In January 2022, the Ministry of Finance (MoF) announced the implementation of Corporate Tax on the net profit of the businesses operating in the UAE. The new tax system was introduced to elevate the country’s development and align with international best practices. However, to adapt to the new framework, businesses need to find their way through the complicated corridors of corporate tax. For instance, laws and regulations pertaining to the new taxation, documents required for corporate tax registration in UAE, the eligibility criteria, and more.
This article will take you through all the necessary details you need to know about UAE corporate tax.
Corporate Tax in the UAE
The Federal Corporate Tax, also known as Business Tax, is applicable to the net profits of all businesses across the UAE. Businesses with profits up to AED 375,000 can benefit from a 0% tax rate, whereas profits exceeding that amount shall be subject to a standard 9% tax. On the other hand, certain entities such as government bodies and specific non-profit organizations are exempt from Corporate tax.
Mandatory corporate tax registration in the UAE
Most businesses operating in the UAE must register for Corporate Tax. Here’s a list of entities that qualify for corporate tax registration:
- All taxable persons: Any entity or individual conducting business in the UAE with an annual turnover exceeding AED 375,000.
- Free Zone entities: Businesses operating in UAE free zones.
- Foreign companies: A foreign enterprise with a permanent establishment or taxable presence in the country.
Additionally, there are exceptions and exemptions for certain businesses and income. You can get the full details including the documents required for corporate tax registration in UAE from the tax consultants at Shuraa Tax.
Detailed guide to corporate tax registration: Step-by-step process
Corporate Tax registration is basically a process where an individual or a company is legally recognized as an operating entity after being registered with the FTA. These are the steps involved in this process:-
Determine the eligibility for registration –
The first civil step in the registration process is to determine if the individual or entity is eligible to pay business tax in the UAE. According to Article 11 of the Corporate Tax Law, the following entities qualify for mandatory corporate tax registration in the UAE:
- Commercial and other entities registered in the UAE
- Foreign legal entities with the majority of their operations in the UAE
- Permanent establishment; company Income tax and Corporate tax; non-resident juridical persons
- Non-resident persons deriving State Sourced Income
- Non-tax residents or companies having a legal acquisition of Income from Immovable Property in the UAE
- Legal entities with a turnover of more than AED 1,000,000, according to the Gregorian calendar year.
Obtain a Tax Registration Number (TRN) –
Before proceeding with the corporate tax registration process, the applicant needs to acquire a tax registration number or TRN from the Federal Tax Authority (FTA). This unique number is essential to complete all transactions associated with taxes.
Assemble the documents –
After obtaining the TRN, the applicant must gather the documents required for the process, which include a valid trade license issued by competent authorities, a copy of the company MOA, valid passports of company shareholders, directors, and other authorized signatories, and the company ID of the business owner.
File the registration application –
Once you have arranged all the documents and the TRN, visit the FTA’s official website and fill out an application form, providing information about your organization’s efforts, changes, and other exemption-related information. Before submission, review the input details and double-check all documents.
Get approval from the Technical Committee of the FTA –
The FTA will review the application and documents and verify its legitimacy. It may also ask for further supporting documents or information if needed. Therefore, to ensure a smooth run of the approval, the business must deal with the requests of FTA on time.
File for Corporate Tax –
Once the application is approved by the FTA, it will issue a registration certificate to the company confirming its registration for corporate tax in the UAE. After receiving the certificate, you can go ahead and pay your corporate taxes.
Consulting with a Shuraa Tax expert will ensure that you meet all the taxation requirements efficiently and on time.
Documents required for corporate tax registration in UAE
Here’s a list of mandatory documents required for corporate tax registration in UAE:-
Trade License – A valid trade license, also known as a business license, issued by the appropriate authorities is crucial for the process. Since the license certifies the legitimacy of the business, the owner must ensure that it is up-to-date and not expired while registering for corporate tax in the UAE.
Memorandum of Association (MOA) or Articles of Association
(AOA) – The MOA is a company document that outlines the objectives, legal structure, and internal rules of the company. In short, it is a business blueprint. Through this document, the FTA gets crucial information about the company’s purpose and structure.
Passport Copies of Owners/Partners/Shareholders – All company owners, partners, or shareholders are required to provide their passport copies. For verification, they can also submit a copy of their Emirates ID. The identities of individuals holding ownership or partnership rights in the company can be verified through these documents.
Contact Information – During mandatory corporate tax registration in the UAE, the company owners must provide accurate and up-to-date contact details of the company and the designated contact person. The submitted details must include phone numbers, email addresses, etc.
Company Details – The owner must also provide details of the official address and PO Box information of the company to ensure clear communication with the FTA.
Board Resolution – This document is typically approved by the company’s board of directors. It authorizes the corporate tax registration in the UAE.
Important Considerations for Corporate Tax in the UAE
Here are some points related to recordkeeping for corporate tax in the UAE that you must take into account:-
- Entities exempt from Corporate tax registration must also maintain records that prove and uphold their exemption status.
- The company must maintain the record for a minimum of seven years even after the conclusion of the tax period.
- Unless the UAE tax group is inclusive of UAE resident entities, they are not permitted to keep combined financial statements or records.
- Only the organizations that are listed on the minister’s list are required to keep audited financial records.
- The taxable entities must provide corporate tax returns, financial statements, and records upon request by the FTA.
Need for accurate record-keeping for CT return filing in the UAE
Entities filing for Corporate tax returns must maintain precise financial records for the following reasons:
- Law and regulation compliance – Businesses must keep complete and accurate financial records to ensure adherence to UAE tax laws and regulations. Improper recordkeeping can lead to penalties, fines, and even legal action.
- Precise tax calculations – By maintaining accurate records and documents, companies can determine their taxable revenue correctly, thereby avoiding the risk of risk underpaying or overpaying taxes which can eventually lead to legal repercussions.
- Transparency – Maintaining financial records facilitates transparency in business operations, helping shareholders, creditors, investors, and regulators evaluate the stability and reliability of the company’s finances.
- Better decision-making – With precise financial documentation, business owners can understand the company’s financial health and make informed decisions for its progress.
Conclusion
Thus, proper submission of documents required for corporate tax registration in UAE ensures a streamlined registration process and compliance with FTA guidelines and UAE tax regulations.
Shuraa Tax Consultants and Accountants help businesses comply with their legal needs and prevent legal consequences that may arise due to non-compliance. By utilizing the services of Shuraa Tax, you can minimize legal risks, preserve compliance within your organization, and efficiently navigate tax-related issues.
Book your free consultation today – www.shuraatax.com
