General particulars
From June 2023 onwards, the UAE has made significant changes in the tax structure by introducing corporate tax. All companies now have to get registered with the FTA, submit tax returns, and pay tax as appropriate. A penalty of AED 10,000 is imposed for failing to register.
Important Facts about Corporate Tax in the UAE
- Corporate Tax (CT): A 9% tax is charged on the profit over AED 375,000, while the profits below the amount are not taxable. Taxable income is defined in terms of net income or loss, which is then modified by the add-backs.
- Special rules: Businesses in the free zones may have other tax rate advantages:
- Small Business Relief: Where businesses with a turnover of not more than AED 3 million are zero-rated.
- Qualifying Free Zone Person (QFZP): This is an income standard where if one derives income from qualifying activities, the entity becomes entitled to a zero percent rate.
How to Register a Business in UAE for Tax purposes
- Time of Registration: It is necessary to obtain registration by the year 2024. The filing of tax returns and payment of taxes should occur within 9 months from the end of the tax period.
- Place of Application: Application for registration is done online at the EmaraTax Portal. This is a prerequisite for returning the first tax return.
- Who Must Register: The FTA requires all persons whether natural or legal and companies registered under Islamic law to register with it.
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Step-by-step Process of Registration
- Log in: Go to the EmaraTax Portal and log in using your username and password or UAE PASS.
- Taxable Person Creation: Click "Create" to include your business as a Taxable Person.
- Start Registration: Click “Register” on the homepage under the Corporate Tax category.
- Provide Required Information: Indicate a registered entity, trading name, business activities, licenses, owners, and address of the business.
- Finalities: Check the details provided and forward the application.
You will be given a reference number which you can use to track your application once you have sent it.
Post-Registration Essentials
- Tax Returns: Every registered person should submit the tax return within 9 months after closing of the tax year irrespective of the tax rate.
- Accounting: For the tax declaration process to be free of errors, appropriate accounting records must be maintained.
- Deregistration: Upon cessation of business, a tax return accompanied with the tax return due on the period within which the cessation occurs and fines shall be paid prior to de-registering from the system.
Expert Opinion
The new corporate tax notwithstanding, it is argued that the UAE is still an appealing market for business setup. From a global perspective, with its lenient tax rate of only 9%, it is also very favorable regarding the establishment and tax optimization of businesses. The process for registration of companies is more systematic but does not overwhelm the clients with the necessary assistance.
For help on matters relating to corporate tax, corporate registration, and corporate tax filing, consult business advisors such as those at Emirabiz. We will assist in ways to lessen your tax burden and also make the necessary provisions to comply with the laws of the UAE.
Elena O.
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