According to the most recent Corporate Tax Guide on Taxation of Natural Persons released in November 2023, individuals running businesses in the UAE must adhere to the Corporate Tax regulations established by the Federal Tax Authority (FTA). This article provides insights into the Corporate Tax registration and deregistration procedures applicable to natural persons in the UAE, along with the influencing factors.
Corporate Tax Registration and Deregistration in the UAE
Corporate Tax Registration Procedures:
Threshold For Mandatory Registration:
It is mandatory for natural persons/individuals conducting business in UAE to get registration in case their annual turnover exceeds one million AED in a financial year. Turnover refers to the total income derived from all business activities in the UAE, regardless of the source or nature of the income.
Natural persons/individuals who are partners in unincorporated partnerships have additional responsibilities for Corporate Tax purposes. They are obliged to pay tax on the partnership’s income on behalf of the partnership, as well as on their own personal income. Therefore, they need to assess their taxable status based on their share of the partnership’s income and other income sources.
Handling New Business Activities:
Natural persons/individuals who start new business activities after registering for Corporate Tax do not need to register again for the new activities. They can use the same tax registration number for all their business activities and report the income and information from the new activities in their subsequent tax returns.
Retaining Tax Registration Status:
Natural persons/individuals who are registered for Corporate Tax remain registered even if their turnover falls below the AED 1 million threshold in the following years. Deregistration can be only possible from UAE Corporate Tax in case they cease all their business/trade activities in the state.
Corporate Tax Deregistration Procedures:
Applying for Tax Deregistration:
Natural persons/individuals who wish to deregister from Corporate Tax must submit a Tax Deregistration application to the FTA within three months of ceasing their business activities. The submission of applications is made online through the Federal Tax Authority (FTA) website. Applications are also accepted in the service centers FTA by visiting them.
Deregistration of Active Businesses:
Deregistration from Corporate Tax of active businesses/trade activities cannot be possible in the UAE even though their threshold turnover is less than the one million AED. They must continue to file tax returns and pay tax on the income from their active businesses.
Deregistration of Multiple Businesses:
Natural persons/individuals who have multiple businesses under the same tax registration number can only deregister from Corporate Tax if they stop all their businesses or business activities in the UAE. They cannot deregister partially for some of their businesses or business activities.
Cessation of Business Activities:
If individuals cease some or all of their business activities during a tax period, the tax period ends on the date of cessation. They must submit the Tax Deregistration application and all the required tax returns within three months of that date. The FTA will approve the deregistration only after verifying that the individuals have fulfilled all their filing obligations and paid all their outstanding corporate tax and penalties.
Additional Considerations for Natural Persons Registration & Deregistration:
Deregistration and Starting a New Business:
If Natural persons/individuals deregister from Corporate Tax and start a new business in the same year, they must register again for Corporate Tax if their turnover exceeds the AED 1 million threshold. They cannot use the same tax registration number that they used for their previous business.
Ceasing To Be a Taxable Person:
If individuals die, they cease to be a taxable person for Corporate Tax purposes. Their Corporate Tax liabilities are settled from the value of their estate before it is distributed among their heirs. If there is any tax due after the distribution, the heirs are liable to pay it unless they obtain a clearance certificate from the FTA.
Tax Period and Financial Reporting:
For an individual, the tax period corresponds to the Gregorian calendar year, spanning from January 1 to December 31. The preparation of financial statements, conducted following the International Financial Reporting Standards (IFRS), requires the consolidation of income generated from all businesses or business activities subjected to Corporate Tax.
Audited Financial Statements:
Natural persons or individuals surpassing turnovers of AED 50 million must generate and uphold audited financial statements during the pertinent tax period.
Filing Corporate Tax Returns:
Compulsory filing of a Corporate Tax Return with the Federal Tax Authority (FTA) is mandated within nine months from the conclusion of the applicable tax period. A singular tax return, encompassing all businesses or business activities subject to Corporate Tax, needs to be submitted. In instances where the aggregate turnover falls below AED 1 million, the submission of a 'nil' tax return is necessary.
Seek the Expert Services of Top Tax Consultants in UAE
In summation, individuals involved in business activities in the UAE should have a comprehensive understanding of Corporate Tax registration and deregistration procedures. These guidelines not only detail mandatory processes but also stress the significance of ongoing compliance and transparent reporting. Successfully navigating the intricate tax landscape is crucial for businesses to operate within legal boundaries, fostering a transparent and responsible fiscal environment. Feel free to engage the expertise of leading Tax Consultants in the UAE to effectively fulfill corporate tax requirements and ensure compliance with statutory regulations.
Shayan Khan is an experienced Corporate Tax Consultant with over 4 years of expertise. He’s skilled in negotiating and investigating taxes with government bodies like the Federal Tax Authority. Shayan is really good at reviewing and drafting tax papers and offers strategic advice on complex tax matters. Clients trust his guidance in navigating tax procedures and minimizing liabilities.