The corporate tax system in the UAE is unique and a bit complicated for businesses. Therefore, businesses are required to understand the requirements of tax authorities regarding corporate tax, such as corporate tax registration, corporate tax return filing UAE, etc. According to the Corporate tax law, all companies in the UAE are required to file their tax returns in accordance with corporate tax standards established by the FTA to avert fines for non-compliance.
Since this concept is relatively new, companies may face challenges in comprehending and fulfilling these challenges. Hence, through this comprehensive guide, we will try to cover every aspect of Corporate Tax in the UAE, including tax return filing, its deadline, and legal requirements.
Corporate Tax in the UAE
In January 2022, the UAE Ministry of Finance declared the implementation of a Corporate Tax (CT) at a standard rate of 9% on the net profits of businesses operating across all the emirates. However, if the annual taxable profits of the business are under AED 375,000, they would be subject to a 0% rate. The new tax regime is governed by Federal Decree-Law No.60 of 2023 and is incorporated with the following intentions:-
- Make UAE a top global destination for business and investment.
- Accelerate its growth and achieve its goals.
- Commit to international tax standards and prevent unfair tax practices.
Key points regarding Corporate Tax in the UAE:-
- Compulsory adherence
According to Federal Decree Law 47, all taxable entities in the UAE are required to comply with corporate tax laws and register for corporate tax with the FTA, even those exempted by the Ministry.
- Unique registration number
Taxable entities are required to obtain a unique tax registration number from the FTA. This can be attained by following a prescribed format and adhering to specific timelines established by the authority.
- Tax rates
Upon successful registration, taxable entities are subject to a standardized corporate tax rate of 9% if their annual taxable profit exceeds AED 375,000, and 0% if the taxable income is up to AED 375,000.
Importance of Corporate Tax in the UAE
The newly implemented corporate tax system encourages businesses to voluntarily contribute to the development of the nation’s economy, thus resulting in several benefits:-
- Compliance and transparency – Businesses adhering to corporate tax regulations can easily maintain compliance with tax laws. It helps them identify and address malicious tax practices, thereby ensuring transparency within the organization.
- World-class standards – The corporate tax system of the UAE aligns with international taxation standards, and by practicing them, businesses can operate efficiently within the legal framework.
- Financial impact – Corporate tax has a direct impact on the financial health of the organization. It reduces the net earnings of the company, which eventually affects its productivity and overall financial stability.
- Shareholders’ interest – Corporate tax affects both direct and indirect shareholders of the company. It also includes ones with private pensions or investment funds.
Requirements for Corporate Tax Registration in UAE:-
- A copy of the trade license
- Passport copies of the trade license holders
- Emirates ID copies of the license owners/partners/shareholders
- Memorandum of Association (MOA) or Article of Association (AOA)
- The relevant corporate tax period
Corporate Tax Return Filing UAE
Corporate Tax return filing is a process where the taxable entity submits the report to the relevant tax authority detailing their income and expenses. According to the Corporate Tax law, the returns must be filed for a specific tax period. Any failure or negligence to file tax returns or pay taxes can result in legal consequences.
So, how do you know whether you are eligible to file corporate tax returns in the UAE? Businesses meeting the following conditions are subject to corporate tax in the UAE –
- If a company or individual has a trade license in the UAE
- Businesses operating in the Free zone
- Foreign individuals or companies doing regular business in the UAE
- Certain businesses like banks, real estate companies, builders, and brokers
- Businesses operating regularly in the UAE
The process of Corporate tax return filing UAE involves several steps –
Obtain a Tax Registration Number – Obtaining a TRN (Tax Registration Number) is the first step to corporate tax return filing UAE. TRN is a unique identification number assigned to every business by the Federal Tax Authority (FTA). To apply for a TRN, companies have to provide the necessary details such as their trade license number, legal entity name, and contact details to the FTA. To ensure a seamless corporate tax return filing, consult an expert tax consultant of Shuraa Tax.
Keep accurate records – Businesses are required to keep accurate records of all their financial transactions including the records of income, expenses, and assets for a minimum of five years. This is to ensure that they are available for inspection as and when required by the tax authorities.
Prepare the tax return – Preparing for tax returns is imperative for every taxable entity. Companies must ensure to arrange all the necessary documents required to prepare the tax return accurately. Further, they need to fill out a tax return form provided by the FTA.
Submit the tax return – Once the tax return is prepared accurately, submit it to the authorities. Additionally, companies must make sure that the tax return is submitted before the deadline in order to avoid any penalties.
Deadlines for corporate tax return filing UAE
The tax return needs to be filed annually by the companies in the UAE. However, the deadline is different for every company depending on their financial year-end. For companies with a financial year-end of 31 December, the deadline would be 31 March of the following year. Similarly, for companies with financial year-end between 1 January and 31 March, the deadline would be 28 April.
Thus, different financial year-ends will have different deadlines. Hence, it is better to seek expert help to confirm the cut-off date for your corporate tax return filing so that your company is not subject to any hefty fines or penalties.
Elements of Corporate Tax Return Filing UAE
In order to file the Corporate Tax Return, you need to provide information about the profits and expenses of the company. The basic documentation includes:
- Balance Sheets depicting the financial position of the company for a specific period.
- Profit and Loss Statements detailing the revenues, costs, and expenses of the business during a specific period.
- Cash Flow Statements showing the inflow and outflow of cash.
- A Tax Residency Certificate (TRC)
- Business License.
- Detailed Records of Financial Transactions (sales, purchases, expenses, and investments)
- Incoming and Outgoing Fund statements.
- Invoices and Receipts.
- Employee Records, including details of salaries, benefits, and taxes paid.
- Contracts and Agreements related to business.
- Previous Tax Returns.
- Audit Reports.
- Statements of Financial Position.
- Receipts for Claimed Deductions.
- Depreciation Records.
- Transfer Pricing Documentation.
- Changes in Financial Reserves.
- Documentation of Exemption Status.
- Business Loan Documents.
- Records of Foreign Taxes Paid.
Choose the best tax consultants in UAE
If you wish to file your tax returns seamlessly and stay compliant with corporate tax regulations and standards of the UAE, it is advisable to avail of the assistance and services of an accredited tax consultancy firm in the UAE like Shuraa Tax and Accounting Consultancy. Their professionals will guide you through every tax activity including the preparation of documents, calculation of tax liability, and compliance with tax obligations such as registration, return filing, refunds, deregistration, etc.
For any further questions or additional information, feel free to contact the team of Shuraa Tax.
