Step-by-Step Guide to Corporate Tax Registration in the UAE

 


The United Arab Emirates introduced a federal corporate tax system in June 2023 to mark a new chapter in the financial regulations of the country. The new law mandated Corporate Tax Registration UAE for eligible corporations which need to be completed timely to avoid any legal consequences. However, oftentimes, business owners in the UAE find it difficult to make their way through the complicated corridors of corporate tax.

Therefore, in this guide, you find all the information regarding corporate tax, the basics and the requirements for the registration process, including the corporate tax registration fees in UAE.

Corporate Tax in the UAE

Corporate Tax, also referred to as “Business Tax”, “Business Profit Tax”, or “Corporation Tax”, is a form of direct tax paid to the government by commercial entities based on their assessed net income or earnings. The UAE government implemented Corporate tax to align with international standards and improve the nation’s position as the preferred destination of choice for business and investment. This regime also encourages tax transparency in order to help offset harmful tax competition and reciprocate with developed countries.

Corporate Tax Registration UAE

Corporate Tax Registration refers to the process where an individual or a company registers with the FTA (Federal Tax Authority) and becomes a legal entity through Corporate Taxation. Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, issued by the Ministry of Finance, states that all individuals and businesses that have a commercial license and operate in the UAE are required to register for Corporate Tax unless they are exempted. The FTA has established a corporate tax rate of 9% on taxable income exceeding a specific threshold, which is AED 375,000.

Nevertheless, before diving into the Corporate Tax Registration UAE process, you need to understand whether or not you are eligible for registration.

·          Mandatory Registration - Businesses that generate annual taxable income above AED 375,000 must mandatorily register for corporate tax. The taxable income of a company is the net income or profit, after adjusting certain deductions and add-backs.

·          Voluntary Registration – On the other hand, businesses with income below this threshold can opt for voluntary registration. Although it is not mandatory, it can still be beneficial for businesses looking to claim foreign tax credits or operate in multiple jurisdictions.

Additionally, businesses operating in the UAE Free zones, that meet the specific criteria,  may qualify for a 0% corporate tax rate under the Qualifying Free Zone Person (QFZP) rules.

Guide to Corporate Tax Registration UAE: Step-by-step process

The corporate tax registration process involves the following steps:-

Determine the eligibility for registration

The first civil step in the process is to determine whether your entity is eligible for corporate tax registration UAE. According to Article 11 of the Corporate Tax Law, the following entities are eligible for registration:-

·          Commercial entities registered in the UAE

·          Foreign entities that handle the majority of their operations in the UAE

·          Non-resident juridical persons with a Permanent establishment in the UAE

·          Non-Resident persons deriving State Sourced Income

·          Non-tax residents with a legal acquisition of Income from Immovable Property in the UAE

·          Legal entities with a turnover of business over AED 1,000,000, according to the Gregorian calendar year

Apply for a Tax Registration Number (TRN)

A Tax Registration Number (TRN) is a prerequisite for corporate tax registration in the UAE. It is a unique number assigned to businesses individually and further used by them to complete any transactions associated with taxes in the UAE, such as filing tax returns and issuing invoices. To get a TRN, businesses need to apply to the FTA by providing them the required details such as the legal status of the company, the trade license number, and contact information. Upon submitting these details, the FTA will assess your information and issue a TRN for your business.

Assemble the documents for registration

Once the TRN is obtained, gather the documents required to complete the process, such as –

·          Trade license

·          Memorandum of Association (MOA)

·          Passport copies

·          Company ID of the owner

Make sure to verify all documents before submission for accuracy.

Submit the registration application

Along with the TRN and other important documents, submit an application for registration to the FTA. Fill out the application form and provide information about the efforts, changes, and other exemption-related details of the company. To avoid any legal problems, it is recommended to re-check all the information and documents.

Get approval from the FTA

Further, the FTA will review the application and confirm if the provided information is correct and up-to-date. It may also ask for further supporting documents or explanations in certain cases. Hence, businesses must deal with such requests on time to ensure a smooth run of the approval.

File for the Corporate Tax (in the given tax period)

Once the application is approved by the FTA, it will issue a Corporate Tax registration certificate to the company as legal proof. After receiving the certificate, the company can go ahead and pay its corporate taxes.

Consulting an expert in taxes like Shuraa Tax will help you determine and meet all your taxation requirements that apply to your business.

Penalty for non-compliance

The UAE corporate tax law states that any business or individual who fails to file for corporate tax registration within the mentioned periods shall be subject to a penalty of up to AED 10,000. Hence, to dodge such situations, it is advisable to seek professional support from a competent tax consultancy firm such as Shuraa Tax that can help you file for corporate tax registration on time and without any potential errors.

Common mistakes to avoid during corporate tax registration UAE

The whole process of Corporate tax registration may seem easy at first. However, there are certain pitfalls businesses can be exposed to. Hence, to avoid such circumstances, it is important to be aware of these mistakes.

·         Incomplete or inaccurate information – While filling in the information in the tax registration form, businesses must review it thoroughly to check if the provided details are accurate and comprehensive.

·         Missing deadlines – Businesses must be aware of the time limits specified for application filing and document submission. Missing the deadlines may result in working longer or even hefty penalties.

·         Lack of understanding – It is essential for businesses to be informed of the basic tax requirements and procedures of registering for taxes. In case there is any challenge, they can always seek the services of a tax professional like Shuraa Tax.

·         Not maintaining proper records – Businesses must ensure to maintain accurate financial records to avoid any delays or errors in tax filings and audits.

Choose Shuraa Tax for all your taxation matters

In a nutshell, companies falling under the eligible category are required to register for Corporate Tax with the FTA. Compliance with specific rules and regulations and adherence to the requirements makes the process more efficient. This not only keeps businesses legally clear but also encourages significant contributions to the continuous growth of the UAE economy.

Therefore, it is highly recommended to involve professional tax agents of Shuraa Tax Consultants and Accountants to address the corporate tax needs of your company and achieve a high level of compliance with the provisions. These professionals guarantee reliable support in all tax-related matters including corporate tax registration, tax return filing, tax payments, compliance, and more.

Book your free consultation today at info@shuraatax.com

 

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