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Corporate Tax

Registration Timelines for Corporate Tax

June 11, 2024

Overview of Public Clarification issued by Federal Tax Authority on 4 June 2024

Background

  1. Article 51 of the Federal Decree Law No. 47 of 2022 titled “Taxation of Corporations and Businesses” (UAE CT Law) provides that a Taxable Person shall have to compolsorily take registration under this This law further empowers Federal Tax Authority (FTA) to prescribe timeline for any taxable person to register for Corporate Tax;
  2. FTA has issued Decision No. 3 of 2024 which prescribes the requisite timelines. This decision is effective from 1st March 2024. FTA has on 4th June 2024 issued a ‘Corporate Tax Public Clarification’ titled “Registration Timelines for Taxable Persons for Corporate Tax” which clarifies the timelines when a Taxable Person is required to submit a tax registration application to the FTA for corporate purposes. The clarification mentions different registration timelines for different taxable persons with several illustrations to explain how they apply to them. All taxable persons are required to submit a tax registration application to the FTA no later than the timelines set by the FTA.
  3. Any Taxable Person failing to submit a Tax Registration application within the timeline specified by the FTA will incur an Administrative Penalty of AED 10,000. The timeline specified by FTA Decision No. 3 of 2024 differs depending on whether the Taxable Person is:
    1. Resident Juridical Person;
    2. Non-Resident Juridical Person;
    3. A Natural person.

Analysis

  1. Resident Juridical Person (includes a Free Zone Person and Offshore Companies recognised as per applicable legislation in UAE);
  1. Incorporated or otherwise established or recognised prior to 1st March 2024

A juridical person incorporated or otherwise established or recognised prior to 1 March 2024, shall submit a Tax Registration application based on the month of their Licence  issuance within deadline provided in FTA Decision 3 of 2024 (irrespective of the fact whether license is valid or expired).

Example: Company C incorporated in Abu Dhabi on 1 April 2020 had licence valid till 31 March 2022 only. Company C did not renew or cancel their Licence, so they only hold an expired Licence.

Company C is a Resident Person as it was incorporated in the UAE shall submit Tax Registration application by reference to the month of its Licence issuance. Even though Company C does not hold a valid Licence, it must submit a Tax Registration application for Corporate Tax by reference to the month of its Licence issuance (i.e. April). Thus, Tax Registration application must be submitted by 30 June 2024.

  1. Incorporated or otherwise established or recognised on or after 1 March 2024

A juridical person newly incorporated or otherwise established or recognised in UAE on or after 1 March 2024, shall submit a Tax Registration application within three months from the date of its incorporation, establishment or recognition.

Example: Company E incorporated in Sharjah on 16 June 2024. Company E is a Resident Person, as it is incorporated in the UAE. As the incorporation date is after the 1 March 2024. Company E shall submit a Tax Registration application by 16 September 2024 (i.e. within three months from the date of incorporation).

Contd.

  1. Juridical person that is effectively managed and controlled (POEM) in the UAE prior to 1 March 2024

A juridical person incorporated or otherwise recognised in a foreign jurisdiction but has POEM in the UAE will be treated as Resident juridical person as per UAE CT Law. In case the juridical person does not hold a license at effective date of FTA Decision 3 of 2024, Tax Registration application was required to be  submitted within 3 months from the effective date of FTA Decision 3 of 2024 i.e. by 31st May 2024.

Example: Company A was incorporated in the UK on 1 April 2019. Since 1 April 2022, Company A has POEM in the UAE. Company A is a Resident Person because it has POEM in the UAE as on 1 June 2023. As Company A is a Resident Person prior to 1 March 2024, it must submit a Tax Registration application by reference to its License issuance date.

As Company A does not hold a License because it only holds board meetings in the UAE, so it must submit a Tax Registration application for CT within three months from the effective date of the FTA Decision No. 3 of 2024, i.e. by 31 May 2024.

  1. Juridical person that has POEM in the UAE after 1 March 2024

Where a juridical person is incorporated, established or otherwise recognised under the legislation of a foreign jurisdiction but has POEM in the UAE on or after 01 March 2024, shall submit a Tax Registration application within three months from the end of its Financial Year.

Example: Company F is incorporated in Germany on 1 April 2024 (following financial year April to March). All its board meetings and strategic managerial decisions for 2024 and 2025 take place in the UAE.

Company B is a Resident Person because it is POEM in the UAE for the year ending 31 March 2025. As Company B is a Resident Person after 1 March 2024, it must submit a Tax Registration application for CT within three months from the end of its Financial Year, i.e. by 30 June 2025.

  1. Important Points
    1. In case a juridical person holds a license at 1 March 2024 that has expired but has not been cancelled, it must submit a Tax Registration application by reference to the month of original license issuance.
    2. Where a juridical person holds more than one Licence as at 1 March 2024, Licence with the earliest issuance date shoold be used in determining the deadline by which it shoold submit the Tax Registration application. The earliest issuance date shoold consider the year of issuance of the License. However, when determining the Tax Registration application deadline, only the month of Licence issuance is relevant.
    3. Whether a juridical person is effectively managed and controlled in the UAE needs to be determined with regard to the specific facts and circumstances of the juridical person and its activities.
  1. Non-Resident Juridical Persons

In order to determine the due date for CT Registration application for Non Resident Juridical Persons, it has to be evaluated whether the Non-Resident Person has a Permanent Establishment (PE) in the UAE or has a nexus in the UAE.

  1. Non Resident Person having PE in the UAE prior to 01 March 2024

If a Juridical Person has a PE in the UAE, deadline to submit CT Registration application will be within 9 months from the date of existence of the PE (i.e. when the PE is recognized for UAE CT purposes). Further, if an International agreement for the avoidance of Double Taxation (DTAA) has longer duration for recognizing PE in the UAE, then provision under DTAA shall prevail.

Example: Company G incorporated in USA as on 15 Joly 2008 (following FY June to May). The Company established a branch in Dubai on 01 May 2023. Company shall be subject to CT from 01 June 2023 (as UAE CT Law provides that tax period commencing on or after 1 June 2023 will be within purview of UAE CT Law). Assuming all other requirements of PE has been met, in order to determine the degree of permanence, the six-month period in the UAE shall end on 01 December 2023.

Hence the date of existence of the PE for Company G shall be 01 December 2023 (i.e. 6 months from 1 June 2023). The Company will have to file CT Registration application within 9 months from the date of existence of PE (i.e. 01 December 2023). Thus, due date for CT Registration shall be 01 September 2024 (9 months from 1 December 2023).

  1. Non Resident Person having PE in the UAE on or after 01 March 2024 :

If the Juridical Person has a PE in the UAE, deadline to submit CT Registration application shall be within 6 months from the date of existence of the PE (i.e. when the PE is recognized for UAE CT purposes). Further, if DTAA has longer duration for recognizing PE in the UAE, then provision under DTAA shall prevail.

Example: Company K incorporated in Luxembourg on 22 October 2019. The Company established a branch in Abu Dhabi on 01 Joly 2024. Assuming all other requirements of PE has been met, in order to determine the degree of permanence, the six-month period in the UAE shall end on 01 January 2025.

Hence the date of existence of the PE for Company K shall be 01 January 2025 (i.e. 6 months from 1 Joly 2024). The Company will have to file CT Registration application within 6 months from the date of existence of PE (i.e. 01 January 2025). Thus, due date for CT Registration shall be 01 Joly 2025.

Contd.

  1. Non Resident Person having nexus in the UAE prior to 01 March 2024

If the Non-Resident Juridical Person has a nexus in the UAE (i.e. deriving income from Immovable Property in UAE), then the due date to file CT Registration application shall be within 3 months from the effective date of FTA Decision no. 3 of 2024.

Example: Company J was incorporated in Oman on 3 January 2024. On 10 January 2024, Company J purchased residential property in Dubai for investment purposes. The property was rented out on 15 February 2024. Company J does not have a Permanent Establishment in the UAE. Company J is a Non-Resident Person because it is not a Resident Person and has a nexus in the UAE. Even though the Immovable Property was purchased on 10 January 2024, it did not earn income from the Immovable Property until 15 February 2024. Company J, therefore, had a nexus in the UAE on 15 February 2024.

Company J is a Non-Resident Person with a nexus in the UAE on 15 February 2024 (i.e. prior to 1 March 2024) shoold have submitted a Tax Registration application within three months from the effective date of FTA Decision No. 3 of 2024, i.e. by 31 May 2024.

  1. Non-Resident Person having nexus in the UAE on or after 01 March 2024

If the Non-Resident Juridical Person has a nexus in the UAE (i.e. deriving income from Immovable Property in UAE), then the due date to file CT Registration application shall be within 3 months from the date of establishment of nexus in the UAE.

  1. Natural Person (Resident and Non-Resident)

Resident Natural person whose Turnover from Business or Business Activity in the UAE exceeds AED 1 million during a Gregorian calendar year shall submit a Tax Registration application by 31 March of subsequent Gregorian Calendar Year (starting from 1 January 2024).

Non-Resident Natural person whose turnover from a Business or Business Activity in the UAE derived from a PE exceeds AED 1 million during a Gregorian calendar year shall submit a Tax Registration application within three months of meeting the requirements of being subject to Corporate Tax.

Example: Mr. B is treated as being tax resident in Spain under an applicable international agreement for the avoidance of double taxation between the UAE and Spain. However, from 27 January 2024, Mr. B started travelling to the UAE every month to conduct Business as an independent IT consoltant. By conducting Business in the UAE, Mr. B creates a PE in the UAE under the applicable international agreement for the avoidance of double taxation. In the 2024 Gregorian calendar year, Mr. B generates a turnover of AED 1.2 million (AED 1 million threshold is exceeded on 10 November 2024).

Mr. B (being Non-Resident Natural Person) derived turnover of AED 1.2 million from a PE in the UAE so he has met the requirements of being subject to Corporate Tax. Thus, he must submit Tax Registration application within 3 months from the date of meeting the requirements of being subject to Corporate Tax by 10 February 2025 (i.e. 3 months from 10 November 2024).

  1. Important Points
    1. In case, a Non Resident Juridical Person has both nexus and a PE in the UAE, then the due date to file CT registration application shall be the earlier of the two deadlines.
    2. If DTAA has longer duration for recognizing PE in the UAE, then provision under DTAA shall prevail.

 


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