UAE Corporate Tax: Definition, Corporate Tax Registration and Filing
Farahat & Co.
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The United Arab Emirates (UAE) has introduced a Federal Corporate Tax UAE on business profits, starting from June 1, 2023. This tax regime aims to enhance the UAE's competitiveness, align with international tax standards, and diversify the country's revenue sources. The Federal Tax Authority (FTA) is responsible for managing and collecting the UAE Corporate Tax. This article provides an overview of the UAE Corporate Tax, its definition, registration, and filing process.
Definition of Corporate Tax UAE
Corporate Tax is a form of direct tax levied on the Taxable Income of corporations and other Businesses. It is charged on a wide range of Business profits, and those subject to Corporate Tax UAE include not only companies but also certain partnerships, unincorporated entities, and natural persons conducting a Business or Business Activity.Corporate Tax is paid on an annual basis concerning the Tax Period of a Taxable Person. A Tax Period is the Financial Year or part thereof for which a Tax Return needs to be filed. The Financial Year is the period of 12 months for which Financial Statements are prepared.
Corporate Tax Registration in UAE
Corporate tax registration in UAE is a procedure under which a Person registers for Corporate Tax purposes with the Federal Tax Authority (FTA). The following are the steps involved in the corporate tax registration process:
Step 1: Determine the eligibility for corporate tax registration
The first step in the corporate tax registration process is to determine whether the Person is required to register for Corporate Tax UAE. According to Article 11 of the Corporate Tax Law, the following Persons are subject to Corporate Tax:
l Juridical persons (such as corporations) that are incorporated in the UAE or foreign juridical persons that are effectively managed and controlled in the UAE.
l Non-resident juridical persons (foreign entities) that have a Permanent Establishment in the UAE.
l Non-Resident Persons deriving State Sourced Income.
l Non-resident juridical persons that have a ‘nexus’ in the UAE by virtue of earning income from Immovable Property in the UAE.
l Natural persons who conduct Business or Business Activities in the UAE and have a Turnover of over AED 1,000,000 per Gregorian calendar year from such Business or Business Activities.
Step 2: Prepare the necessary documents
Once the eligibility for corporate tax registration has been determined, the next step is to prepare the necessary documents. The following documents are required for corporate tax registration:
Step 3: Submit the application for corporate tax registration
The application for corporate tax registration can be submitted online through the FTA's e-Services portal. The following information needs to be provided in the application:
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Once the application has been submitted, the FTA will review it and issue a Corporate Tax Registration Certificate if the application is approved.
Corporate Tax Filing in UAE
Taxable Persons are required to file a Corporate Tax Return on an annual basis. The Corporate Tax Return must be filed electronically through the FTA's e-Services portal. The following are the steps involved in the corporate tax filing process:
Step 1: Prepare the Financial Statements The first step in the corporate tax filing process is to prepare the Financial Statements for the Tax Period. The Financial Statements must be prepared in accordance with the International Financial Reporting Standards (IFRS).
Step 2: Calculate the Taxable Income The Taxable Income is calculated by making certain adjustments to the Accounting Income. The adjustments include the deduction of allowable expenses and the exclusion of Exempt Income.
Step 3: Determine the Corporate Tax Liability The Corporate Tax Liability is calculated by applying the applicable Corporate Tax rate to the Taxable Income. The Corporate Tax rate is 0% on the portion of the Taxable Income not exceeding AED 375,000 and 9% on the portion of the Taxable Income exceeding AED 375,000.
Step 4: File the Corporate Tax Return The Corporate Tax Return must be filed electronically through the FTA's e-Services portal. The following information needs to be provided in the Corporate Tax Return:
The Corporate Tax Return must be filed within nine months from the end of the applicable Tax Period.
Penalties for Non-compliance
Businesses that fail to comply with the UAE Corporate Tax regulations may face penalties, including fines and interest on late payments. The penalties for non-compliance include:
l Late filing penalty: A penalty of AED 500 to AED 1,000 for each month of delay may be imposed for late filing of corporate tax returns, depending on the duration of the delay.
l Late payment penalty: A penalty of AED 500 to AED 1,000 for each month of delay may be imposed for late filing of corporate tax returns, depending on the duration of the delay.
l Failure to keep the required records and other information: A penalty of AED 10,000 may be imposed for failing to to keep the required records and other information specified in the Corporate Tax Law and AED 20,000 for repeated violation.
In conclusion, the introduction of corporate tax UAE marks a significant development in the country's tax landscape. While the registration and filing process may seem daunting, seeking the guidance of corporate tax consultants in UAE can help businesses navigate these challenges and ensure compliance with the new tax regime. With the right support and expertise, businesses can effectively manage their corporate tax obligations and maximize their growth potential in the UAE.