Corporate Tax UAE

Tier	Taxable Income	Corporate Tax Rate
1.	Up to AED 375,000	0%
2.	Above AED 375,000	9%
3.	Large multinationals Companies with Total annual revenue over EUR 750 million (around AED 3.15 billion) under Pillar Two of the Organisation for Economic Cooperation and Development (OECD) base erosion and profit shifting (BEPS) project.	15%

What is the deadline for registering for business corporate tax in UAE ?

As the initial UAE corporate tax registration deadline of 31 May 2024 rapidly approaches, it is essential for companies and other business entities to confirm their registration deadlines for becoming a taxable person. According to the Federal Tax Authority (FTA), taxable entities are allotted a registration period extending until their first tax filing deadline. For example, if a financial year ends on May 31st, entities have 26 months to register, allowing them to complete the registration process by February 28th, 2025. Conversely, if the financial year concludes on December 31st, there is a 33-month registration window, permitting registration up until September 30th, 2025.

What is the penalty for not registering Corporate Tax in UAE ?

No.	Description of Violation	Administrative Penalty Amount in AED
1.	Failure to keep required records and information under the Tax Procedures Law or Corporate Tax Law.	1. 10,000 per violation. 2. 20,000 for repeated violation within 24 months.
2.	Failure to submit tax-related data, records, and documents in Arabic as requested by the Authority.	5,000
3.	Failure to submit deregistration application within the specified timeframe.	1,000 for late submission, and 1,000 monthly up to a maximum of 10,000.
4.	Failure to inform the Authority of information amendments for the Tax record.	One of penalties shall apply: 1. 1,000 per violation. 2. 5,000 for repeated violation within 24 months.
1.	Failure to keep required records and information under the Tax Procedures Law or Corporate Tax Law.	1. 10,000 per violation. 2. 20,000 for repeated violation within 24 months.
5.	Failure of the Legal Representative to provide timely notification of appointment.	1,000
6.	Failure of the Legal Representative to file a Tax Return within specified timeframes.	1. 500 per month for the first twelve months. 2. 1,000 per month from the thirteenth month onwards. The penalty starts the day after the Tax Return deadline and continues monthly thereafter.
7.	Failure of the Registrant to submit a Tax Return 1. 500 For each full or partial month within the specified timeframe.	1. 500 For each full or partial month within the specified timeframe. throughout the first 12 months, 2. 1,000 for each month or part of a month after the thirteenth month. The penalty starts the day after the Tax Return deadline and continues monthly thereafter.
8.	Failure to settle the Payable Tax.	A monthly penalty of 14% per annum, for each month or part thereof, on the unsettled Payable Tax amount from the day following the due date of payment and on the same date monthly thereafter. 1. The due date of payment is 20 Business Days from the date of submission in case of voluntary Disclosure. 2. The due date of payment is 20 Business Days from the date of receipt in case of Tax Assessment.
9..	Submission of an incorrect Tax Return.	500 unless the Person corrects the Tax Return before the deadline.
10.	Submission of a Voluntary Disclosure for errors in the Tax Return, Tax Assessment, or Tax refund application.	Monthly penalty of 1% on the Tax Difference until Voluntary Disclosure is submitted.
11.	Failure to submit a Voluntary Disclosure before being notified of a Tax Audit.	1. Fixed penalty of 15% on the Tax Difference. 2. Monthly penalty of 1% on the Tax Difference until Voluntary Disclosure is submitted or Tax Assessment issuance.
12.	Failure to offer facilitation to the Tax Auditor in violation of Article (20) of the Tax Procedures Law.	20,000
13.	Failure to submit or late submission of a Declaration as required by the Corporate Tax Law.	1. 500 per month for the first twelve months. 2. 1,000 per month from the thirteenth month onwards.

What is the due date for filing corporate tax return in UAE ?

Financial Year End	Applicability of Corporate Tax Law	First Tax Period	Return Filing Due Date
May 31st	June 1, 2023	June 20, 2023 to May 31, 2024	February 28, 2025
December 31st	January 1, 2024	January 1, 2024 to December 31, 2025	September 30, 2026

Additionally:
Businesses with accounting period from June 1st to May 31st have 26 months for registration.

Businesses with accounting period from January 1st to December 31st have 33 months for registration.

What are Corporate tax filing, documentation and administrative requirements ?

Aspect	Details
Corporate Tax Registration	Businesses must register with the FTA and obtain a Tax Registration Number within the specified time frame. FTA can register qualifying entities if voluntary registration is not done.
Record-Keeping Requirements	Businesses must maintain financial and other records explaining corporate tax return details and submit them to the FTA. Exempted entities must maintain records to prove their exempted status.
Audited Financial Statements	The need for financial statement audits is determined by company laws. Free zone businesses must audit statements to avail the 0% corporate tax rate. Consult tax consultants for details.
Corporate Tax Deregistration	A person with a Tax Registration Number must submit a Tax Deregistration application to the Authority when their business ceases, following specified procedures and timelines. Deregistration is only allowed if all Corporate Tax, Penalties, and Tax Returns have been paid and filed. If approved, the deregistration is effective from the cessation date. Non-compliance may lead to deregistration based on specific criteria determined by the Authority.
Corporate Tax Return Filing	Businesses file one corporate tax return per tax period and related supporting schedules within nine months after the end of the relevant Tax Period. No provisional tax return or advance payments are necessary.
Corporate Tax Payments Refunds	The Corporate Tax Payable under the Corporate Tax Law must be settled within nine months from the end of the relevant Tax Period or as decided by relevant authority. Refunds are applicable in cases where Taxable Persons have overpaid and are owed money by the Authority. Consult tax consultants for assistance.
Corporate Tax Assessments	UAE corporate tax operates on a self-assessment principle. Businesses are responsible for accurate and compliant tax returns. FTA reviews and issues assessments within prescribed timeframes. Taxpayers can challenge amended assessments following procedures in the Tax Procedures Law. Consult tax agents for assistance.

Is corporate tax uae applicable on Free Zones Company also ?

Corporate Tax Rate	Applies to	Definition
0%	Qualifying Income	A Free Zone Person who meets certain conditions and is taxed at a 0% UAE corporate tax rate on their qualifying income.
9%	Taxable Income that does not qualify as Qualifying Income	A Free Zone Person who does not meet the conditions for Qualifying Free Zone Person.

Qualifying Income includes the following categories of income, provided that such income is not attributable to a Domestic Permanent Establishment or a Foreign Permanent Establishment in the UAE:

1. Income derived from transactions with other Free Zone Persons, except for income derived from Excluded Activities.
2. Income derived from transactions with a Non-Free Zone Person only in respect of Qualifying Activities that are not Excluded Activities.
3. Any other income provided that the Qualifying Free Zone Person satisfies De Minimis Requirement threshold.

To be considered a Qualifying Free Zone Person, the Free Zone Person must meet all of the following conditions:

1. Maintains Adequate Substance in the UAE
2. Derives Qualifying Income
3. Has not specifically elected to be subject to Corporate Tax under the Corporate Tax Law
4. Complies with Transfer Pricing regulations
5. Maintains audited financial statements as per IFRS / IFRS for SMEs.

Is UAE Corporate Tax is applicable on SMEs also ?

Yes, the UAE Corporate Tax applies to small businesses operating in the UAE. However, the UAE government has introduced a Small Business Relief scheme designed to facilitate a smooth transition to the new tax framework for SMEs. As outlined in the Small Business Relief Guide published by the UAE Ministry of Finance, a taxable UAE resident entity can claim Small

Business Relief if its revenue does not surpass the AED 3,000,000 threshold for both the relevant and preceding tax periods within each tax year.

It's important to note that Small Business Relief is not applicable to:
businesses qualifying as Free Zone Persons under the Corporate Tax Law or
to members of Multinational Enterprises Groups (MNE Groups) with consolidated group revenues exceeding AED 3.15 billion, as defined in Cabinet Decision No. 44 of 2020.

Consequently, small businesses or SMEs in the UAE are eligible for Small Business Relief if their revenue remains below the AED 3,000,000 threshold for each relevant tax year.

What is Transfer Pricing rules in UAE ?

Transfer pricing constitutes a set of rules and regulations governing the pricing of goods and services exchanged between related entities, including companies within the same multinational enterprise group. Its purpose is to prevent pricing anipulation influenced by their relationships.

In the UAE, transfer pricing rules have a substantial impact on businesses. Recently introduced by the UAE Ministry of Finance, these regulations mandate companies to conduct transactions with related parties at arm's length. This means the prices for goods and services must align with those in transactions between unrelated parties.

As per Ministerial Decision No (97) of 2023 on the Requirements for Maintaining Transfer Pricing Documentation, companies are obligated to maintain a master file and a local file under specific conditions:

If their revenues in a relevant tax period are at least AED 200 million.
If they are part of a multinational group with a total consolidated group revenue of at least AED 3.15 billion in the relevant tax period.

These documentation requirements serve to enable taxpayers to demonstrate the arm's length nature of their transactions with related parties and connected individuals. Standardized files are utilized to ensure consistency and accuracy in this process.

What is Country by Country Reporting in UAE ?

The UAE has implemented Country-by-Country Reporting (CbCR) rules in line with the guidance issued by the Organization for Economic Cooperation and Development (OECD) on CbCR.
The CbCR rules apply to:

The Ultimate Parent Entity (UPE) of a Multinational Group of Entities (MNE) which is a ‘tax resident’ in the UAE and
If consolidated revenues equal to or exceeding AED3.15 billion (approximately USD858 million) in the preceding financial year.

The following table summarizes the CbCR requirements:

Criteria	Requirement
Applicability	UAE-headquartered MNE Groups with ‘financial reporting years’ starting on or after January 1st 2019.
Filing deadline for CbCR Submission	Within 12 months from the end of the financial reporting year. For ex. The MNE Group, with a financial year from January 1, 2023, to December 31, 2023, must file the CbC Report by December 31, 2024.
Reporting format	Country-by-Country Report (CbC Report)
Reporting threshold	Consolidated revenues equal to or exceeding AED 3.15 billion in the preceding financial year.
Penalty for Non-Compliance	Individuals failing to file the CbCR on time may face an administrative fine of up to AED 1,000,000. Additionally, there is an additional fine of AED 10,000 for each day of delay, with a maximum cumulative fine of AED 250,000.

Is Corporate Tax is applicable on freelancers in UAE ?

Under the corporate tax laws in the UAE, any taxable income surpassing AED 375,000 is subject to Corporate Tax. This taxation framework also encompasses freelancers and independent contractors in the UAE who are self-employed, provided their income exceeds the AED 375,000 threshold.

The UAE's Corporate Tax system is extended to freelancers and other independent contractors who operate autonomously once their income surpasses the AED 375,000 limit. According to the law, these independent contractors must possess a valid license or permit.

Here are some key scenarios in which corporate tax applies to freelancers:

Individuals possessing the recently introduced freelance permit, accessible under the updated labor law for self-sponsored expatriates, are exempt from corporate tax on their income.
In the case of independent contractors holding business licenses within free zones, if they engage in work for other companies, the sponsoring entity is obligated to pay the corporate tax.
For freelancers employed by a company, their income from salaries remains untaxed at the individual level. Instead, it is the responsibility of the company issuing the visa to pay income tax on its net profit.

What is small business relief under UAE corporate tax ?

Under the corporate tax laws in the UAE, any taxable income surpassing AED 375,000 is subject to Corporate Tax. This taxation framework also encompasses freelancers and independent contractors in the UAE who are self-employed, provided their income exceeds the AED 375,000 threshold.

The UAE's Corporate Tax system is extended to freelancers and other independent contractors who operate autonomously once their income surpasses the AED 375,000 limit. According to the law, these independent contractors must possess a valid license or permit.

Here are some key scenarios in which corporate tax applies to freelancers:

Individuals possessing the recently introduced freelance permit, accessible under the updated labor law for self-sponsored expatriates, are exempt from corporate tax on their income.
In the case of independent contractors holding business licenses within free zones, if they engage in work for other companies, the sponsoring entity is obligated to pay the corporate tax.
For freelancers employed by a company, their income from salaries remains untaxed at the individual level. Instead, it is the responsibility of the company issuing the visa to pay income tax on its net profit.

How do you calculate corporate tax in UAE ?

In the UAE, corporate tax is computed at a rate of 9% based on the net profit indicated in the company's financial statements. This calculation is done after subtracting all eligible deductions and excluding income that is exempt from taxation. Foreign taxes paid can also be deducted from the profit stated in the financial statement. The taxable income is determined as the net profit remaining after all deductions. Corporate tax at 9% is applicable only if the taxable value exceeds AED 375,000. To calculate your corporate tax, use online corporate tax calculator. It will estimate your corporate tax liability.

Who is exempted from Corporate Tax in the UAE ?

Category	Type of Exempt Persons	Conditions for Exemption
Automatically Exempt Persons	Government Entities	None
Exempt upon notification and conditions	Extractive Businesses and Non-Extractive Natural Resource Businesses	Notify Ministry of Finance and meet relevant conditions
Exempt upon Cabinet Decision and conditions	Government Controlled Entities and Qualifying Public Benefit Entities	Listed in Cabinet Decision and meet relevant conditions
Exempt upon application and approval	Public and private pension or social security funds	Apply to and get approval from the FTA
	Qualifying Investment Funds	Apply to and get approval from the FTA
	Juridical persons incorporated in the UAE owned and controlled by specific Exempt Persons	Apply to and get approval from the FTA
	Any other Person as determined by Cabinet Decision	Decision issued by the Cabinet at the suggestion of the Minister

If an individual or entity classified as an Exempt Person no longer fulfills the necessary criteria for exemption, they typically lose their exempt status starting from the Tax Period in which the criteria are no longer met. Consequently, they become liable for Corporate Tax on all their Taxable Income.

However, in specific temporary and unforeseen situations, the individual or entity has the option to apply to the FTA. They can seek permission to maintain their Exempt Person status even if they temporarily fail to meet the exemption criteria.