Frequently Asked Questions for Corporate Tax Registration:

What is the corporate tax in the UAE?

Corporate tax in the UAE, introduced in 2023, is a federal tax levied on the profits of businesses. It features a tiered structure with a 0% rate for taxable income up to AED 375,000, supporting small businesses and startups, and a 9% rate for income exceeding that threshold. Certain multinational corporations may face a higher rate under the OECD’s Pillar Two framework. While most businesses are subject to corporate tax, exemptions apply to government entities, public benefit organizations, and qualifying free zone businesses that meet specific conditions. The tax aims to align the UAE with global standards while preserving its status as a business-friendly hub.

Who is subject to corporate tax in the UAE?

Corporate tax in the UAE applies to most businesses and legal entities operating within the country. Key groups subject to corporate tax include:

    1. UAE-based Companies: Businesses incorporated in the UAE that generate taxable profits.
    2. Foreign Companies: Entities earning income from UAE sources, such as branch offices.
    3. Individuals with Business Activities: Individuals engaged in commercial, industrial, or professional activities under a business license.
    4. Free Zone Entities: While free zone businesses may benefit from tax incentives, they must meet specific criteria to remain exempt.

      Are companies in free zones subject to corporate tax in the UAE?

      Free zone companies that meet specific regulatory requirements and do not conduct business with mainland UAE are eligible for a 0% corporate tax rate on qualifying income.

              When did corporate tax come into effect in the UAE?

              Corporate tax in the UAE became effective for financial years starting on or after June 1, 2023.

              How will corporate tax impact businesses in the UAE?

              Corporate tax introduces compliance requirements for businesses, including tax registration, regular filings, and record-keeping. However, it also enhances transparency and aligns with global tax practices.

              What documents are required for corporate tax registration?

              Documents typically required include:

              • Copy of valid Trade License (Must not be expired)
              • Valid passports and Emirates IDs of the authorized person and shareholders in the license
              • Memorandum of Association (MOA) or Power of Attorney (POA)
              • Active contact number and Email ID
              • Complete company address including P.O box number
              • Corporate Tax Period (Financial period of your entity)

              (Document to be submitted in PDF)

              How does corporate tax work?

              Corporate tax is calculated as a percentage of a business’s taxable profits. Companies must register for tax, file periodic returns, and pay the applicable tax based on their income and tax slab.

              What is the tax period or financial period for corporate tax?

              The tax period generally aligns with the financial year of the business, which is typically 12 months. Businesses can opt for a different financial year with prior approval.

              What is tax group registration?

              Tax group registration allows two or more related businesses in the UAE to register as a single entity for corporate tax purposes. This option is available for companies that meet specific criteria, such as being UAE residents and having a common parent company or ownership structure.

              By forming a tax group:

              1. Single Tax Return: The group files one consolidated tax return, simplifying compliance.
              2. Offsetting Profits and Losses: Profits of one group entity can offset the losses of another, optimizing tax liabilities.
              3. Intragroup Transactions: Transactions within the group are disregarded for corporate tax purposes, avoiding duplication.

              Tax group registration promotes efficient tax management for businesses with multiple entities under the same ownership.

              Do branches require separate corporate tax registration?

              No, branches are treated as part of the parent company and do not require separate corporate tax registration.

              What are the corporate tax rates in the UAE?

              The UAE corporate tax rates are:

              • 0% on taxable income up to AED 375,000
              • 9% on taxable income above AED 375,000

              What are the corporate tax registration deadlines?

              Businesses are required to register for corporate tax before the end of their first financial year under the new corporate tax regime.

              What is the deadline for filing corporate tax returns?

              Corporate tax returns must generally be filed within 9 months of the end of the relevant financial year.

              What are the administrative penalties for late corporate tax registration and filing?

              In the UAE, administrative penalties apply for late corporate tax registration and filing, ensuring compliance with tax regulations. The penalties include:

              • Late Registration Penalty: Businesses that fail to register for corporate tax within the required timeframe may face fines determined by the Federal Tax Authority (FTA). corporate tax late registration penalty AED 10000
              • Late Filing Penalty: Filing the corporate tax return after the deadline can result in significant penalties.
              • Failure to Pay Tax: Delayed payment of the corporate tax due can incur additional fines based on the overdue amount and duration of non-payment.
              • Non-Compliance Penalties: Additional penalties may apply for incorrect or incomplete submissions or for failing to comply with record-keeping requirements.

              When should a company deregister for corporate tax in the UAE?

              Companies must deregister when they cease all business activities or if they no longer meet the criteria for corporate tax registration.

              Are there penalties for failing to deregister for corporate tax in the UAE?

              Yes, businesses that fail to deregister promptly may face financial penalties and additional administrative consequences.

              What are the compliance requirements after registering for corporate tax?

              After registering for corporate tax in the UAE, businesses must meet several compliance requirements to ensure adherence to the law. These include maintaining accurate financial records and accounting systems to calculate taxable income and deductions accurately. Businesses must file their corporate tax returns annually within the stipulated deadline, ensuring all required information is complete and correct. Any tax payable must be settled within the payment timelines specified by the Federal Tax Authority (FTA). Additionally, businesses should retain supporting documentation, such as invoices and contracts, for a minimum period as mandated by the FTA. Regular updates to registration details, if changes occur, are also required to stay compliant.

              On what basis is corporate tax levied in the UAE?

              Corporate tax is levied based on a company’s taxable income, which is calculated after adjusting revenue for allowable expenses and deductions.

              What exemptions are available under corporate tax in the UAE?

              Exemptions include:

              • Qualifying income of free zone entities
              • Certain government entities and pension funds
              • Income from agriculture and natural resources

              What can be done to waive off the late corporate tax registration penalty?

              To waive penalties, businesses should:

              • Submit a valid justification for the delay
              • Ensure all overdue filings are completed promptly
              • Pay any outstanding tax liabilities and late fees
                The Federal Tax Authority may grant waivers on a case-by-case basis.

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