With the introduction of the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, the UAE has officially stepped into a new era of corporate taxation. Designed to align the UAE’s practices with international standards, the new corporate tax law aims to enhance economic growth, diversify revenue, and support compliance. Corporate tax is levied directly on business profits, and companies operating within the UAE, as well as certain foreign entities, must be prepared to navigate this updated regulatory landscape.

What is a Corporate Tax Certificate?

A corporate tax certificate is a crucial document that confirms a business's tax registration and compliance with corporate tax regulations in the UAE. Issued by the Federal Tax Authority (FTA), the certificate enables businesses to operate transparently, meet legal tax obligations, and leverage potential tax benefits. For companies with cross-border operations, a corporate tax certificate often strengthens their credibility with international partners and clients, providing a seal of compliance with UAE tax laws.

Eligibility and Scope of Corporate Tax

The UAE corporate tax applies to "Taxable Persons," a category that includes resident entities, non-resident businesses with a UAE nexus, and individuals with substantial business activities. The law distinguishes between:

• Resident Juridical Persons: These include UAE-incorporated companies, free zone entities, and businesses effectively managed within the UAE.
• Non-Resident Persons: Foreign entities that operate in the UAE, either through a permanent establishment or via transactions within the country, are also subject to corporate tax.
• Free Zone Persons: Entities operating within designated free zones may benefit from a reduced tax rate if they meet specific requirements.

In addition to the above, entities such as government-controlled bodies, qualifying public benefit entities, and certain resource-focused businesses may be exempt from corporate tax altogether. Understanding eligibility is essential for determining a company’s tax status and the necessity of obtaining a corporate tax certificate.

Corporate Tax Rates and Taxable Income

The UAE corporate tax regime imposes tax at two primary rates:

• 0% on taxable income up to AED 375,000.
• 9% on taxable income exceeding AED 375,000.

Taxable income is calculated based on a business’s accounting income, with specific adjustments for exemptions or deductions. Various income sources may qualify as exempt, such as dividends from domestic subsidiaries and income derived from qualifying foreign operations. Determining taxable income accurately is crucial for compliance and helps businesses optimize their tax liability effectively.

Steps for Corporate Tax Registration

Acquiring a corporate tax certificate requires registration with the FTA. Here’s a detailed step-by-step guide to help you navigate the registration process via the EmaraTax portal:

1. Log into EmaraTax:
   • Begin by logging into your EmaraTax account using your credentials or through the UAE Pass. If you’re new to EmaraTax, click the ‘sign up’ button to create an account.
2. Add Taxable Persons:
   • Once logged in, you’ll see a dashboard displaying the Taxable Persons linked to your profile. If none are linked, you’ll need to add a Taxable Person before proceeding with corporate tax registration.
3. Select Corporate Tax Registration:
   • In the dashboard, navigate to the Corporate Tax section and select ‘Register’ to start the process.
4. Review Registration Guidelines:
   • A page containing the registration guidelines will appear. It is important to read through the guidelines carefully. Once reviewed, accept the guidelines by checking the box and click ‘Start’ to begin your application.
5. Fill in Entity Details:
   • Choose your business’s entity type (Natural Person or Legal Person) from the dropdown menu. The form will automatically adjust the fields based on your selection. Enter the relevant entity details such as the legal structure, trade license, and registration number.
6. Enter Identification Details:
   • In the next section, provide the identification details of your business. This includes your trade name, license number, and legal name (in both English and Arabic).
7. Add Business Activities:
   • Click the ‘Add Business Activities’ button to enter details about the specific business activities related to your trade license. Be sure to provide accurate information as required.
8. Add Owners (if applicable):
   • For businesses where individuals or entities own 25% or more, click ‘Add Owners’ and input their details, including ownership percentage and personal identification documents.
9. Input Branch Information (if applicable):
   • If your business operates through multiple branches, select ‘Yes’ when prompted and enter details for each branch, including trade license numbers and associated business activities.
10. Provide Contact Details:
    Enter the full address of your registered business, including the building name, street number, city, and preferred contact details (mobile, landline, and email).

11. Add Authorized Signatory:

• If your business has an authorized signatory, click ‘Add Authorized Signatory’ and provide the necessary details, including Emirates ID or passport copies, and proof of authorization.

12. Review and Declaration:

• After completing the previous steps, proceed to the ‘Review and Declaration’ section. Thoroughly review all the information entered and ensure its accuracy. Mark the declaration checkbox to confirm that the information is correct.

13. Submit Application:

• Once you are confident that all the information is accurate, click ‘Submit’ to send your corporate tax registration application through the EmaraTax portal.

Document Requirements for Corporate Tax Compliance

Compliance with corporate tax involves strict documentation:

• Financial Statements: Companies must keep accurate financial records, ideally audited to meet FTA requirements.
• Shareholder Details: Information on shareholders and their investment is typically required.
• Transaction Records: Maintain records of all income, expenses, and related documents.
• Transfer Pricing Documentation: For entities dealing with related parties, maintaining documentation to support arm’s-length pricing is essential, especially for free zone businesses.

Businesses are advised to keep records for a minimum of seven years to ensure compliance in case of an audit.

Corporate Tax Filing and Payment

Corporate tax returns must be filed annually, with payments due within nine months of the end of the business’s financial year. The process is as follows:

• File a Tax Return: Tax returns are self-assessed, with businesses calculating their taxable income and applicable tax.
• Amendments: If there are errors or additional details needed, companies can amend their tax returns within certain limits.
• Penalties for Late Filing: Penalties may apply if returns or payments are delayed, emphasizing the importance of timely filing.

Free Zones and Qualifying Free Zone Persons

For companies operating in UAE free zones, the corporate tax law provides preferential treatment. Qualifying free zone persons can benefit from a 0% tax rate on their qualifying income, subject to specific criteria. To qualify, a free zone entity must:

1. Generate income from approved qualifying activities.
2. Maintain substance requirements, including sufficient resources within the free zone.
3. Meet the de minimis requirements, allowing minor income from non-qualifying activities.
4. Opt not to be taxed at the general corporate tax rate.

Compliance and Record-Keeping Obligations

Under UAE corporate tax law, meticulous record-keeping is required. Businesses must retain transaction records, financial reports, contracts, and tax-related documents for a period of seven years. The FTA may conduct audits to verify compliance, making accurate records essential. Inadequate documentation could result in penalties and affect a company’s tax status.

Penalties and Consequences of Non-Compliance

Under the UAE's corporate tax regime, there are several penalties businesses need to be aware of to remain compliant:

1. Late Registration Penalty: Businesses that fail to register for corporate tax on time will face a AED 10,000 penalty. This applies to both mainland and free zone companies that miss their registration deadlines.
   
   
2. Late Filing of Tax Returns: For late tax returns, the penalties are:
   • AED 500 per month (or part of a month) for the first 12 months of delay.
   • AED 1,000 per month from the 13th month onwards​.
     
     
3. Incorrect Tax Return Submission: A penalty of AED 500 is applied for submitting incorrect returns, unless amended before the deadline. If mistakes are not disclosed voluntarily, additional penalties up to 15% of the tax difference may apply​.
   
   
4. Failure to Maintain Records: Businesses must keep accurate records as required by the tax law. A failure to do so results in a penalty of AED 10,000 for each violation, increasing to AED 20,000 for repeated violations within 24 months​.
   
   
5. Other Violations: Additional penalties include AED 5,000 for not providing records in Arabic upon request and AED 20,000 for non-cooperation during audits​.
   
   

These penalties encourage timely compliance with tax obligations and help maintain transparency in the UAE's tax system. It's essential for businesses to register, file, and maintain proper records to avoid significant fines.

Benefits of Obtaining a Corporate Tax Certificate

A corporate tax certificate provides multiple benefits:

• Legal Compliance: Ensures that a business is meeting UAE’s tax obligations.
• International Credibility: Boosts credibility for cross-border operations, assuring partners and clients of compliance.
• Operational Efficiency: Simplifies the filing process, making it easier for businesses to manage their taxes.

Common FAQs About Corporate Tax in UAE

1. Who needs a corporate tax certificate in the UAE? Any UAE business that meets the eligibility criteria for corporate tax must register with the FTA and obtain a corporate tax certificate.
2. Are there exemptions for small businesses? Some businesses, particularly those with minimal revenue, may qualify for small business relief, reducing or eliminating tax obligations.
3. How is corporate tax calculated for free zone entities? Qualifying free zone entities benefit from a 0% tax rate on qualifying income, provided they meet specified criteria.

Conclusion

Navigating the UAE’s corporate tax landscape requires careful attention to detail, from registration to compliance and record-keeping. Obtaining a corporate tax certificate not only affirms a business’s compliance but also opens doors to enhanced credibility and potential tax benefits.

For businesses seeking expert guidance, consulting with a tax professional can make a significant difference. Finanshels offers tailored corporate tax services to help UAE businesses stay compliant, minimize liabilities, and maximize the benefits of their corporate tax certificate. Reach out to a Finanshels tax expert today to ensure your business is fully equipped to meet the UAE’s corporate tax requirements with confidence.

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