Navigating the UAE's New Corporate Tax Landscape: Deadlines, Rates, and Exemptions

Navigating the UAE's New Corporate Tax Landscape: Deadlines, Rates, and Exemptions

In a significant move to bolster its fiscal framework, the UAE has recently introduced new corporate tax registration deadlines, signaling a pivotal shift for eligible businesses. Under the revamped regulations effective from March 1, companies failing to comply face penalties of up to Dh10,000 ($2,722). Let's delve into the specifics to ensure your organization stays compliant.

Understanding the New Deadlines

Resident companies established or incorporated in the UAE before March 1 are subject to specific registration deadlines this year. For instance, businesses issued licenses in January or February must submit their corporate tax registration application by May 31 to remain compliant. Notably, the deadline for entities with multiple licenses is determined based on the issuance date of the earliest license.

Conversely, companies established on or after March 1, including those in free zones, must register for corporate tax within three months of incorporation, establishment, or recognition. Furthermore, overseas entities managed and controlled in the UAE post-March 1 must apply for registration within three months of their financial year-end.

Unveiling the Tax Rate

The UAE introduced the federal corporate tax with a standard statutory rate of 9 percent starting from the financial year beginning on or after June 1, 2023. It brought the income of companies exceeding Dh375,000 ($102,110) within the taxable bracket. Taxable profits below that level will be subject to a tax of zero percent.In May, the Ministry of Finance confirmed that business owners in the country would be subject to corporate tax only if their turnover in a calendar year exceeds Dh1 million, ensuring that only business or business-related activity income is taxed. That means that a business owner or entrepreneur making Dh500,000 from their business in a calendar year would not pay tax on their earnings.For example, if a UAE resident operates an online business and the combined annual turnover from the business exceeds Dh1 million, under the new decision, that income would be subject to corporate tax.However, if the resident also earns income from a rental property and personal investments, these sources of income would not be subject to the tax, as they fall under the out-of-scope categories, the ministry said.

Streamlining the Registration Process

To ensure compliance, businesses subject to corporate tax must register and obtain a tax registration number. The registration application is typically submitted to the Federal Tax Authority. Additionally, taxable entities must file tax returns no later than nine months after the financial year-end. Register with us now to avoid penalty at:

Exemptions and Relief Measures

Various exemptions are available for businesses operating in key sectors. Entities exempt from corporate tax comprise government entities, government-controlled entities, natural resource businesses (both extractive and non-extractive), qualifying public benefit entities, qualifying investment funds, public pension or social security funds, and private pension or social security funds.

Additionally, an entity wholly owned and controlled by an exempt individual is also exempt if it performs activities on behalf of that individual, holds assets or invests funds exclusively for their benefit, and conducts ancillary activities to those carried out by the individual.

In May, the UAE Ministry of Finance issued three new ministerial decisions elucidating exemptions and financial statement preparation. Furthermore, in April, the ministry clarified that small businesses in the UAE with revenue of Dh3 million or less are eligible for a new corporate tax relief program.

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