. A taxable person is any person who conducts a business in the UAE and is not exempt from corporate tax.

The registration process for corporate tax is not yet fully announced by the Federal Tax Authority, but it is expected to be similar to the existing VAT registration process. The registration can be done online through the FTA website. The registration deadline depends on the financial year of the taxable person, but it should be done before the first tax filing date. For example, if a taxable person has a year ending on May 31st, they have a registration period of 26 months available until February 28th, 2025.

Some of the benefits of registering early for corporate tax are:

• Avoiding penalties for late registration or non-compliance¹²
• Having more time to prepare and file the first tax return¹²
• Being able to claim tax credits for any corporate tax paid in other jurisdictions.
• Benefiting from the certainty and clarity of the corporate tax regime and its implications for the business.
• Enhancing the reputation and credibility of the business as a responsible taxpayer.

The penalties for late registration or non-compliance with corporate tax are not yet specified by the Federal Tax Authority or the Ministry of Finance. However, based on the existing VAT penalties, some of the possible penalties are:

• AED 20,000 for failure to register within the specified timeframe.
• AED 3,000 for failure to submit a tax return or make a payment within the specified timeframe.
• AED 10,000 for failure to keep the required records and other information specified in the tax legislation.
• AED 5,000 for each incorrect tax return.
• A percentage-based penalty ranging from 5% to 50% of the unpaid tax amount depending on the circumstances and timing of the payment.

These penalties may vary depending on the type and severity of the violation. It is advisable to consult a tax professional for more guidance on the corporate tax penalties.

You can avoid these penalties by complying with the corporate tax obligations and requirements. Some of the ways to do that are:

• Registering for corporate tax within the specified timeframe or before the first tax filing date.
• Submitting accurate and complete tax returns and making timely payments.
• Keeping proper records and documents related to your business activities and income
• Reporting any errors or omissions in your tax returns or payments through voluntary disclosure
• Seeking professional advice or assistance from a registered tax agent if you are unsure about any aspect of corporate tax

According to Article 29 of the Corporate Tax Law, you need to keep the following records and documents for corporate tax purposes:

• Accounting records and books
• Commercial and financial documents
• Tax returns and related documents
• Any other records or documents specified by the Federal Tax Authority

You need to keep these records and documents for at least 7 years from the end of the relevant tax period or until the final determination of any dispute, whichever is later. You also need to keep these records and documents in Arabic or English, unless otherwise specified by the Federal Tax Authority.

Source:finexcube.com

– Please note that this is not a professional or legal advice and you should consult finexcube officially or a qualified expert before relying on it. Above is education purpose only.