Corporate tax registration in UAE
What is Corporate tax registration in UAE ?
Corporate tax registration in UAE is a process that requires businesses to register with the UAE Federal Tax Authority (FTA) and get a Corporation tax registration in UAE ID or number. The registration process involves logging in to the EmaraTax portal and providing accurate information about the company, such as trade license details, ownership structure, financial records, and contact information. The corporate tax rate in UAE varies from 0 percent to 9 percent depending on the type and location of the business.
How to apply in Corporate tax registration in UAE ?
Taxable entities must follow these steps for Corporate tax registration in the UAE:
-Business License Registration:
Register the business license with the Federal Tax Authority to obtain a unique Tax Registration Number (TRN), essential for companies engaged in taxable activities in the UAE.
-Online Registration Form:
Complete an online registration form provided by the FTA, furnishing specific details about the corporation, such as legal name, address, and nature of business activities.
Submit supporting documents, including the trade license and articles of incorporation.
-TRN Issuance:
Upon completion, the corporation receives a Tax Registration Number, which must be used in all tax-related records, including tax returns and invoices. Safeguard the TRN as it is intricately linked to the corporation’s financial activities in the UAE.
-Ongoing Tax Obligations:
Comply with various tax-related obligations, including maintaining accurate financial records, timely submission of tax returns, and payment of all applicable taxes.
Corporate tax registration in UAE Documents
To initiate Corporate tax registration in the UAE, businesses must provide the following documents:
- Trade License
- Shareholders/Directors’ Passports
- Emirates ID Copies
- Memorandum of Association (MOA) or Power of Attorney (POA)
- Share Register and Share Certificate
- Financial Statements
- Bank Statements
- Audited Statements (if applicable)
- Contact Information
- Bank Account Information
- FTA Portal Login Credentials (if registered for VAT)
Additionally, other business details, identification information, and contact details of owners and partnerships are required. It is essential to verify and submit accurate details before completing the registration form.
What is the tax rate?
The UAE introduced the federal corporate tax with a standard statutory rate of 9 per cent starting from the financial year beginning on or after June 1, 2023.
It brought the income of companies exceeding Dh375,000 ($102,110) within the taxable bracket. Taxable profits below that level will be subject to a tax of zero per cent.
In May, the Ministry of Finance confirmed that business owners in the country would be subject to corporate tax only if their turnover in a calendar year exceeds Dh1 million, ensuring that only business or business-related activity income is taxed.
That means that a business owner or entrepreneur making Dh500,000 from their business in a calendar year would not pay tax on their earnings.
For example, if a UAE resident operates an online business and the combined annual turnover from the business exceeds Dh1 million, under the new decision, that income would be subject to corporate tax.
However, if the resident also earns income from a rental property and personal investments, these sources of income would not be subject to the tax, as they fall under the out-of-scope categories, the ministry said.
Deadlines for UAE Corporate Tax registrations explained: When, how Dh10,000 fine applies
According to the Ministry of Finance, an administrative penalty of Dh10,000 applies for late registrations.
Here is all you need to know
Authorities in the UAE have specified deadlines for businesses to submit their Corporate Tax registration applications. Effective from March 1, 2024, the Federal Tax Authority (FTA) decision has spelt out timeframes for each segment of taxable entities or persons to register and avoid violating tax laws.
According to the Ministry of Finance, an administrative penalty of Dh10,000 applies for late registrations. Here is all you need to know.
For new resident businesses incorporated after March 1, the registration deadline is “mostly” three months from the date of incorporation, Rayma said.
Here are the deadlines as specified by the FTA:
- A person that is incorporated or recognized under the applicable legislation in the UAE, including a free zone person: Three months from the date of incorporation, establishment or recognition.
- A person that is incorporated or recognized under the applicable laws of another country or foreign jurisdiction: Three months from the end of the financial year of the person
– Non-resident juridical person prior to March 1
- A person that has a permanent establishment in the UAE: Nine months from the date of existence.
- A person that has a nexus in the UAE: May 31
– Non-resident juridical person after March 1
- A person that has a permanent establishment in the state: Six months from the date of existence
- A person that has a nexus in the state: May 31
– Natural persons (individuals operating in their personal capacity)
According to Rayma, the deadline for resident natural persons with a turnover exceeding Dh1 million is March 31 of the subsequent year, while non-resident natural persons must register within three months of meeting the requirements of being subject to tax.
Understanding Corporate Tax Registration
Before diving into it’s importance, let’s first understand corporate tax registration.
Corporate tax registration in UAE is officially signing up your business with the proper authorities to ensure you follow all the tax rules and laws. Every business in the UAE has to do this, and it’s necessary because it helps keep things fair and square financially.
When you register your company for corporate tax in the UAE, you commit to abide by the tax rules. This keeps you out of trouble and ensures financial matters in the UAE stay organized.
But it’s not just about following the rules—being registered for corporate tax in the UAE can also bring benefits like tax breaks, which can help your business.
Ensuring your corporate tax registration in UAE is sorted is a big deal. It’s laying down a solid foundation for your business. At AHG Chartered Accountants, we’re here to help you navigate this tax process and set your business up for success.
Consequences of Missing Tax Return Deadlines
Adhering to the prescribed timelines for corporate tax filing in the UAE is an essential regulatory requirement; it is a fundamental part of maintaining a stable business environment. Failing to meet these deadlines can lead to a range of severe consequences:
- Penalties and Fines: The UAE tax authorities impose significant penalties for late filing of tax returns. These penalties can accrue daily until the return is filed. Depending on the delay, fines can significantly impact a company’s financial stability.
- Loss of Good Standing: Non-compliance with tax return deadlines can result in a loss of good standing with the tax authorities, which can adversely affect a company’s reputation and its ability to do business effectively.
- Legal Ramifications: Non-compliance with tax regulations can lead to legal action, including the suspension or revocation of business licenses. This can disrupt business operations and lead to long-term consequences.
- Reputational Damage: Late or non-compliance with tax obligations can tarnish a company’s reputation in the market. It can lead to a loss of trust among stakeholders, including customers, partners, and investors.
- Audits and Scrutiny: Companies that fail to meet tax return deadlines may be subjected to rigorous audits and scrutiny by tax authorities. This can consume time and resources that could be better utilized for business growth.
- Cash Flow Constraints: Penalties and fines resulting from late filings can impose significant financial burdens on businesses. This may affect cash flow and the company’s ability to invest in expansion or day-to-day operations.
Top 6 facts you should know about corporate tax law in UAE:
- All businesses in Dubai are required to register for corporate tax.
- All companies are required to perform accounting & bookkeeping in with compliance to the Federal Tax Authority (FTA) rules.
- If your business is exempt from corporate tax, the burden of proof falls on the business.
- All businesses have to file tax returns, including companies that are eligible for exempt from corporate tax.
- The corporate regulations apply to all companies registered in free zones across UAE.
- Social media influencers and freelancers could be subject to CT.
Why was corporate tax introduced in the UAE?
Taxes on business profits were implemented in the UAE for a number of significant reasons. They include:
- To enhance the nation’s standing as a significant hub for commerce and investment.
- To accelerate the transformation and developmental programmes in order to achieve strategic goals
- To address global standards for tax transparency.
- To eliminate bad tax practises from the system.
- To increase its revenue from non-oil sources.
AHG, Top Audit and Chartered Accountants firm in UAE. Corporate Tax is to be withheld from State Sourced Income of UAE businesses in accordance with Article 45 of this Decree-Law.