A Simple Guide to Corporate Tax in the UAE

Corporate Tax in the UAE has been introduced to align with global tax standards while maintaining a competitive business environment. This guide provides an overview of corporate tax, including its applicability, required documents, and the registration process.

What is Corporate Tax?

Corporate Tax is a direct tax imposed on the net profit of businesses. In the UAE, Corporate Tax is governed by Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses and is effective from June 1, 2023.

Who is Subject to Corporate Tax?

Corporate Tax applies to:

• UAE-based businesses and entities engaged in commercial activities.
• Free zone companies that do not qualify as “Qualifying Free Zone Persons” under Cabinet Decision No. 55 of 2023.
• Foreign entities that generate income from the UAE.

Exempt Entities

Certain entities are exempt, including:

• Government and government-controlled entities.
• Charitable organizations registered with the Ministry of Finance.
• Qualifying Free Zone Companies meeting specific conditions.

Corporate Tax Rates

Small Business Relief (SBR) Rules

Under Ministerial Decision No. 73 of 2023, the UAE offers Small Business Relief (SBR) for eligible businesses with revenues not exceeding AED 3 million per tax period. This allows small businesses to be treated as having no taxable income, thereby reducing compliance burdens. SBR is available for tax periods starting on or after June 1, 2023, and applies until further government amendments.

• 0% for businesses with taxable income up to AED 375,000.
• 9% for taxable income exceeding AED 375,000.
• Different rates may apply to large multinational enterprises meeting OECD’s Pillar Two rules.

Documents Required for Corporate Tax Registration

To register for corporate tax, businesses must prepare the following:

1. Trade License (Valid and up-to-date).
2. Emirates ID and Passport Copies of the owner(s) or partners.
3. Memorandum of Association (MOA) or Articles of Association (AOA).
4. Financial Statements (Audited or internally prepared).
5. VAT Registration Certificate (if applicable).
6. Tenancy Contract/Ejari.
7. Bank Statements for the last 12 months.

Corporate Tax Registration Process

Step 1: Create an Account on the EmaraTax Portal

Visit the Federal Tax Authority (FTA) website and register on the EmaraTax platform.

Step 2: Submit Corporate Tax Registration Application

• Fill in business details and attach required documents.
• Choose the applicable tax period.

Step 3: Await Approval

• The FTA will review the application and may request additional information.
• Once approved, a Corporate Tax Registration Number (TRN) is issued.

Corporate Tax Filing & Compliance

Documents Required for Corporate Tax Filing

To successfully file corporate tax returns, businesses must provide the following documents:

1. Corporate Tax Registration Number (TRN) – Issued upon successful registration.
2. Financial Statements – Audited or internally prepared financial statements covering the tax period.
3. Profit and Loss Statement – A summary of business income and expenses.
4. Balance Sheet – Details of assets, liabilities, and equity.
5. General Ledger Reports – Comprehensive transaction records.
6. VAT Returns (if applicable) – Filed VAT returns for reconciliation.
7. Bank Statements – Supporting financial transactions and cash flow.
8. Invoices and Expense Receipts – Proof of income and expenditures.
9. Payroll Records – Employee salary details if applicable.
10. Any Adjustments or Deductions – Supporting documentation for tax adjustments and relief claims.
11. Maintain Accurate Records – Businesses must keep records for at least 7 years.
12. File Corporate Tax Returns – Returns must be filed within 9 months from the end of the financial year.
13. Pay Corporate Tax Dues – Tax payments must be made on time to avoid penalties.

Key Compliance Requirements

• Taxable businesses must register even if their income is below the taxable threshold.
• Failure to register, file, or pay taxes will result in penalties.
• Free Zone Businesses must maintain compliance with tax laws to retain 0% benefits.

Conclusion

Understanding corporate tax is essential for businesses operating in the UAE. By ensuring timely registration, documentation, and compliance, businesses can avoid penalties and operate smoothly.

For expert assistance on Corporate Tax registration, compliance, and filing, contact Capital Zone Accounting & Bookkeeping today!