The United Arab Emirates introduced a
federal corporate tax system in June 2023 to mark a new chapter in the
financial regulations of the country. The new law mandated Corporate Tax
Registration UAE for eligible corporations which need to be completed timely to
avoid any legal consequences. However, oftentimes, business owners in the UAE
find it difficult to make their way through the complicated corridors of
corporate tax.
Therefore, in this guide, you find all the information
regarding corporate tax, the basics and the requirements for the registration
process, including the corporate
tax registration fees in UAE.
Corporate Tax in the UAE
Corporate Tax, also referred to as “Business Tax”,
“Business Profit Tax”, or “Corporation Tax”, is a form of direct tax paid to
the government by commercial entities based on their assessed net income or
earnings. The UAE government implemented Corporate tax to align with
international standards and improve the nation’s position as the preferred
destination of choice for business and investment. This regime also encourages
tax transparency in order to help offset harmful tax competition and
reciprocate with developed countries.
Corporate Tax Registration UAE
Corporate Tax Registration refers to the process where
an individual or a company registers with the FTA (Federal Tax Authority) and
becomes a legal entity through Corporate Taxation. Federal Decree-Law No. 47 of
2022 on the Taxation of Corporations and Businesses, issued by the Ministry of
Finance, states that all individuals and businesses that have a commercial
license and operate in the UAE are required to register for Corporate Tax unless
they are exempted. The FTA has established a corporate tax rate of 9% on
taxable income exceeding a specific threshold, which is AED 375,000.
Nevertheless, before diving into the Corporate Tax
Registration UAE process, you need to understand whether or not you are
eligible for registration.
·
Mandatory Registration - Businesses that generate
annual taxable income above AED 375,000 must mandatorily register for corporate
tax. The taxable income of a company is the net income or profit, after
adjusting certain deductions and add-backs.
·
Voluntary Registration – On the
other hand, businesses with income below this threshold can opt for voluntary
registration. Although it is not mandatory, it can still be beneficial for
businesses looking to claim foreign tax credits or operate in multiple
jurisdictions.
Additionally, businesses operating in the UAE Free
zones, that meet the specific criteria,
may qualify for a 0% corporate tax rate under the Qualifying Free Zone
Person (QFZP) rules.
Guide to Corporate Tax Registration
UAE: Step-by-step process
The corporate tax registration process involves the
following steps:-
Determine the eligibility for registration
The first civil step in the process is to determine
whether your entity is eligible for corporate
tax registration UAE. According to Article 11 of the
Corporate Tax Law, the following entities are eligible for registration:-
·
Commercial entities registered in the UAE
·
Foreign entities that handle the majority of their
operations in the UAE
·
Non-resident juridical persons with a Permanent establishment
in the UAE
·
Non-Resident persons deriving State Sourced Income
·
Non-tax residents with a legal acquisition of Income from
Immovable Property in the UAE
·
Legal entities with a turnover of business over AED
1,000,000, according to the Gregorian calendar year
Apply for a Tax Registration Number
(TRN)
A Tax Registration Number (TRN) is a prerequisite for
corporate tax registration in the UAE. It is a unique number assigned to
businesses individually and further used by them to complete any transactions
associated with taxes in the UAE, such as filing tax returns and issuing
invoices. To get a TRN, businesses need to apply to the FTA by providing them
the required details such as the legal status of the company, the trade license
number, and contact information. Upon submitting these details, the FTA will
assess your information and issue a TRN for your business.
Assemble the documents for
registration
Once the TRN is obtained, gather the documents
required to complete the process, such as –
·
Trade license
·
Memorandum of Association (MOA)
·
Passport copies
·
Company ID of the owner
Make
sure to verify all documents before submission for accuracy.
Submit the registration application
Along with the TRN and other important documents,
submit an application for registration to the FTA. Fill out the application
form and provide information about the efforts, changes, and other
exemption-related details of the company. To avoid any legal problems, it is
recommended to re-check all the information and documents.
Get approval from the FTA
Further, the FTA will review the application and
confirm if the provided information is correct and up-to-date. It may also ask
for further supporting documents or explanations in certain cases. Hence,
businesses must deal with such requests on time to ensure a smooth run of the
approval.
File for the Corporate Tax (in the
given tax period)
Once
the application is approved by the FTA, it will issue a Corporate Tax
registration certificate to the company as legal proof. After receiving the
certificate, the company can go ahead and pay its corporate taxes.
Consulting an expert in taxes like Shuraa Tax will
help you determine and meet all your taxation requirements that apply to your
business.
Penalty
for non-compliance
The UAE corporate tax law states that any business or
individual who fails to file for corporate tax registration within the
mentioned periods shall be subject to a penalty of up to AED 10,000. Hence, to
dodge such situations, it is advisable to seek professional support from a
competent tax consultancy firm such as Shuraa Tax that can help you file for
corporate tax registration on time and without any potential errors.
Common mistakes to avoid during
corporate tax registration UAE
The whole process of Corporate tax registration may
seem easy at first. However, there are certain pitfalls businesses can be
exposed to. Hence, to avoid such circumstances, it is important to be aware of
these mistakes.
·
Incomplete or inaccurate information – While
filling in the information in the tax registration form, businesses must review
it thoroughly to check if the provided details are accurate and comprehensive.
·
Missing deadlines – Businesses must be aware
of the time limits specified for application filing and document submission.
Missing the deadlines may result in working longer or even hefty penalties.
·
Lack of understanding – It is essential for
businesses to be informed of the basic tax requirements and procedures of
registering for taxes. In case there is any challenge, they can always seek the
services of a tax professional like Shuraa Tax.
·
Not maintaining proper records – Businesses
must ensure to maintain accurate financial records to avoid any delays or
errors in tax filings and audits.
Choose Shuraa Tax for all your
taxation matters
In a nutshell, companies falling under the eligible
category are required to register for Corporate Tax with the FTA. Compliance
with specific rules and regulations and adherence to the requirements makes the
process more efficient. This not only keeps businesses legally clear but also
encourages significant contributions to the continuous growth of the UAE
economy.
Therefore, it is highly recommended to involve
professional tax agents of Shuraa Tax Consultants and Accountants to address
the corporate tax needs of your company and achieve a high level of compliance
with the provisions. These professionals guarantee reliable support in all
tax-related matters including corporate tax registration, tax return filing,
tax payments, compliance, and more.
Book
your free consultation today at info@shuraatax.com
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