PTG Consultant L.L.C
Corporate Tax in UAE
We provide professional Corporate Tax Registration services that help businesses comply with the Federal Decree-Law No. 47 of 2022 titled “Taxation of Corporations and Businesses” (‘Corporate Tax Decree Law’) issued by the Ministry of Finance in the UAE.
Registration for Corporate Tax
Clause 1 of Article 51 of Federal Decree Law No. 47 of 2022 (UAE CT Law) mandates that a Taxable Person must register for Corporate Tax in the prescribed form, manner, and within the timeline set by the Authority, and obtain a Tax Registration Number, unless otherwise specified by the Minister.
In line with this, the Federal Tax Authority (FTA) has issued Decision No. 3 of 2024, which outlines the registration timelines for Taxable Persons under the UAE CT Law. This decision will come into effect on 1 March 2024.
Timelines For Natural Person
Natural Person conducting business/ business activities in UAE
Natural Person conducting Business or Business Activity during 2024 Gregorian calendar year or subsequent year and total Turnover in Gregorian calendar year exceeds threshold specified (i.e. AED 1million
Resident Person
Non-Resident Person
31 March of the subsequent Gregorian calendar year
3 months from the date of meeting the requirements of being subject to tax
1 January to 31 January
1 February to 28/29 February
1 March to 31 March
1 April to 31 April
1 May to 31 May
1 June to 30 June
1 August to 31 August
1 September to 30 September
1 October to 31 October
1 November to 30 November
1 December to 31 December
Where a person does not have a Licence at the effective date of this Decision
31 May 2024
31 May 2024
30 June 2024
30 June 2024
31 July 2024
31 August 2024
30 September 2024
31 October 2024
31 October 2024
30 November 2024
30 November 2024
31 December 2024
(3) three months from the effective dare of this Decision
Person that is incorporated or otherwise established or recognised under the applicable legislation in the state, including a Free Zone Person
Person that is incorporated or otherwise established or recognised under the applicable legislation of a foreign jurisdiction that is effectively managed and controlled in the State (POEM in UAE)
3 months from the date of incorporation, establishment or recognition
3 months from the end of the FY of the person
With a PE in UAE
With a Nexus in UAE
Non Resident Juridical Person prior to 1 March 2024
With a PE in UAE
With a Nexus in UAE
9 months from the date of existence of the PE
3 months from the effective date of this Decision
Non Resident Juridical Person prior to 1 March 2024
6 months from the date of existence of the PE
3 months from the date of establishment of the Nexus
Timelines For Resident Juridical Person
Resident Juridical Person Incorporated or otherwise established prior to 1 March 2024
Timeline For Resident Juridical Person
Resident Juridical Peron incorporated or otherwise established on after 1 March 2024
OUR APPROACH
In-house tax departments often face challenges in adapting to constantly changing requirements. Our experienced professionals at PTG are here to ensure a smooth and seamless transition to the new Corporate Tax regime in the UAE. With our expertise, your team’s burden will be significantly reduced. Our corporate tax teams are already assisting numerous businesses in the UAE with tax impact assessments, transfer pricing reviews, cross-border transaction evaluations, and operational implementation planning.
The phases in the diagram will be revised as follows:
Phase I: Impact Assessment
Phase II: Transition Support
Phase III: Compliance Support
OUR SERVICES
A corporate tax assessment will help you identify the necessary changes to align your business, both financially and operationally, with the requirements of the Corporate Tax law. This comprehensive assessment will provide the foundation for effective tax planning and a strong compliance framework.
Foreign companies that are 1) Effectively controlled and managed from the UAE (i.e., Place of Effective Management (POEM)), 2) have a permanent establishment in the UAE, 3) derive UAE-sourced income, or 4) have a nexus in the UAE, fall within the scope of the UAE Corporate Tax regime. At MBG Corporate Services, we assist foreign companies conducting business in the UAE, through any form of presence, by evaluating their existing business models, long-term agreements/contracts, intra-group and cross-border transactions, and more, to assess the impact from a permanent establishment (PE) risk perspective. Additionally, for foreign companies effectively managed and controlled from the UAE, we can assess potential exposure from a POEM perspective.
The international tax framework is now relevant in every country in the post-globalization era, with Transfer Pricing being one of its key concepts. At PTG Services, we possess a deep understanding of compliance requirements under local Transfer Pricing regulations, Country-by-Country Reporting (CbCR) regulations, and tax laws in various countries. We can assist taxpayers with gap analysis for transactions covered by the UAE's Transfer Pricing regulations, as well as support them with documentation, filings, disclosures, and reporting obligations.
The Federal Tax Authority has announced that Corporate Tax registration must be completed through their digital platform, EmaraTax. Registration is now open for all mainland and freezone entities. Our experts at PTG are fully equipped to assist you with the registration process, as we have a comprehensive understanding of the requirements and procedures.
A Tax Residency Certificate is required, among other things, to benefit from the Double Tax Avoidance Agreement. We can assist both individuals and companies in obtaining a Tax Residency Certificate in the UAE, in compliance with the recently updated guidelines and criteria.
Entities incorporated or established in UAE Free Zones are eligible for the 0% Corporate Tax incentive under the CT Decree Law. However, this incentive is subject to certain conditions and requires a detailed analysis of the compliance procedures that must be followed to maintain eligibility. At PTG, we can assist companies in conducting an analysis to determine if these conditions are met and guide them through the necessary procedures to continue benefiting from this incentive.
360-degree approach
We provide a comprehensive 360-degree approach to the implications of the upcoming Corporate Tax regime. Our solutions cover legal, VAT, audit, IFRS, and other UAE-related laws and regulations.
Corporate Tax
Tailored Tax Impact Assessment
Transition Assistance
Ongoing Post-Implementation Support
Tax Group vs. Individual Entity Registration
Indirect Tax
VAT & Corporate Tax Alignment Assessment
Transition Assistance
Customs, Excise, VAT Reconciliation, and Tax Support
Risk Advisory
Risk Assessment for Selected Accounts
Development of Guidelines, Policies, & Procedure Manual
Strong Periodic Accounting Reconciliation System
Training & Workshops
Cost Optimization, including Supply Chain Management
Audit
Consolidated v/s standalone financial statements Support
Statutory Audit
ICV Certification & Guidance
Legal
Business Restructuring
Transactions and Ownership Matters
Corporate Secretarial Compliance
Compliance Management and Resolutions
Transfer Pricing
Transfer Pricing Impact & Gap Assessment
Transfer Pricing Policy Review & Development
Supply Chain, Functional, and Benchmarking Analysis
Transfer Pricing Documentation & Benchmarking Analysis
FAQ
The Federal Tax Authority (FTA) is responsible for administering, collecting, and enforcing the Corporate Tax Law. In this regard, the FTA issues guidelines, provides clarifications, and conducts awareness sessions.
The Ministry of Finance is the competent authority for bilateral and multilateral tax agreements, as well as the international exchange of tax information. It also has the authority to issue the implementing regulations for the UAE Corporate Tax Law.
(a) Yes, foreign entities are liable to pay UAE Corporate Tax at a rate of 9% if their annual taxable income during the relevant tax period exceeds AED 375,000.
(b) Yes, foreign individuals are subject to UAE Corporate Tax at a rate of 9% if their annual taxable income during the relevant tax period exceeds AED 375,000, provided their total turnover from businesses or business activities exceeds AED 1 million during a Gregorian calendar year (1 January to 31 December).
According to FAQ No. 329 issued by the FTA, all taxable persons must be registered before filing their first Corporate Tax Return. The FTA may, at its discretion, register a taxable person who is not already registered. However, at present, no specific timeline has been prescribed for Corporate Tax registration.
According to Cabinet Decision No. 49 of 2023, an individual (referred to as a natural person in the UAE CT Law) will be subject to Corporate Tax if their annual turnover from a 'Business' or 'Business Activity' in the UAE exceeds AED 1 million during a Gregorian calendar year (1 January to 31 December).
According to Article 3 of Federal Decree Law No. 47 of 2022 (UAE CT Law), in conjunction with FAQ No. 26 issued by the FTA, the Corporate Tax will be levied at the following rates:
- Natural persons and juridical persons: 0% on taxable income up to and including AED 375,000.
- 9% on taxable income exceeding AED 375,000.
- Qualifying Free Zone Persons: 0% on qualifying income.
- 9% on taxable income that is not qualifying income, as outlined in Cabinet Decision No. 100 of 2023.
Corporate Tax is calculated on taxable income, which is derived by making adjustments for allowances and disallowances (as specified under the UAE CT Law) to the accounting net profit or loss.
The following persons are subject to UAE Corporate Tax:
Resident Persons
(a) Juridical persons incorporated or otherwise established in the UAE.
(b) Foreign juridical persons that are effectively managed and controlled in the UAE.
(c) Natural persons conducting business or business activity in the UAE with a turnover exceeding AED 1 million during the Gregorian calendar year.
Non-Resident Persons
(a) Permanent establishments in the UAE.
(b) Persons deriving UAE-sourced income.
(c) Persons with a nexus in the UAE.
(d) Natural persons conducting business or business activity in the UAE with a turnover exceeding AED 1 million during the Gregorian calendar year.
The following persons are automatically exempt from Corporate Tax:
- Government entities or government-controlled entities.
- Persons engaged in Extractive or Non-Extractive businesses (subject to meeting certain conditions).
- Qualifying Public Benefit Entities.
The following persons are exempt from Corporate Tax, subject to certain conditions and approval from the Authority:
- Qualifying investment funds.
- Public/private pension or social security funds.
- UAE juridical persons wholly owned by certain exempted entities.
Additionally, any other person may be exempted based on a decision issued by the Cabinet upon the suggestion of the Minister.
Tax losses can, subject to certain conditions, be carried forward and offset against taxable income in future periods, up to a maximum of 75% of the taxable income in each of those periods. Unutilized tax losses can be carried forward indefinitely, subject to certain conditions.
It is important to note that losses incurred before the first tax period of any business cannot be used to offset taxable income in future tax periods.
Withholding tax is the tax deducted at source by a Resident Person on payments made to a Non-Resident Person for certain types of UAE-sourced income earned by the Non-Resident Person. The specific categories of income subject to withholding tax are yet to be defined.
Yes, withholding tax is applicable in the UAE. Currently, the withholding tax rate is 0%, meaning businesses have no obligation to withhold taxes on domestic or international payments.
Yes, foreign taxes paid on income that is subject to corporate tax in the UAE can be claimed as a Foreign Tax Credit against the total corporate tax liability. However, the maximum Foreign Tax Credit will be the lower of the following:
- The foreign tax paid.
- The tax payable in the UAE on the relevant income.
It is important to note that the Foreign Tax Credit can only be utilized in the relevant tax period (i.e., it cannot be carried forward or back to a different tax period). Any business claiming the Foreign Tax Credit must have adequate documentary evidence to support the claim.
Yes, Transfer Pricing rules will apply to all businesses in the UAE that engage in transactions with related parties or connected persons. These rules are applicable to both mainland and free zone businesses.
Non-compliance with the Corporate Tax regime will result in penalties for businesses. The penalties may vary depending on the nature of the violation related to the application of the Corporate Tax regime. A detailed list of penalties is outlined in Cabinet Decision 75 of 2023.
According to Article 51 of Federal Decree Law No. 47 of 2022, all taxable persons must register for Corporate Tax with the Federal Tax Authority (FTA) in the prescribed form, manner, and timeline, and obtain a Tax Registration Number, unless exempted by the FTA. Therefore, it is mandatory for all mainland entities, free zone entities, Qualifying Public Benefit Institutions, and even loss-making entities to register for UAE Corporate Tax and obtain a Corporate Tax Registration Number. As per Article 53 of the same law, the Corporate Tax Return must be filed within 9 months following the end of the relevant tax period or by any other date specified by the FTA.
Key Highlights
The timelines outlined in the subject decision apply only to the submission of registration applications, not for obtaining registration.
If a juridical person holds multiple licenses, the license with the earliest issuance date will be used to determine the applicable timelines and deadlines.
Failure to submit the 'Tax Registration application' within the prescribed timelines may result in an administrative penalty of AED 10,000, as per Cabinet Decision No. 75 of 2023 (amended).
Therefore, it is crucial for each taxable person to carefully review the timelines and applicable categories to ensure timely compliance and avoid any penalty risks.