Introduction to UAE Corporate Tax
Corporate tax in the United Arab Emirates (UAE) has been implemented by the Ministry of Finance (MoF). The introduction of the federal corporate tax law requires businesses to comply with Corporate Tax Regulation within the stipulated time frame. As of 2024, the UAE has announced new regulations regarding corporate tax registration, signaling a significant step in its taxation system.
Corporate Tax Registration in the UAE
The Federal Tax Authority (FTA) is responsible for the administration, collection, and enforcement of Corporate Tax. Businesses subject to corporate tax are required to register and obtain a tax registration number. Corporate tax in UAE is a crucial step for businesses operating in the country. It is important for these businesses to understand the registration process and ensure they have all the required documents ready for submission.
More than just a revenue tool, the Corporate Tax signifies the UAE’s strategic vision. It aims to:
- Bolster its stature as a global business nexus.
- Drive sustainable growth and transformation.
- Align with global benchmarks for tax transparency and counteract detrimental tax practices.
“The Corporate Tax underscores the UAE’s forward-thinking approach, aligning with global tax standards while fostering sustainable growth.”
New Corporate Tax Registration Deadline
The UAE has set a new corporate tax registration deadline for businesses operating within its jurisdiction. With effect from March 1, 2024, the Ministry of Finance has implemented an Administrative Penalty amounting to AED 10,000 on failure of the Taxable Person to submit a Tax Registration application within the specified timeframe.
Timeline for Corporate Tax Registration
Below is the Corporate Tax Registration Timeline applicable for a business which is incorporated in the UAE prior to the date which is 1st March of 2024.
| Date of License issuance irrespective of year of issuance | Deadline for submitting a Tax Registration application |
| January 1 – January 31 | May 31, 2024 |
| February 1 – February 28/29 | May 31, 2024 |
| March 1 – March 31 | June 30, 2024 |
| April 1 – April 30 | June 30, 2024 |
| May 1 – May 31 | July 31, 2024 |
| May 1 – May 31 | July 31, 2024 |
| July 1 – July 31 | September 30, 2024 |
| August 1 – August 31 | October 31, 2024 |
| September 1 – September 30 | October 31, 2024 |
| October 1 – October 31 | November 30, 2024 |
| November 1 – November 30 | November 30, 2024 |
| December 1 – December 31 | December 31, 2024 |
| Where a person does not have a License at the effective date of this Decision | (3) three months from the effective date of this Decision |
Natural Persons conducting a business in UAE must also submit a Tax registration within specific timelines based on their category:
| Category of Natural Persons | Deadline for submitting a Tax Registration application |
| A Resident person who is conducting a Business or Business Activity during the 2024 Gregorian calendar year or subsequent years whose total Turnover derived in a Gregorian calendar year exceeds the threshold specified in the relevant tax legislation | 31 March of the subsequent Gregorian calendar year |
| A Non-Resident Person who is conducting a Business or Business Activity during the 2024 Gregorian calendar year or subsequent years whose total Turnover derived in a Gregorian calendar year exceeds the threshold specified in the relevant tax legislation | (3) three months from the date of meeting the requirements of being subject to tax |
How to Register and Who Needs to Register for Corporate Tax in UAE
To register for corporate tax in the UAE, businesses must follow the guidelines provided by the Federal Tax Authority (FTA). Generally, companies engaging in activities subject to corporate tax are required to register. This includes entities operating in sectors such as banking, insurance, and oil and gas, among others. Additionally, businesses meeting certain revenue thresholds may also be obligated to register for corporate tax.
Documents Required for Corporate Tax Registration in UAE
When registering for corporate tax in the UAE, businesses must prepare a set of documents to comply with the regulatory requirements. These documents typically include but are not limited to, company incorporation documents, financial statements, tax identification numbers, and any other relevant licenses or permits. Ensuring the completeness and accuracy of these documents is crucial for a smooth registration process and to avoid potential penalties or delays.
1. Copy of Trade License (must not be expired).
2. Passport copy of the owner/partners who own the license (must not be expired).
3.Emirates ID of the owner/partners who owns the license (must not be expired).
4. Memorandum of Association (MOA) – Or – Power of Attorney (POA)
5. Concerned person’s contact details (Mobile Number and E-mail).
6. Contact details of the company (complete address and P.O. Box).
7. Corporate Tax Period.
Who needs to Register
As for who needs to register, every taxable person, including a Free Zone person, needs to register for corporate tax and get a Registration Number. This includes all businesses and individuals conducting business activities under a commercial license in the UAE, including free zone businesses. The tax will also apply to foreign entities and individuals only if they conduct a trade or business in the UAE in an ongoing or regular manner.
In conclusion, the registration for Corporate Tax in the UAE is a crucial step for businesses operating in the country. It is important for these businesses to understand the registration process, ensure they have all the required documents ready for submission, and complete the registration process within the stipulated time.
Who is Exempted in Corporate Tax?
The Corporate Tax in the UAE has several exemptions, particularly for businesses operating in strategic sectors. The following entities are exempt from the corporate tax:
- Government entities: These include federal and local government bodies.
- Government-controlled entities: These are entities where the government has a controlling interest.
- Extractive and non-extractive natural resource businesses: These are businesses engaged in the extraction of natural resources like oil and gas, or non-extractive businesses like mining.
- Qualifying public benefit entities: These are entities that provide public benefits and meet certain criteria set by the government.
- Qualifying investment funds: These are investment funds that meet certain criteria set by the government.
- Public pension or social security funds: These are funds that provide pension or social security benefits to the public.
- Private pension or social security funds: These are funds that provide pension or social security benefits to private individuals or entities.
Additionally, an entity that is wholly owned and controlled by an exempt person is also exempt if it undertakes part or all the activity of the person, exclusively holds assets or invests funds for the benefit of the person, and only carries out activities that are ancillary to those carried out by the person.
The Corporate Tax applies to a broad range of businesses and individuals conducting business activities in the UAE, there are several exemptions in place. These exemptions are designed to support strategic sectors and certain types of entities and to ensure that the tax system is fair and equitable.
What is Qualifying Free Zone Person (QFZP) in Corporate Tax
Definition: A QFZP is a juridical person incorporated, established, or registered in a Free Zone, subject to Corporate Tax under specific laws, and meeting certain conditions.
Conditions to be a QFZP:
- Maintains adequate substance in the State (e.g., Core Income-Generating Activities, assets, employees, operating expenditures).
- Derives Qualifying Income.
- Has not elected to be subject to 9% Corporate Tax.
- Complies with Transfer Pricing requirements.
- Non-qualifying revenue does not exceed de minimis requirements.
- Prepares audited financial statements.
I. Meaning of Qualifying Income in Corporate Tax
Categories of Qualifying Income:
Qualifying Income” refers to the types of income that a Qualifying Free Zone Person (QFZP) can earn that are eligible for certain tax benefits.
- Immovable Properties: Ownership or exploitation.
- FZP: Transactions with other FZP, except income from Excluded Activities.
- Permanent Establishment: Income attributable to a Domestic or Foreign PE.
- NFZP: Transactions with NFZP that are Qualifying Activities (not excluded).
- Other Income: Any other income satisfying de minimis requirements.
II. Understanding Transaction with FZP in Corporate Tax
FZP stands for Free Zone Person, which typically refers to a business entity that is registered and operates within a Free Zone. Free Zones are special economic areas within a country where businesses often benefit from reduced taxes, customs duties, and regulatory requirements.
A “transaction with FZP” would refer to any business deal or commercial activity conducted between Free Zone Persons or between a Free Zone Person and another entity.
| Category | Details |
| Excluded Activities | – Income from certain regulated financial services |
| – Ownership or exploitation of intellectual property assets | |
| – Transactions with natural persons (with exceptions) | |
| Eligibility for 0% Tax Benefit | – Transactions of QFZP with FZPs |
| – Income derived from non-excluded activities | |
| – Free Zone Person is the Beneficial Recipient |
III. Meaning Transaction with NFZP in Corporate Tax
An entity or individual that is not registered or operating within a Free Zone. Free Zones are special economic areas that often provide certain tax benefits and reduced regulatory requirements. An NFZP would be outside of these zones and subject to the standard laws and regulations of the jurisdiction.
Qualifying Activities:
- Reinsurance services.
- Fund management services.
- Wealth & investment management services.
- Treasury and financing service to Related Parties.
- Headquarter services to Related Parties.
- Holding of shares and other securities.
- Manufacturing/processing of goods or materials.
- Distribution of goods or materials.
- Ownership, management, and operation of Ships.
- Financing and leasing of Aircraft.
- Logistics Services.
Ancillary Activities: Activities that are supplementary to the above.
IV. What is De Minimis Requirements in Corporate Tax
The De Minimis Requirements set a boundary to determine when non-qualifying revenue is significant enough to impact the tax treatment of a QFZP. If the non-qualifying revenue is below the specified limits, it is treated as insignificant for tax purposes, and the QFZP may still qualify for the tax benefits.
This concept is commonly used in various legal and financial contexts to simplify regulations and administration by ignoring trivial details or amounts.
Criteria:
UAE’s Corporate Tax Regime Compared to Other Countries
The corporate tax rate in the UAE is competitively positioned when compared to other major financial centres and developed economies. The tax rates are as follows:
- 0% for taxable income up to AED 375,000
- 9% for taxable income above AED 375,000
- A different tax rate (not yet specified) for large multinationals that meet specific criteria set with reference to ‘Pillar two’ of the OECD Base Erosion and Profit Shifting Project.
When compared to other major financial centres, the UAE’s corporate tax rate is relatively low. For instance, the average top corporate tax rate among the EU countries is 21.3 per cent. The figure stands at 23.04 per cent among Organisation for Economic Co-operation and Development countries and 26.7 per cent in the G7, according to the Tax Foundation in Washington. (However, this information is only a rough count and may change).
This competitive tax rate positions the UAE as an attractive destination for businesses and investors, offering a favourable tax environment compared to many other major economies.
Importance of Registering for Corporate Tax in UAE
Registering for Corporate Tax in the UAE is of paramount importance for several reasons:
| Access to Services: In many cases, having a tax registration number is a prerequisite for accessing certain services or benefits. For example, businesses may need to provide their tax registration number when opening a bank account, applying for business loans, or engaging in certain types of contracts. |
| Transparency and Reputation: Registering for Corporate Tax also contributes to the transparency and reputation of a business. It demonstrates that the business is compliant with local laws and regulations, which can enhance its reputation with clients, investors, and other stakeholders. |
Registering for Corporate Tax in the UAE is not only a legal requirement but also an important aspect of responsible business management.
Do you need to assess your corporation’s taxes before registering?
Yes, it is crucial to assess your corporate’s taxes before registering. This is where Adam Global can assist. We offer a wide array of accounting, taxation services across the UAE to help you in planning to merge or acquire a company in the UAE to steer clear of any sort of post-transaction upsets. Our team is known for providing quality services in all aspects of a business, from business inception to business expansion and everything in between.
How Adam Global Can Assist you with Corporate Tax Registration in UAE
Adam Global is a Dubai-based full-fledged business, taxation and accounting consultancy firm. We offer a wide array of taxation services across the UAE to help you in deciding to merge or acquire a company in the UAE to steer clear of any sort of post-transaction upsets. We are known for providing quality services in all aspects of a business, from business inception to business expansion and everything in between.
Conclusion
The introduction of Corporate Tax in the UAE marks a significant shift in the country’s tax landscape. It is crucial for businesses operating in the UAE to understand the new tax laws and regulations and ensure they are compliant. We are here to assist you with all your corporate tax needs, from understanding the new laws to registering for the Corporate Tax. For more information Contact us today at +971 4341 9701 or email us at info@adamglobal.ae and get expert advice from our consultants.