On June 1, 2023, the UAE implemented the Corporate Tax law, significantly transforming the tax landscape for all business entities operating within its jurisdiction.
This legislation applies to entities across the UAE, including those on the mainland, within free zones, as well as offshore. Additionally, the UAE CT law extends its reach to foreign entities that are either “managed and controlled” from the UAE or have a permanent establishment (PE) or significant nexus in the country, aligning with international tax principles.
To ease the compliance burden, several exemptions and relief measures have been introduced. Notably, there are provisions for small business relief and qualified free zone persons subject to specific conditions. However, the obligation to register with the Federal Tax Authority remains universal. One of the critical aspects of the new CT law is the requirement that every entity must register with the FTA, regardless of whether its income is taxable or exempt. Further, CT registration is different compared to VAT registration, even though the regulatory authority remains the Same i.e. FTA. Therefore, even if an entity is registered with FTA for VAT purpose, one needs to register separately for CT purpose.
The deadlines for registration are fast approaching, with the earliest being May 31, 2024. The registration dates vary based on the issuance date of the trade licence. The most immediate deadlines are for entities whose trade licences were issued in January or February, regardless of the issuance year, with a due date of May 31, 2024. For entities with trade licenses issued in March or April, the registration deadline is June 30, 2024.
Currently, the registration portal is open for all entities except for offshore entities, whose registration is temporarily on hold. Registering on FTA portal is generally not cumbersome. However, the process can sometimes require detailed information and specific clarifications, necessitating expert guidance. Tax professionals can provide assistance in ensuring that all required details are accurately and comprehensively submitted, helping entities avoid potential pitfalls.
In conclusion, the first and most critical step towards compliance with the UAE’s corporate tax regulations is registering your entity with the FTA. Entities must act promptly to meet the prescribed deadlines to avoid penalties. With expert guidance, businesses can navigate the complexities of the new law, ensuring smooth and compliant operations in the evolving UAE tax landscape.
The writer is Partner MICS International