Don’t Miss the UAE Corporate Tax Deadline
The United Arab Emirates (UAE) recently announced the implementation of a federal corporate tax on business profits effective for financial years starting on or after 1st June 2023. With the deadline for the first corporate tax return filings fast approaching, businesses in the UAE should start preparing now.
Getting your corporate taxes done correctly and on time is critical. Falling behind on your obligations can lead to penalties, interest charges, and even potential business closures. That’s why choosing the right corporate tax advisor, like Bazaar Accounting, is so important.
At Bazaar Accounting, our expert team stays on top of the latest tax policy changes in the UAE. We can help your business understand the new tax, comply with regulations, file on time, and minimize your tax liability through proven planning strategies.
Overview of Corporate Tax in the UAE
The newly introduced UAE federal tax will apply to most corporate enterprises and commercial activities, with a few exceptions. Here is an overview of the key features:
- Tax rate – A standard statutory tax rate of 9% will apply on taxable profits exceeding AED 375,000.
- Taxable entities – The tax applies to most types of companies and commercial activities in the UAE, including limited liability companies, public joint stock companies, partnerships, branches and permanent establishments of foreign companies, and trust funds.
- Exemptions – Oil and gas companies that hold an ADNOC concession or license and qualifying real estate investment trusts (REITs) are exempt.
- Threshold – Businesses making taxable profits under AED 375,000 in a tax year are exempt.
- Tax year – The tax year (assessment year) aligns with the calendar year starting 1 January. However, for the first year, it is a shortened tax period from 1 June 2023 to 31 December 2023.
- Tax return deadline – Returns must be filed within nine months after the end of the tax period. So for the inaugural 2023 tax year, the first filing deadline is 31 December 2024.
- Penalties – Late filing penalties can amount to AED 1,000 per day, with a maximum penalty of 300% of unpaid taxes. There are also penalties for tax evasion, inaccurate returns, and obstructing tax audits.
While the framework seems relatively straightforward, accurately interpreting how specific or unique business activities should be treated for tax purposes can be complicated.
The stakes are high, so relying on a trusted tax advisor like Bazaar Accounting is crucial for avoiding issues down the line. Our team stays on top of the evolving regulations so your business remains compliant.
What Taxes Currently Apply to Businesses in Dubai?
Even before the new UAE Corporate Tax, companies operating in Dubai and the UAE have had to comply with other taxes, including:
Value-Added Tax (VAT)
VAT is an indirect tax applied on the consumption of most goods and services in the UAE. The standard VAT rate is 5%. Companies must register for VAT if their taxable supplies and imports exceed the mandatory registration threshold of AED 375,000 over the last 12 months.
As VAT registered businesses, companies must charge VAT on their sales at the appropriate rate, file regular VAT returns, and maintain proper accounting records.
Excise Tax
Excise tax applies to specific goods deemed harmful to human health or the environment. The list of excise tax products includes tobacco, energy drinks and fizzy drinks. The responsibility to account for excise tax falls on the local manufacturer or importer. Retailers also need to record excise taxes.
Customs Duty
Customs duties apply to certain imported goods entering the UAE. Rates vary considerably based on the goods classification and purpose. Clearing customs and paying the appropriate duties is mandatory for importers.
Municipality Fees
If your business holds a trade license in Dubai, you must pay an annual municipality fee based on your license type and activities. Fees range from AED 1,000 to AED 70,000+.
With UAE corporate tax added to the mix, keeping up with all the different taxes and regulatory requirements is only getting more challenging. Our dedicated consultants at Bazaar Accounting are here to help your company make sense of it all.
How Can a Company Register for Corporate Tax in the UAE?
If your business expects to cross the AED 375,000 taxable profit threshold in the coming years, you should register with the Federal Tax Authority (FTA) as soon as possible.
While the registration deadline has not been formally announced yet, tax experts anticipate companies will need to register before the end of the first tax period on 31 December 2023.
Determine your tax residence status
Businesses will need to assess if they meet the conditions to be tax resident in the UAE or not based on their management offices, headquarters, ownership structure, founding documents and other factors.
Choose a reporting method
UAE tax resident businesses can select to calculate taxable profits based on financial accounting standards or international financial reporting standards (IFRS), while non-residents must use IFRS.
Appoint a resident agent (if applicable
Foreign companies with a UAE tax presence but no permanent establishment must appoint a UAE tax resident agent or representative.
Obtain digital signature certificates
All business representatives submitting the application must have an approved digital signature from an official certification authority.
Register through the eServices portal
Businesses complete the registration application on the Federal Tax Authority’s online portal. Supporting documents like ownership records and financial statements will need to be attached.
Get registered
If approved, the FTA will send a confirmation notice and corporate tax registration number, meaning your business can operate legally per the tax rules.
As the registration deadline draws nearer, we expect the process to become more urgent and competitive. Get ahead of the curve by scheduling a corporate tax consult with our experts at Bazaar Accounting today. We’ll ensure your registration goes smoothly for full compliance.
How Bazaar Accounting Approaches UAE Corporate Tax Services
The prospect of a new federal tax is undoubtedly concerning for companies who’ve enjoyed a virtually tax-free environment in the UAE until now.
Yet, with careful planning and support from experienced tax advisors, your business can adapt and even save substantially on its tax obligations.
At Bazaar Accounting, our corporate tax services include:
Corporate Tax Planning & Advisory
- Tax technical support covering registration, accounting methods, deadlines, and more
- Residency status evaluation and non-resident agent appointment
- Forecasting tools to estimate tax liability impacts
- Feasibility studies around formation changes, IP ownership structuring, holding companies
Tax Calculation & Filing
- Maintain appropriate records for tax reporting
- Prepare computations based on financial accounts
- Provide audit and filing support
- Submit declaration, returns, and other required documents to regulators
Tax Savings Opportunities
- Identify available tax incentives, exemptions, rebates
- Apply applicable tax reliefs related to losses, donations, R&D
- Review transactions to avoid double taxation occurrences
- Set up tax efficient holding structures, IP ownership, financing
Tax Audit Support
- Assist with managing queries, assessments, and tax authority audits
- Provide documentation and clarification as needed
- Perform corrective adjustments to historical filings if required
- Defend position on complex gray areas when disputes occur
With UAE tax experts based right in the Dubai World Trade Centre, our advisors leverage the latest technologies along with proven best practices honed from experience working locally and abroad with major international firms like the Big 4.
Get your corporate taxes covered and avoid penalties by partnering with the leading accounting and tax consultancy firm in Dubai today.
