Corporate Tax Return Filing Deadline Alert

(for Juridical Person (Entity) Incorporated in the UAE in June 2023)

Timeline

• Deadline for filing of First Corporate Tax Return is 30^th September 2024, if:
  • The Entity is newly incorporated in June 2023; and
  • It follows Financial Year /Accounting Period of January to December

Applicability

• It covers new entities incorporated or established under The Federal Decree-Law No. 32 of 2021 on Commercial Companies (“Commercial Companies Law”) or any other legislation applicable to Free Zones in the UAE including:
  • Joint Liability Company;
  • Limited Partnership Company;
  • Limited Liability Company;
  • Public Joint Stock Company;
  • Private Joint Stock Company and
  • Foreign incorporated companies who have established their head office/branch/ representative office in the UAE.
• Aforesaid categories of Entities are being re-issued their corporate tax registration certificates wherein the due date for filing Return is shown as 30 September 2024.

Penalty

• Failure to file return within due date : AED 500 per month (or part of month) for first 12 months and AED 1,000 each month from 13 month & onward;
• Failure to settle tax: Monthly penalty of 14% per annum;
• Incorrect Tax Return: AED 500 per month (unless the Person corrects his Tax Return before the expiry of the deadline).

Rationale

• The Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Business, and its amendments (“Corporate Tax Law”) applies to Tax Periods commencing on or after 1 June 2023. A Taxable Person’s Tax Period is the Financial Year or part thereof for which a Tax Return is required to be filed;
• The Corporate Tax Law does not provide a specific provision for the First Financial Year of a juridical person that is a Taxable Person. The First Financial Year of the newly incorporated entity has to be understood from the guidance given by the Federal Tax Authority by means of the Public Clarification (‘CTP003’). This clarification considers the provisions of the Commercial Company Law for determining the First Financial Year of a newly incorporated entity;
• The Financial Year followed by the Taxable Person under the Commercial Companies Law will be the Financial Year and, therefore, will be the Tax Period for the Corporate Tax Law. Under Article 28 of the Commercial Companies Law, the Financial Year of a newly incorporated company starting from its date of incorporation must be not less than 6 months and not more than 18 months. Hence, the First Tax Period of a newly incorporated company will depend on the First Financial Year under the Commercial Companies Law;
• Therefore, any entity established or incorporated in the month of June 2023 and following January to December has to prepare Financial Statements for the period June 2023 to December 2023 (being 7 months as Financial Year since FY cannot be less than 6 months and greater than 18 months);
• Article 53 (‘Tax Returns’) of the Corporate Tax Law provides that an entity must file a Tax Return within 9 months from end of relevant Tax Period (i.e. Financial Year);
• Thus, any new entity incorporated/ established in the month of June 2023 will be required to prepare Financial Statements for the First Financial Year comprising of the period June 2023 to December 2023 (First Tax Period) and file its first CT Return on or before 30 September 2024;
• Each subsequent Tax Period will be the 12-month period following from the end of the First Tax Period.
• Illustration given in the Corporate Tax Public Clarification ‘CTP003’:

‘A company is incorporated on 5 June 2023: Under Article 28 of the Commercial Companies Law, the first Financial Year of the company will be from 5 June 2023 to 31 December 2023 (6 months and 26 days) and the first financial statements for this company will be prepared for the same period. As per Article 53 ‘Tax Returns’ of UAE CT Law, a Taxable Person must file within 9 months from end of relevant Tax Period (i.e. Financial Period). Thus Company will be required to file CT Return on or before 30 September 2024.