The United Arab Emirates has introduced a new corporate tax regime, effective from the financial year beginning on or after June 1, 2023. This significant change has brought about several important deadlines, fines, and exemptions that businesses operating in the UAE must be aware of.
Registration Deadlines
The Federal Tax Authority in the UAE has set specific deadlines for businesses to register for corporate tax, depending on their license issuance date and whether they are a resident or non-resident entity.
For UAE resident entities incorporated or established before March 1, 2024, the deadlines are as follows:
Licenses issued in January or February: Register by May 31, 2024
Licenses issued in March or April: Register by June 30, 2024
Licenses issued in May: Register by July 31, 2024
Licenses issued in June: Register by August 31, 2024
Licenses issued in July: Register by September 30, 2024
Licenses issued in August or September: Register by October 31, 2024
Licenses issued in October or November: Register by November 30, 2024
Licenses issued in December: Register by December 31, 2024
Businesses that were established on or after March 1, 2024, including those in free zones, must register for corporate tax within three months of their date of incorporation, establishment, or recognition.
A non-resident entity is considered to have a permanent establishment (PE) in the UAE if it has a fixed or permanent place of business in the country or if a person habitually exercises authority to conduct business on its behalf. Nonresident entities with a permanent establishment or obtaining state-sourced income in the UAE must also register for corporate tax within the specified deadlines.
Fines for Non-Compliance
If a business fails to register for corporate tax within the specified deadlines, it can result in hefty fines. The UAE government has announced an administrative penalty of AED 10,000 (approximately $2,700) for businesses that miss the registration deadline.
This penalty is in line with the fines imposed for late registration of other taxes, such as VAT and excise tax. It is intended to encourage businesses to comply with the new corporate tax regulations.
Exemptions
The UAE corporate tax law provides several exemptions for businesses operating in strategic sectors. These include:
- Government entities and government-controlled entities
- Extractive and non-extractive natural resource businesses
- Qualifying public benefit entities and qualifying investment funds
- Public pension or social security funds, and private pension or social security funds
- Entities that are wholly owned and controlled by an exempt person, if they undertake the person’s activities exclusively and only carry out ancillary activities
- Small businesses in the UAE with a revenue of AED 3 million or less can benefit from a new corporate tax relief program
What You Need to Do
If your business is subject to the UAE corporate tax, it is essential to understand the applicable registration deadline, and ensure that you comply with it, as failure to register on time can result in significant penalties.
You can register for corporate tax on the FTA’s EmaraTax digital platform, which offers a straightforward four-step process. If you have not registered with the FTA before, you will need to create a new user profile on the platform using your email address and phone number. Once your registration is approved, you will receive a Tax Registration Number (TRN) for corporate tax, which you will need to present in your tax filings and other related transactions.
It is essential to review corporate tax law, executive decisions, and related guidelines to ensure you understand your obligations and eligibility for any exemptions or reliefs.
The introduction of corporate tax in the UAE is a significant change and requires businesses to proactively understand and comply with the new regulations. By staying informed and meeting the registration deadlines, businesses can avoid costly penalties and ensure a smooth transition to the new tax regime.
