July 1, 2024
Samuel Aziz Boubaous
Navigating Corporate Tax Registration in the UAE
Since the UAE introduced its corporate tax system on June 1, 2023, it's essential for businesses to ensure compliance. With a 9% corporate tax on profits exceeding AED 375,000, companies must register with the Federal Tax Authority (FTA) to stay compliant. Exempt categories, such as personal investments, real estate, and foreign income, still require registration. Our step-by-step guide outlines the registration process, from gathering documents to calculating taxable income and maintaining compliance. Wealth Consulting offers expert guidance to navigate this evolving tax landscape, ensuring your business stays compliant and focused on growth.
Isn't it fascinating how the UAE always manages to make headlines? Something groundbreaking happens every other day, drawing the world's attention. But have you ever stopped to wonder why?
The answer is simple: the UAE is evolving at lightning speed to attract global investors and entrepreneurs to its dynamic economic landscape. If you want to expand your business, the UAE offers many opportunities.
Here comes a vital factor to focus on: Corporate Tax Registration
The UAE introduced a corporate tax system on June 1, 2023. Now, it's crucial to evaluate your tax compliance and ensure you understand the necessary steps for corporate tax registration.
Understanding Corporate Tax in the UAE
Before discussing the intricacies of corporate tax registration, let's consider what it means for businesses in the UAE.
In 2022, the UAE introduced a 9% corporate tax rate on annual company profits exceeding AED 375,000. While this marked a significant policy shift, the UAE continues to shine as one of the most attractive financial hubs globally. The country took steps to incorporate best practices and initiate processes to meet international standards on tax transparency. The UAE still offers one of the lowest corporate tax rates globally.
Who is exempt from UAE Corporate Tax?
While the Federal Tax Authority requires registration for exempt businesses, they can still be entirely tax-free legally. Some categories exempt from Corporate Tax include:
Employee Salaries:
Not subject to Corporate Tax. However, income from freelancing activities under a license will be taxed.
Dividends, Capital Gains, or Income from Personal Investments:
Exempt if in shares or similar assets.
Not taxed, provided the investor has no business license.
Intra-group Transactions and Reorganizations:
Not subject to Corporate Tax.
Foreign Investors:
Not taxed on income from dividends, gains, royalties, and similar returns unless obtained through a business or business activity.
Who should register for Corporate Tax?
Every taxable person, including those in Free Zones, must register for Corporate Tax and obtain a Registration Number. According to UAE Corporate Tax Law, the conditions for tax registration are:
Mandatory Registration:
If your business falls under the Corporate Tax policy, you must apply for Corporate Tax registration in the UAE.
Registration at the discretion of the Federal Tax Authority (FTA):
Some entities may be required to register based on FTA's discretion.
Step-by-Step Registration Process for Corporate Tax in the UAE
Embarking on a business journey in the UAE involves navigating the corporate tax registration process. Read our step-by-step guide to guarantee a smooth and compliant experience:
Prepare Necessary Documentation
Before beginning the registration process, gather all essential documents, which will be the foundation of your corporate tax profile. These include:
Trade License:
This document allows you to conduct business legally within the UAE.
Passport Copies:
Provide passport copies for all owners, partners, or shareholders.
Memorandum or Articles of Association:
These documents outline the business's operational blueprint.
Contact Details: Include details of a responsible individual and the company’s complete address.
Submit a Trade License Request
Submit a trade license application to the Department of Economic Development (DED) in the emirate where you will allocate your business. Ensure your application includes all necessary information, such as:
Business name
Ownership structure
Proposed activities
Financial statements
The DED will analyze your case and grant the license if you meet the requirements. Note that businesses in specific industries may require additional approvals or permits.
Determine Eligibility and Requirements
Identify if your business is subject to mandatory registration under the Corporate Tax policy. Key points include:
· Taxable Persons: Everyone, including Free Zone entities, must register for corporate Tax.
· Exempted Persons: While certain entities are exempt from corporate Tax, they must still register and obtain a Tax Registration Number (TRN).
Register for Corporate Tax
Register your business with the Federal Tax Authority (FTA). The steps include:
Create an Account on the FTA Portal:
Access the FTA’s online portal and create an account.
Complete the Registration Form:
Fill out the corporate tax registration form with accurate details.
Submit Required Documents:
Upload all previously prepared documents, including the trade license and passport copies.
Obtain the Tax Registration Number (TRN): After submission, the FTA will review your application. Once approved, you will receive a TRN confirming your registration.
Follow Compliance Timelines
It's crucial to stay on top of deadlines to avoid penalties. Key deadlines include:
· General Deadline: Register within the specified timeframe based on the month of your company's license issuance.
· Specific Deadlines: For businesses incorporated before March 1, 2024, deadlines range from May 31 to December 31, 2024. Natural persons conducting business with significant turnover must register by March 31 of the subsequent year.
Calculate Taxable Income
Understand how to calculate your taxable income:
· Start with Accounting Net Profit: Base your calculations on the company’s financial statements.
· Adjust for Deductions: Account for deductible expenses such as 50% of entertainment costs and net interest expenditures, capped at 30% of EBITDA.
· Exclude Non-Deductible Costs: Certain costs, like fines and recoverable VAT, cannot be deducted.
Monitor and Report
Monitor your financial activities regularly and maintain accurate records. To stay compliant, ensure timely submission of corporate tax returns and payments.
Seek Professional Guidance
Consider partnering with tax consultants or firms like Wealth Consulting for expert advice and proactive compliance management. This will ensure you navigate the tax landscape effectively, avoid pitfalls, and focus on business growth.
How Wealth Consulting Can Assist
Consider two scenarios: In one, a business faces financial turmoil and legal troubles due to non-compliance with tax regulations. In another, the business partners with Wealth Consulting, ensuring proactive compliance and enabling focused growth. The difference? Expert guidance and proactive planning.
Launching a business in a foreign market inherently involves risks. However, it's essential to remember that risk is inevitable in entrepreneurship. You can navigate these challenges and open up new growth opportunities with the proper knowledge and resources.
For any inquiries or further information, feel free to reach out to the Wealth Consulting team:
Book a Call with our experts to discuss your financial needs and explore personalized solutions.
We’re here to help you achieve your financial goals with tailored guidance and support.
