The United Arab Emirates (UAE) has introduced a corporate tax regime, and businesses operating in the country must comply with the registration and filing requirements.
Failure to do so can result in penalties, underscoring the importance of understanding and adhering to the new tax regulations.
This comprehensive guide aims to provide clarity on the corporate tax registration process, deadlines, and penalties for late compliance.
Late Registration Penalty
Late registration for UAE corporate tax can result in penalties. Here are the key points:
AED 10,000 Penalty: If a business fails to submit its corporate tax registration application within the specified timelines, an administrative penalty of AED 10,000 will be imposed. This penalty encourages timely compliance with tax regulations.
Monthly Penalties for Late Tax Returns: Once registered, businesses must also submit their corporate tax returns on time.
Failure to do so results in a monthly penalty of AED 500 for up to one year. Filing within this period exempts the business from the penalty.
Ministerial Declarations:
The Minister may declare specific exclusions from corporate tax registration. However, businesses falling outside these exclusions must promptly register to avoid penalties.
Who Needs to Register for Corporate Tax?
- All Businesses: Every business operating in the UAE, regardless of size or industry, must register for corporate tax.
- Exemptions: There are a few exceptions, such as natural persons conducting business activities individually or as sole proprietors.
Registration Process:
- Taxable Persons: Both legal entities (companies) and natural persons fall under the category of “taxable persons.”
- Obtain a Tax Registration Number: All taxable persons must register for corporate tax and obtain a unique Tax Registration Number (TRN) from the Federal Tax Authority (FTA).
Deadlines and Filing:
- Tax Period: Taxable persons must file corporate tax returns for a specific tax period.
- Deadline: Corporate tax returns should be filed within 9 months from the end of the relevant tax period.
- Payment: Corporate taxes due are paid based on the tax period covered by the filed return.
Exclusions and Ministerial Declarations:
- Ministerial Exclusions: In some cases, the Minister may declare specific exclusions from corporate tax registration.
- Specific Format: If excluded, a taxable person must still register for corporate tax in a format specified by the FTA within the designated timeline.
Corporate Tax Rates:
- Standard Rate: The standard corporate tax rate is 9%.
- Taxable Income Threshold: Taxable income up to AED 375,000 is charged at 0%.
- Above Threshold: Taxable income above AED 375,000 is subject to the 9% rate.
In summary, businesses in the UAE must proactively register for corporate tax, obtain a TRN, and comply with filing deadlines.
Staying informed about tax regulations ensures smooth operations and compliance with the law.
Remember that accurate and timely tax reporting is crucial for business sustainability and legal compliance.
