Mandatory Corporate Tax Registration in the UAE: 2024 Guide

For many years, the UAE was unique among global jurisdictions for not imposing tax on most corporate and personal incomes. However, to support the nation’s thriving business environment and infrastructure, the UAE has implemented several changes to its tax policies.

In 2022, a 9% corporate tax was introduced, applicable to annual profits exceeding AED 375,000. Although this marks a significant shift in the UAE’s tax policy, it remains one of the most attractive financial environments globally, with numerous small and medium-sized businesses still enjoying tax-free status.

As a result of this change, many businesses across the UAE must now register with the Federal Tax Authority (FTA), with some deadlines set for 31 May 2024.

If you think your business is subject to corporate tax and you haven’t registered with the FTA yet, here’s what you need to know to comply with the new regulations.

Understanding Corporate Tax in the UAE

The decision to introduce corporate tax in the UAE was made after considerable discussion, aimed at reinforcing the country’s position as a top business and investment hub. This move will provide the government with a reliable source of tax revenue, enabling further development and helping meet ambitious growth and transformation goals. It also aligns with international standards for tax and financial transparency.

For businesses in the UAE, the new rules bring new responsibilities. Depending on your financial year, corporate tax obligations may apply starting from either 1 June 2023 or 1 January 2024.

Corporate tax affects all businesses conducting commercial activities in any UAE emirate, including foreign entities regularly trading in the UAE and many businesses in free zones, although existing tax incentives will remain in effect for now.

The tax is imposed only on taxable profits exceeding AED 375,000 annually. If your company’s profits are below this threshold, no tax is due.

The FTA defines taxable income as “the accounting net profit (or loss) of the business, after adjustments as specified in the Corporate Tax Law.”

It’s important to note that the 9% corporate tax rate applies solely to company earnings. It does not affect individual employment income, dividends, capital gains, interest, royalties, or other investment incomes.

Who Needs to Register for Corporate Tax?

All taxable entities in the UAE are required to register with the FTA, regardless of whether their income surpasses the AED 375,000 threshold. Failure to register can result in fines of up to AED 10,000.

A taxable entity includes any commercial business operating in the UAE, irrespective of its profit level or whether it meets the taxable threshold. According to the FTA, a commercial business is any entity engaged in economic activities, whether ongoing or short-term, with a profit motive and a structured system for the activities conducted. Profit or loss does not affect this definition.

In essence, corporate tax registration is mandatory for almost all businesses. You should not wait until your earnings exceed AED 375,000, nor assume that small businesses are exempt. Small business relief is available for companies with total revenue below AED 3 million, but registration is still required.

If you haven’t registered yet, there’s still time to comply. Here are the FTA deadlines for businesses registered before 1 March 2024:

Any business established after 1 March 2024 must register with the FTA within three months of incorporation.

Steps to Register for Corporate Tax in the UAE

The process for registering for corporate tax is designed to be straightforward. Typically, you can complete your application in about 30 minutes by following these three steps on the FTA website:

1. Create an Account: Register your email and phone number on the Emaratax portal to establish your login credentials for corporate tax matters.
2. Register Your Business: Follow the on-screen instructions to register your business and designate the taxable person or persons.
3. Complete Registration: Once all taxable persons are recorded, you can select the option to register for corporate tax. You will receive your corporate tax registration number within 20 business days.

While the registration process is relatively simple, navigating the broader corporate tax landscape can be complex. Seeking guidance from an expert, such as Brightlink Consulting, can be beneficial. Our team can assist with tax and accounting queries from registration to filing and beyond.

Why Work with Brightlink Consulting?

Understanding complex tax regulations can be challenging, especially with relatively new rules in the UAE. When undertaking critical business processes, having access to expert knowledge is essential.

Brightlink Consulting provides a comprehensive range of tax and accounting services to support your business’s growth and long-term financial stability. Beyond tax registration and filing, we can help streamline your accounting operations, including invoicing, bank reconciliation, expense management, inventory tracking, and report generation.

With over 10 years of experience as a leading corporate service provider, our award-winning team is well-equipped to assist with all aspects of UAE business setup and operations.

Contact Brightlink Consulting today to continue your successful business journey in the UAE with expert support.