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Avoid AED 10,000 penalty by registering for Corporate Tax today!

Corporate Tax in UAE

Have you registered for Corporate Tax yet? Avoid AED 10,000 penalty by registering for Corporate Tax today!

Registration for corporate tax

Clause 1 of Article 51 of the Federal Decree Law No. 47 of 2022 (UAE CT Law) provides that a Taxable Person shall register for Corporate Tax within the form and manner and within the timeline prescribed by the Authority and obtain a Tax Registration Number, except in circumstances prescribed by the Minister.

In relation to above, the Federal Tax Authority (FTA) has recently issued the Decision No. 3 of 2024 which prescribes the timelines for registration of Taxable Person for Corporate Tax for the purpose of UAE CT Law (the decision is effective from 1 March 2024).

Our

approach

Tax departments which are based in-house in companies are often challenged to meet constantly changing requirements. Our experienced professionals will ensure a smooth and seamless transition to the new era of CT regime with MBG’s Corporate Tax in UAE Offerings. This way your team’s burden is lessened. Our corporate tax teams are already working on tax impact assessments, transfer pricing reviews, cross-border transaction reviews and planning operational implementation for several businesses in the UAE.

The aforesaid phases in the diagram be changed to as under:

  • Phase I: Impact Assessment
  • Phase II: Transition Support
  • Phase III: Compliance Support
Our

Services

Corporate tax assessment will help you determine what changes would be necessary to align business from both financial and operational standpoint with the requirements of the CT law. A thorough assessment will lay the foundation for efficient tax planning and robust compliance framework.

The international tax framework is applicable in every country in the post-globalization world today, and Transfer Pricing is one of its key concepts. At MBG Corporate Services, we have in-depth understanding of compliance requirements under various countries’ local Transfer Pricing regulations, CbCR regulations and tax legislations and can assist taxpayers with a gap analysis for transactions being covered under UAE’s transfer pricing regulations, documentation, filings, disclosures and reporting obligations.

A Tax Residency Certificate is required, inter-alia, to avail benefits under the Double Tax Avoidance Agreement. We can assist individuals as well as companies in obtaining a Tax Residency Certificate in UAE in accordance with the recently announced revised guidelines and criterion.

Foreign companies that are 1) Effectively controlled and managed (i.e. Place of Effective Management (POEM)) from the UAE or 2) that have a permanent establishment in the UAE or 3) that derive UAE sourced income or 4) have nexus in the UAE are covered within the scope of the UAE CT regime. At MBG Corporate Services, we can assist Foreign companies conducting business in the UAE, through any form of presence, inter-alia, evaluate their existing business models, long term agreements / contracts, intra group and cross-border transactions etc. to assess the impact from a PE risk perspective. Further, for Foreign companies which are effectively managed and controlled from the UAE, we can evaluate any exposure from POEM perspective.

Federal Tax Authority has announced registration for corporate tax shall be made through their digital services platform named EmaraTax. Corporate Tax registration is already open for all mainland and freezone entities. Our experts at MBG can assist you in the registration process, as we have complete understanding of the process and requirements.

Entities incorporated or established in Free Zones in the UAE are eligible to avail 0% Corporate Tax Incentive under the CT Decree Law. However, such incentive is subject to fulfillment of certain conditions and require a thorough analysis on compliances/ procedures as may be required to be followed to continue to avail such incentives. At MBG, we can help companies undertake an analysis to determine whether such conditions are fulfilled in their case and corresponding procedures required to be followed for such incentive.

360-degree approach

At MBG Corporate Services, we give you a holistic 360 degree approach to the implications of the upcoming Corporate tax regime. We offer solutions related to legal, VAT, audit, IFRS, and other UAE-related laws and regulations.

Corporate Tax
  • - Customized Tax Impact Assessment
  • - Transition Support
  • - Post-Implementation Support
  • - Tax Group v/s Individual Entity Registration
Transfer Pricing
  • - TP Impact & Gap Assessment
  • - TP policy review / policy development
  • - Supply chain / Functional and Benchmarking Analysis
  • - TP documentation & benchmarking analysis
Legal
  • - Restructuring
  • - Transaction and Ownership
  • - Corporate Secretarial Compliances
  • - Compliances and Resolution
Audit
  • - Consolidated v/s standalone financial statements Support
  • - Statutory Audit
  • - ICV Certification & Guidance
Risk Advisory
  • - Risk assessment on selected accounts
  • - Guidelines, Policies & Procedure Manual
  • - Robust periodic Accounting Reconciliation system
  • - Training & Workshops
  • - Cost Optimization including Supply chain
Indirect Tax
  • - VAT & Corporate tax alignment assessment
  • - Transition Support
  • - Custom, Excise, Vat reconciliation and Tax

FAQ

"The Federal Tax Authority is responsible for the administration, collection and enforcement of the Corporate Tax Law. In relation to the same, the FTA is responsible for issuing guides, provide clarifications and undertake awareness sessions.
The Ministry of Finance is the competent authority for the purposes of bilateral/multilateral tax agreements and the international exchange of information for tax purposes. It has the authority to issue the implementing regulations for UAE Corporate Tax Law."

"(a) Yes, foreign entities subject to prescribed conditions is liable to pay UAE Corporate Tax @ 9% where the annual taxable income during the relevant tax period exceeds AED 3,75,000/-
(b) Yes, foreign Individuals are subject to UAE Corporate tax @ 9% where their annual taxable income during the relevant tax period exceeds AED 3,75,000/-, if the Total Turnover derived from Businesses or Business Activities being carried out by the individual exceeds AED One Million duirng a Gregorian calendar year (1 January to 31 December) "

As per FAQ No. 329 issued by the FTA, all taxable persons must be registered before they file their first Corporate Tax Return. The FTA may register a taxable person, who is not otherwise registered, at their discretion. However, currently, there is no timeline prescribed for registration of Corporate Tax.

As per Cabinet Decision No. 49 of 2023, an individual (termed as natural person in UAE CT Law) shall be subject to levy of Corporate Tax in case he/she derives an annual turnover exceeding AED 1 million from a 'Business' or 'Business Activity' in the UAE during a Gregorian calendar year ( 1 January to 31 December).

"As per Article 3 of the Federal Decree Law No. 47 of 2022 (UAE CT Law), read with FAQ No. 26 issued by the FTA , the corporate tax shall be imposed at the following rates :
  • - Natural persons and juridical persons : 0% for Taxable Income up to and including AED 375,000.
  • - 9% for Taxable Income exceeding AED 375,000
  • - Qualifying Free Zone Persons : 0% on Qualifying Income
  • - 9% on Taxable Income that is not Qualifying Income as specified in Cabinet Decision No. 100 of 2023"

The Coporate Tax is calculated on Taxable Income derived after making adjustments of allowances and disallowances (as prescribed under UAE CT Law) in accounting net profit/ loss.

"The following persons are subject to UAE Corproate Tax
Resident Person
  • (a) Juridical persons that are incorporated or otherwise eastablished in UAE
  • (b) Foreign juridical persons that are effectively managed and controlled in the UAE.
  • (c) Natural persons conducting Business or Business activity in UAE and having turnover exceeding AED 1 million during gregorian calendar year
Non-Resident Person
  • (a) Permanent Establishment in the UAE;
  • (b) Deriving UAE Sourced Income;
  • (c) Nexus in the UAE;
  • (d) Natural persons conducting Business or Business activity in UAE and having turnover exceeding AED 1 million during gregorian calendar year "

"The following persons are automatically exempted from Corporate Tax:
  • - Government Entity/ Government Controlled Entity;
  • - Persons engaged in an Extractive Business or Non-Extractive Business (subject to meeting certain conditions)
  • - Qualifying Public Benefit Entities
The following persons are exempted from Corporate Tax (subject to certain conditions and approval from Authority):
  • - Qualifying Investment funds;
  • - Public/Private pension or social security funds;
  • - UAE juridical persons wholly owned by certain exempted entities.
Further, any other person may be covered under Exempt Person basis the decision issued by the Cabinet at the suggestion of Minister."

"Tax Losses can, subject to certain conditions, be set off against the Taxable Income of future periods, up to a maximum of 75% of the Taxable Income in each of those future periods. Unutilised Tax Losses can be carried forward and used indefinitely (subject to certain condition).
It is important to note that 'Losses incurred for a period before First Tax Period' of any business cannot be utilised for set-off against Taxable income of future Tax Period."

"Withholding tax is the tax deducted at source by a Resident Person for payments made to a Non Resident person for certain categories of state source income derived by the Non Resident Person. The subject cateogories of income are yet to be specified.
Yes, It is applicable in the UAE. Currently, the withholding tax rate is 0%, which effectively implies that a business has no obligation to withhold taxes while making domestic or international payments."

"Yes, Foreign tax paid on income which is being offered for corporate tax in UAE can be claimed as a Foreign Tax Credit from the total liability of Corporate Tax. However, the maximum Foreign Tax Credit will be lower of the following:
  • - Foreign Tax Paid;
  • - Tax Payable in UAE on the relevant income
It is important to note that Foreign Tax Credit can only be utilised in the relevant Tax Period (i.e. Foreign tax credit cannot be carried forward or back to a different Tax Period). Any business claiming foreign tax credit must have satisfactory documentary evidence to support the credit claim. "

"Yes, the Transfer Pricing rules will apply to all businesses in the UAE if they undertake any transactions with their Related Parties or Connected Persons. These rules are applicable to both Mainland and Free Zone Businesses."

Non-compliance of Corporate Tax regime will attract penalties for the businesses. The penalties may vary depending upon the violation in the application of Corporate Tax regime. A list of penalties have been specified in Cabinet Decision 75 of 2023.

"As per Article 51 of the Federal Decree Law No. 47 of 2022, any taxable person shall register for Corporate Tax with the Federal Tax Authority (FTA) in the form and manner and within the timeline prescribed by the FTA and obtain a Tax Registration Number, except in circumstances prescribed by the FTA. Thus, it is mandatory for all mainland entities, free zone entities , Qualifying Public Benefit Institutions and even for loss making entities to register for UAE CT and obtain a Corporate Tax Registration Number. As per Article 53 of Federal Decree Law Decree No. 47 of 2022, the Corporate Tax Return will be filed within 9 months following the end of the relevant Tax Period or by such other date as directed by the FTA."

"Experts are playing multi-fold role in helping the businesses to properly comply with the Corporate Tax system, including not limited to following:
  • - Carrying Out Impact Assessment for the companies and helping them to understand how Corporate Tax will impact their businesses;
  • - Advising and analysing the operations of companies in light of provisions of UAE Corporate Tax Law ;
  • - Guidance relating to restructuring of businesses;
  • - Preparation of Transfer Pricing Benchmarking Reports;
  • - Assistance in filling of Tax Form/ Disclosure Form in compliance with the provisions of the UAE CT Law as per prescribed timelines (once the forms are released)"

Key

Highlights

  • The timelines provided in subject decision are not for obtaining registration but for submission of registration applications only.
  • In case a juridical person is having more than one Licence, the Licence with the earliest issuance date shall be used for determining the timelines/ deadlines
  • Delay in submitting ‘Tax Registration application’ within timelines provided in previous slides can lead to a potential administrative penalty amounting to AED 10,000 in accordance with Cabinet Decision No. 75 of 2023 (amended).
  • Thus, it is important for each Taxable Person to analyse the timelines and the relevant applicable category and ensure timely compliance to avoid any penalty exposure.
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