Dive into the world of UAE Corporate Tax with confidence! Equip yourself with the knowledge and tools needed to thrive in this dynamic environment.
CT is a form of direct tax levied on the net income or profit of corporations and other businesses. CT is sometimes also referred to as “Corporate Income Tax” or “Business Profits Tax” in other jurisdictions.
With the UAE government’s announcement of implementing corporate tax starting from the financial year 2023, the tax compliance landscape in the country is poised to undergo a paradigm transformation. Businesses operating in the UAE have been obliged to assess their corporate tax eligibility and compliance requirements such as tax registration, deregistration, filing of tax returns and payment, among other things.
The registration under the UAE Corporate Tax law can be either voluntary by the taxpayer themselves or the FTA has the power to directly register a qualifying person under the UAE Corporate Tax law if they fail to register themselves Suo-moto, even though they might be so required. Businesses that fall under the ambit of UAE corporate tax are required to carry out registration with the FTA and obtain the Tax Registration Number within the prescribed period specified by the regulatory body.
In the event of cessation or liquidation when the business ceases to be subject to corporate tax, they are required to apply for tax deregistration. A deregistration application needs to be submitted to the FTA within three months from the date of cessation or discontinuation.
Deregistration request will be approved by the FTA only if it is satisfied that the business has filed corporate tax returns and paid due taxes and settled all the corporate tax liabilities and penalties (if any) that were due for all periods up to and including the date of cessation. If a business fails to apply for corporate tax deregistration within the timeframe stipulated by the FTA or fails to comply with the payment and filing obligations, FTA has the power to deregister the business based on the information available at its disposal.
Tax always comes into the forefront in almost every facet of the business. Tax advice needs to be sought before you enter into business transactions, to avoid surprise losses related to tax. Hence, tax planning should always be developed in advance. However, certain transactions may have been undertaken without proper tax planning or even without any tax planning at all.
In such situations, one would need to identify tax risks and find ways to mitigate them. It would be better if you could provide us with relevant draft agreements as it would help us better understand your business and, in particular, the envisaged transaction and thereby identify the relevant tax implications, and recommend ways to mitigate the relevant tax risks.
You may also discuss with our team at Accostax, the transactions or deals that you have undertaken but about which you are uncertain of the tax implications. Our tax experts at Accostax will identify the tax risks and recommend ways to mitigate them.
International Accounting Standard 12 Income Taxes (IAS 12) requires companies to measure deferred tax assets and liabilities at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
Based on the above, companies have to assess the deferred tax implications and the estimated deferred tax [Deferred Tax Assets (DTA) / Deferred Tax Liabilities (DTL)] for reporting periods, including interim reporting.
With the right approach, our team of finance and accounting professionals along with the subject matter experts from the corporate tax team will assist you in quarterly and annual tax provision calculations, reviewing tax balance sheet accounts and related deferred tax provisioning computations.
The Corporate Tax Return is a form filed by the Taxable Person for a specific tax period containing the details of income and expenses reported in the financial statements/records, along with supporting schedules and computation showing the Corporate tax liability and other necessary information required by the FTA from time to time. The Tax Return should be filed within a specific period with the tax authority according to the Corporate Tax Law.
Accostax has highly knowledgeable and experienced Tax consultants in UAE in assisting clients with the best Corporate Tax services in UAE for Corporate Tax returns, ensuring staying compliant with the laws and regulations of the Tax Authority. Our team will also guide you through document preparation, calculating the tax liability, and tax compliance for Corporate Tax activities such as Registration, filing returns, refunds, etc.
With the UAE government’s announcement of implementing corporate tax starting from the financial year 2023, the tax compliance landscape in the country is poised to undergo a paradigm transformation. Businesses operating in the UAE have been obliged to assess their corporate tax eligibility and compliance requirements such as tax registration, deregistration, filing of tax returns and payment, among other things.
The registration under the UAE Corporate Tax law can be either voluntary by the taxpayer themselves or the FTA has the power to directly register a qualifying person under the UAE Corporate Tax law if they fail to register themselves Suo-moto, even though they might be so required. Businesses that fall under the ambit of UAE corporate tax are required to carry out registration with the FTA and obtain the Tax Registration Number within the prescribed period specified by the regulatory body.
In the event of cessation or liquidation when the business ceases to be subject to corporate tax, they are required to apply for tax deregistration. A deregistration application needs to be submitted to the FTA within three months from the date of cessation or discontinuation.
Deregistration request will be approved by the FTA only if it is satisfied that the business has filed corporate tax returns and paid due taxes and settled all the corporate tax liabilities and penalties (if any) that were due for all periods up to and including the date of cessation. If a business fails to apply for corporate tax deregistration within the timeframe stipulated by the FTA or fails to comply with the payment and filing obligations, FTA has the power to deregister the business based on the information available at its disposal.
A corporate Tax Audit in UAE is a mandatory process to audit the tax liability, Tax compliance and financial records of companies that meet the conditions. An auditor reviews the financial statements, tax returns, and documents to identify any discrepancies or errors during the process.
In order for the governing body to determine whether a taxable organization is adhering to the Corporate Tax law and standards as per FTA guidelines, corporate tax audits are carried out and submitted to the government. It is mandatory for all companies to adhere to this Corporate Tax Law and Audit procedures. The FTA investigates if the taxable companies have settled all debts and that all taxes are due to have been collected and paid to the authorities within the time limit specified through the tax audit. The purpose of a corporate tax audit is to ensure that companies are paying the correct amount of tax and following the regulations set by the FTA in the UAE. Companies that fail to comply with tax regulations may face Corporate Tax penalties or legal action.
For a seamless corporate tax registration process, rely on our expert team for efficient and hassle-free assistance.
Understanding Corporate Tax's true impact is crucial for minimizing liabilities, maximizing savings, and ensuring bussiness success.
Seeking assistance with Corporate Returns? Our team aids in document preparation, tax liability calculation, and compliance.
1. Ajuridical person that is a Resident Person, incorporated or otherwise established or recognized prior to the effective date of this Decision, shall submit the Tax Registration application, in accordance with the following table:
| Date of Licence issuance irrespective of year of issuance | Deadline for submitting a Tax Registration application |
|---|---|
| 1 January - 31 January | 31 May 2024 |
| 1 February - 28/29 February | 31 May 2024 |
| 1 March - 31 March | 30 June 2024 |
| 1 April - 30 April | 30 June 2024 |
| 1 May - 31 May | 31 July 2024 |
| 1 June - 30 June | 31 August 2024 |
| 1 July - 31 July | 30 September 2024 |
| 1 August - 31 August | 31 October 2024 |
| 1 September- 30 September | 31 October 2024 |
| 1 October - 31 October | 30 November 2024 |
| 1 November - 30 November | 30 November 2024 |
| 1 December - 31 December | 31 December 2024 |
| Where a person does not have a Licence at the effective date of this Decision | Three months from the effective date of this Decision |
2. For the purposes of Clause 1 of this Article, where a juridical person has more than one License, the License with the earliest issuance date shall be used.
3. A juridical person that is a Resident Person incorporated or otherwise established or recognized on or after the effective date of this Decision, shall submit a Tax Registration application, in accordance with the following table:
| Category of juridical persons | Deadline for submitting a Tax Registration application |
|---|---|
| A person that is incorporated or otherwise established or recognised under the applicable legislation in the state, including a Free Zone Person | Three months from the date of incorporation, establishment or recognition |
| a person that is incorporated or otherwise established or recognised under the applicable legislation of a foreign jurisdiction that is effectively managed and controlled in the state | Three months from the end of the Financial Year of the person |
| TAxable Income | Corporate Tax Rate |
|---|---|
| Upto AED 375,000 | Nill |
| Above AED 375,000 | 9% |
The terms “Business” and “Business Activity” as defined in the Corporate Tax Law identify when the activities of certain persons give rise to a UAE CT liability by considering the person to be a taxable person.
“Business” means any economic activity, whether continuous or short term, conducted by any person. It is implied that a business is conducted with a profit motive, and that there is the existence of some system and organization to the activity conducted. However, a business or business activity for UAE CT purposes does not lose its identity simply because it does not make a profit.
For the application of the Corporate Tax Law to companies and other juridical persons, all activities conducted and assets used or held will generally be considered activities conducted, and assets used or held, for the purposes of a “Business”.
Individuals can earn income from wages and salaries, investments or from practicing a commercial, industrial or professional activity, either directly or as sole proprietor of a business. For natural persons, a Cabinet Decision will be issued in due course specifying further information on what would bring a natural person within the scope of UAE CT.
Yes. Transfer pricing rules apply to UAE businesses that have transactions with Related Parties and Connected Persons, irrespective of whether the Related Parties or Connected Persons are located in the UAE mainland, a Free Zone or in a foreign jurisdiction.
Where no election is made or the income of the foreign branch or permanent establishment is not eligible for an exemption from CT, the UAE CT payable on the income of the foreign branch or permanent establishment can be reduced by the corporate tax (or similar) paid on the relevant income in the foreign jurisdiction.
A competitive CT regime based on international best practices is expected to cement the UAE’s position as a leading global hub for business and investment and accelerate the UAE’s development and transformation to achieve its strategic objectives.
Introducing a CT regime also reaffirms the UAE’s commitment to meeting international standards for tax transparency and preventing harmful tax practices.
The term “Natural Person” in the Corporate Tax Law means an individual.
Most countries in the world have a comprehensive CT regime, including most of the countries in the Middle East.
The UAE CT regime will become effective for financial years starting on or after 1 June 2023.
Examples :
UAE CT applies to juridical persons incorporated in the UAE and juridical persons effectively managed and controlled in the UAE, as well as to foreign juridical persons that have a permanent establishment (see section Foreign persons) in the UAE (see question ‘Who is considered resident for UAE CT purposes?’ under section Scope and rate).
Individuals will be subject to CT only if they are engaged in a business or business activity in the UAE, either directly or through an unincorporated partnership or sole proprietorship. A Cabinet Decision will be issued in due course specifying further information on what would bring a natural person within the scope of UAE CT.
Yes – the UAE CT does not differentiate between nationality or residence. Juridical persons that are incorporated or resident in the UAE, or that have a permanent establishment in the UAE, will be subject to UAE CT. This applies irrespective of the residence and nationality of the individual founders or (ultimate) owners of the entity.
Yes. The UAE CT is a Federal tax and will therefore apply across all the Emirates.
The taxable income for a Tax Period is the accounting net profit (or loss) of the business, after making adjustments for certain items as defined in the Corporate Tax Law.
No, CT and VAT are two different types of taxes. Both will continue to apply in the UAE.
In principle, all legitimate business expenses incurred to derive taxable income will be deductible, although the timing of the deduction may vary for different types of expenses and the accounting method applied. For capital assets, expenditure would generally be recognized by way of depreciation or amortization deductions over the economic life of the asset or benefit.
Expenditure that has a dual purpose, such as expenses incurred for both personal and business purposes, will need to be apportioned with the relevant portion of the expenditure treated as incurred wholly and exclusively for the purpose of the taxable person’s business.
If you are a registered business for VAT, you will have to pay VAT and CT separately. If your business is not VAT registered you may still have to pay CT.
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