Stay Ahead of the Curve: Registering for Corporate Income Tax in the UAE – Everything You Need to Know

The United Arab Emirates (UAE) has taken a significant step in its economic landscape by implementing Corporate Income Tax, as outlined in the federal Decree-Law No.47 of 2022 on taxation of corporations and business, commonly known as the “Corporate Tax Law.” This new tax framework imposes direct taxes on the net income or profit generated by corporations and other entities operating within the UAE. With the effective date set for the first financial year starting on or after 1 June 2023, this article aims to provide a comprehensive overview of the UAE Corporate Tax regime, including applicable rates, registration process, and important considerations for businesses.

Corporate Tax Rates

As per the Ministry of Finance in the UAE, the Corporate Tax Law introduces the following corporate tax rates:

• 0% Tax Rate: Businesses with annual net profits of up to AED 375,000 are subject to a 0% tax rate.
• 9% Tax Rate: Businesses are subject to a 9% tax rate on any annual net profits exceeding AED 375,000.

Record keeping and filing tax returns

The Corporate Tax Law requires specific accounting records to be kept; make sure your accountants are aware of the Corporate Tax Law regulations and these record-keeping requirements.

Each business must file a corporate tax return with the Federal Tax Authority (FTA) every year at the end of the business’ taxable period. Based on this tax return, which includes claiming any applicable relief or exemptions, the FTA will determine any tax you owe (though your accountants should already have calculated this figure).

Early Registration and Priority

During the period from January 2023 to May 2023, specific companies have been invited by the FTA to conduct early registration for Corporate Tax. Following this pre-registration period, the FTA will announce a date on which other corporations may register for the corporate tax in the UAE. It is important to note that priority will be given to businesses with a financial year starting on 1 June 2023, once the official registration date is announced by the FTA.

Applicability of Corporate Tax

The UAE Corporate Tax regime will come into effect for financial years starting on or after 1 June 2023. To provide a clearer understanding of the implementation, consider the following examples:

1. A business with a financial year starting on 1 July 2023 and ending on 30 June 2024 will become subject to UAE Corporate Tax from 1 July 2023. This is considered the beginning of the first financial year that starts on or after 1 June 2023.
2. A business with a financial year starting on 1 January 2023 and ending on 31 December 2023 will become subject to UAE Corporate Tax from 1 January 2024. This marks the beginning of the first financial year following 1 June 2023.

Conclusion

The implementation of Corporate Income Tax in the UAE represents a significant milestone in the country’s economic landscape. As per the Corporate Tax Law, businesses and individuals engaged in commercial activities under a license in the UAE will be subject to this tax regime. Understanding the applicable tax rates, adhering to the registration process, and adhering to the specified timeline is crucial to ensure compliance with the UAE Corporate Tax Law. By proactively registering for Corporate Tax and familiarizing themselves with the requirements, businesses can avoid penalties and non-compliance issues. Embracing these changes will contribute to a more robust and sustainable economic system in the UAE.

Registration Process with Sage

To ensure compliance with the new Corporate Tax Law, all businesses (including free zone companies and freelancers) in the UAE need to complete the registration process.

Please reach out to us for a consultation call to assist you with the registration process and help you maintain compliance with the new Corporate Tax Law.