With the introduction of corporate tax in the UAE, all businesses are required to fulfill their tax registration responsibilities. Starting from June 1, 2023, all companies, including those in free zones, must register for corporate tax, even if they are already registered for VAT.
The UAE Corporate Tax is a direct tax levied on the net income or profit of companies and businesses by the UAE Ministry of Finance. This tax reform introduces a 9% tax rate for corporate profits exceeding 375,000 AED, designed to support medium and small businesses. All taxpayers are required to comply with the corporate tax regulations in the UAE. This obligation includes corporate tax registration, submission of annual tax returns, and proper accounting record-keeping.
However, the implementation of corporate tax in the UAE aims to meet international tax standards.
The Federal Tax Authority has left no room for uncertainty — all businesses operating in the UAE must register for corporate tax in 2024. This directive applies to all businesses, regardless of profitability or the date of establishment. Even loss-making businesses are not exempt from this mandatory registration.
Corporate tax registration obligation has been implemented as part of a forward-looking approach. New businesses established in the UAE are also advised to register for corporate tax without delay.
Key points to note:
- Corporate tax: A 9% rate applies to taxable income exceeding 375,000 dirhams (100,000 USD).
- Deadline for UAE resident companies: The latest application deadline is May 31, 2024, subject to change based on company formation and commercial licensing.
- Non-resident companies operating in the UAE are also required to register for corporate tax.
- Penalties: Those who fail to register on time are subject to a fine of 10,000 AED in accordance with Cabinet Decision No. 75 of 2023.
According to the Federal Tax Authority's Decision No. 3 of 2024:
- UAE resident legal entities have a 3-month period from their date of establishment to register.
- Foreign legal entities operating in the UAE have a 3-month period from their fiscal year-end to register.
- Resident individuals with business activity exceeding 1 million AED must register by March 31 of the following year, while non-residents have three months to fulfill their tax obligations.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
