UAE Corporate Tax: Definition, Corporate Tax Registration and Filing

Danish Fareed March 12, 2024March 18, 2024

Corporate Tax constitutes a direct tax imposed on the Taxable Income of corporations and various businesses. It is applied to a broad spectrum of business profits, encompassing not only companies but also specific partnerships, unincorporated entities, and individuals engaged in business or business activities. The scope of Corporate Tax in the UAE extends to an annual payment structure, referencing the Tax Period of a Taxable Person. The Tax Period corresponds to the financial year or a portion thereof, necessitating the filing of a Tax Return. The financial year, spanning 12 months, is the duration for which financial statements are prepared. This article comprehensively outlines the UAE Corporate Tax, elucidating its definition, registration procedures, and the filing process.

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:

Juridical persons (such as corporations) that are incorporated in the UAE or foreign juridical persons that are effectively managed and controlled in the UAE.
Non-resident juridical persons (foreign entities) that have a Permanent Establishment in the UAE.
Non-Resident Persons deriving State Sourced Income.
Non-resident juridical persons that have a ‘nexus’ in the UAE by virtue of earning income from Immovable Property in the UAE.
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:

Trade license
Passport copies of the authorized signatory
Emirates ID copy of the authorized signatory
Legal persons must submit proof of authorization for the individual who will act as the authorized signatory for the corporate tax registration process. This could be a power of attorney, board resolution, or other relevant documentation.

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:

Business name and legal form
Tax Registration Number (TRN) (if already registered for Value Added Tax)
Contact details (address, phone number, email)
Financial Year start and end dates
Business activities
Estimated annual revenue
Details of the authorized signatory

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:

Taxable Income
Corporate Tax Liability
Tax payments made during the Tax Period
Any available Tax Credits
Any Tax Losses carried forward from previous Tax Periods

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 corporate tax penalties for non-compliance include:

For Not Keeping Required Records or Information: If you don’t keep the necessary records or information as required by the Corporate Tax Law, the penalty is AED 10,000 for each instance. If you repeat this violation within 24 months, the penalty increases to AED 20,000 for each repeated violation??.

For Submitting Documents Not in Arabic When Requested: Failing to submit data, records, and documents in Arabic to the Federal Tax Authority (FTA) when requested attracts a penalty of AED 5,000??.

For Late Deregistration: If you’re late in applying for deregistration, there’s a penalty ranging from AED 1,000 to AED 10,000, depending on how late the application is submitted??.

For Not Informing FTA of Amendments in Tax Records: If you fail to inform the FTA about any changes that may require an update to your tax records, you could face a penalty of AED 1,000 for each violation. For repeated violations within 24 months, the penalty increases to AED 5,000??.

Late Filing of Tax Returns by Legal Representatives: Legal representatives who file tax returns late are penalized AED 500 for each month or part thereof for the first twelve months, and AED 1,000 for each month or part thereof from the thirteenth month onwards??.

Late Payment Penalties: The penalty for not settling the payable tax amounts to a monthly charge of 14% per annum for each month or part thereof, calculated from the day following the due date??.

Incorrect Tax Return Submission: Submitting an incorrect tax return incurs a penalty of AED 500, unless corrected before the deadline??.

Voluntary Disclosure Penalties: If you submit a voluntary disclosure for errors in the tax return, tax assessment, or tax refund application, you face a monthly penalty of 1% on the tax difference for each month or part thereof until the date the voluntary disclosure is submitted?

Seek the Expert Services of Top Tax Consultants in UAE

In summary, the incorporation of corporate tax in the UAE represents a noteworthy advancement in the nation’s tax framework. Although the procedures for registration and filing may appear formidable, engaging the services of corporate tax consultants in the UAE can assist businesses in navigating these complexities and guaranteeing adherence to the new tax structure. With the appropriate guidance and Tax Experts, businesses can proficiently handle their corporate tax responsibilities, unlocking the potential for growth in the UAE. Therefore ,contact us today and we shall be glad to assist you.