In a recent announcement, the Federal Tax Authority (FTA) announced the launch of early corporate tax registration in UAE through the EmaraTax platform. This announcement is in keeping with the Authority's commitment to offering digital tax services to businesses and members. This action is in accordance with Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, which specifies that taxable persons will be subject to corporate tax in UAE in their first financial year that begins on or after June 1, 2023.
Early Registration for Corporate Tax in UAE
According to the Authority, certain categories of UAE-based companies are eligible for early corporate tax registration in UAE from January 2023 until May 2023. This selected group of companies will receive an invitation to register via email and SMS from the FTA.
As a follow-up to this phase, the FTA will announce when registration for other businesses will be open. During the registration process, the FTA will make sure that companies and businesses are given plenty of time to meet their legal obligations and submit their application for registration.
It is intended that companies and businesses with a financial year starting on (or shortly after) 1 June 2023 will be given priority when registration opens. Using international best practices, the Authority will provide businesses with flexible tax compliance mechanisms. The Authority's goal is to continually improve the registration process during this phase.
Efficiency and Seamlessness of Administrative Procedures
To ensure the highest standards of corporation tax implementation in the UAE, the FTA has intensified its efforts in collaboration with the competent authorities. It is the Authority's aim to position itself as an ally and partner for the business sector, protecting its interests while simultaneously supporting the national economy in a balanced and transparent manner that strengthens the competitiveness of the UAE, said Khalid Ali Al Bustani, Director-General of FTA.
He continued by stating that the FTA will ensure the efficiency, accuracy, and seamlessness of administrative procedures without negatively impacting business operations. The Authority will support all business sectors in complying with tax regulations and procedures through flexible mechanisms that align with international best practices.
Competitive Corporate Tax Regime
The corporate tax UAE regime, with only a nine per cent levy from June 1, 2023, will be among the most competitive in the world. The corporate tax on business profits above Dh375,000 ($102,110) will help diversify government revenue away from the oil sector and broaden the government's revenue base.
Who Can Register for Corporate Tax
In the opinion of reputable Tax Advisors, corporate tax registrations in UAE will be distinct from VAT registrations. Regardless of whether their taxable income is below the threshold of Dh375,000 per annum or if they are exempt, all businesses, including free zones and companies, must register.
As of now, businesses do not have to register for corporate tax UAE unless they receive an 'invitation to register' during the January-May period. No penalties relating to registration may be imposed if businesses ensure to register at least before the due date for tax return submission (i.e. nine months from the end of the relevant financial year).
Businesses with a commercial license and taxable income will be subject to corporation tax when they operate as sole proprietorships or sole corporations. To implement the new levies in the country, the new tax regime allows for a generous compliance period.
With a financial year starting on June 1, 2023, and ending on May 31, 2024, businesses will have until February 28, 2025, to file their tax returns and make payments.
In due course, the FTA will provide more information on corporate tax registration, and the following link will provide information about the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses: https://tax.gov.ae/en/taxes/corporate.tax/corporate.tax.topics/what.is.corporate.tax.aspx
About Federal Tax authority:
In 2016, the Federal Tax Authority (FTA) was established by Federal Decree-Law No. (13) of 2016 in order to promote economic diversity and enhance non-oil revenue in the UAE. As per international best practices and standards, the Authority is responsible for administering and collecting federal taxes. It is the FTA's goal to coordinate efforts with relevant entities so that a comprehensive, fair, and technologically advanced tax system can be established. The purpose of this project is to position the UAE as a world leader in the implementation of a fully digital tax system which prioritizes voluntary compliance and ease of use for taxpayers. This includes a streamlined process for registration, submission of tax returns, and payment of taxes, which can all be accomplished through the Authority's website: www.tax.gov.ae. Through the entire tax process, the FTA ensures the highest levels of transparency and accuracy.
Abrar Ahmad holds a Master’s as well as an MPhil in Finance and has an extensive experience of 10+ years in managing all aspects of Taxation, VAT Consulting and Accounting. He also carries with him a working knowledge of corporate tax and has helped drive value and growth to the businesses of numerous clients.