Corporate tax is a type of tax that companies have to pay to support government activities, maintain public infrastructure, and provide services to the public. It is calculated based on the profits and income of the business and varies depending on the country or region. The tax is generally calculated by deducting business expenses from the company’s overall income. Companies can also benefit from deductions and credits offered by governments to reduce their tax liability. Corporate taxes are usually paid monthly or quarterly, depending on the amount owed and any payment arrangements with the authorities.
UAE Corporate Tax
The United Arab Emirates (UAE) is planning to introduce a corporate tax system with a standard rate of 9% starting in June 2023. This proposal was made by the UAE Minister of Finance during the annual budget announcement. The new tax will apply to all businesses in the UAE, even those that are currently exempt from taxes. The goal is to make the UAE more competitive and attractive to foreign investors while also increasing government revenue.
The new corporate tax will replace the current VAT system and will be set at a rate of 9%. Businesses with annual revenues exceeding AED 375,000 will be required to comply with the new system. The Federal Tax Authority (FTA) will be responsible for overseeing the corporate tax regime.
It is estimated that the implementation of the corporate tax system will generate approximately AED 12 billion in additional revenue for the UAE government in the first year. This revenue will be used to support various government initiatives and programs.
The FTA has issued guidance on corporate taxation in the UAE, which applies to most taxable corporations in the country. The taxable income of corporations will be calculated based on their net profit from financial statements, with certain adjustments. The FTA has provided a list of items that will be exempt from tax and a list of allowable deductions. Compared to neighboring countries like Saudi Arabia, Qatar, and Kuwait, the proposed corporate tax rate of 9% in the UAE is significantly lower.
Read More: Corporate Tax in the UAE: Everything You Need to Know
Corporate Tax Registration in UAE
All businesses subject to taxation, including those operating in Free Zones, must register for Corporate Tax and obtain a Corporate Tax Registration Number. In some cases, even Exempt Persons may be required to register for Corporate Tax as determined by the Federal Tax Authority.
Businesses liable for Corporate Tax must submit a Corporate Tax return for each Tax Period within 9 months after the end of the relevant period. Generally, the same deadline applies for the payment of any Corporate Tax owed for the specific Tax Period.
When most businesses register, they simultaneously register as an employer with Companies House, Corporation Tax, and PAYE.
If you have already registered your business but haven’t registered for Corporation Tax, you need to use this service to complete the registration process:
- If you registered for Companies House using an agent and third-party software but didn’t register for Corporation Tax, log in to HMRC’s online services. If you don’t have an account for online services yet, you can create one during the login process.
- Register your company within three months of starting your business. This includes activities like buying and selling, advertising, renting real estate, and hiring employees. If you’re unsure about what constitutes starting a business, you can find the information you need by searching.
Read More: Corporate Tax Registration in UAE: Steps and Guidelines
Corporate Tax Registration Process in UAE
To register for Corporation Tax, simply access your business tax account and follow the provided instructions. Make sure you have your company’s Government Gateway user ID and password ready to sign in. If you don’t have a user ID, you can create one during the sign-in process.
You’ll also need your company’s 10-digit Unique Taxpayer Reference (UTR) number. HM Revenue and Customs (HMRC) will send this UTR to your registered company address within 14 days of your company being registered with Companies House. If you haven’t received the UTR yet, you can obtain it online.
Once you have all the necessary information, you can easily register for Corporation Tax through your business tax account.
Corporate Tax De-registration in UAE
When a business or business activity is coming to an end, whether through dissolution, liquidation, or another method, the Taxable Person must complete a deregistration form according to the specified format. It is important to submit all required documents for the deregistration process to be approved.
Once the Tax Deregistration Application is approved, the relevant authority will proceed with deregistering the property. However, if any of the requirements for Tax Deregistration are not fulfilled as outlined in the article, the authority may proceed with deregistering the Taxable Person on either of the following dates:
- When the Authority became aware that this provision had not been followed at the end of the tax period;
- Taxable Persons cease to exist at this point.
Corporate Tax Services in UAE
To ensure a successful expansion into the UAE, companies must hire corporate tax consultants in Dubai. The expertise of tax consultants, such as TCA, is essential in navigating the taxation system of the United Arab Emirates (UAE). We have the knowledge and experience to help businesses understand and comply with tax requirements. Our expert advice is invaluable in minimizing tax liabilities while ensuring full adherence to relevant laws and regulations at every stage of operations in Dubai. With our corporate tax services, companies can confidently navigate the tax landscape and optimize their tax strategies for success. For more related to corporate tax services in UAE, get in touch with TCA.
