DETAILS OF THE NEW PENALTY FOR LATE CORPORATE TAX REGISTRATION IN UAE
The UAE introduced a federal corporate tax regime, effective from June 1, 2023. The standard corporate tax rate is 9% on taxable income exceeding AED 375,000 (approximately USD 102,000). Income up to this threshold is tax-exempt.
ENTITIES REQUIRED TO REGISTER FOR UAE CORPORATE TAX
Corporate tax registration In the UAE, is mandatory for various types of entities and businesses, as outlined below:
- Natural persons with a turnover exceeding AED 1 million.
- All entities conducting business activities within the UAE, including those incorporated in mainland UAE, must register for corporate tax. This includes:
- Limited Liability Companies (LLCs).
- Joint Stock Companies.
- Partnerships.
- Sole Establishments.
- Foreign companies with a permanent establishment.
- Free zone entities.
ENTITIES EXEMPT FROM UAE CORPORATE TAX
In the UAE, the following entities are exempt from corporate tax registration:
- Government entities.
- Government-controlled entities.
- Extractive and non-extractive natural resource businesses.
- Qualifying public benefit entities.
- Qualifying investment funds.
- Public pension or social security funds.
- Private pension or social security funds.
- Wholly owned and controlled subsidiaries of exempt organizations in the UAE.
- Non-resident entities that do not have a physical permanent establishment or a nexus in the UAE.
CORPORATE TAX REGISTRATION DEADLINE
The decision indicates that a juridical person, which is a Resident Person incorporated, established, or otherwise recognized prior to March 1, 2024, must apply for corporate tax registration within the following timeframes to avoid penalties:
As for a juridical person that is a resident person, including free zone persons, incorporated, established, or otherwise recognized under applicable laws in the UAE on or after March 1, 2024, they must apply for corporate tax registration within three (3) months from the date of incorporation, establishment, or recognition.
UAE CORPORATE TAX FILING DEADLINE
The filing must be completed electronically no later than nine months after the end of the relevant tax period. Any UAE corporate tax payable must also be settled within this timeframe.
CORPORATE TAX VIOLATIONS AND ADMINISTRATIVE PENALTIES:
Various corporate tax penalties are imposed based on the nature of the violation. Penalties can either be a fixed amount or a variable percentage.
Cabinet Decision No. 75 of 2023 and Cabinet Decision No. 10 of 2024 outline the following corporate tax penalties:
PREPARING AUDITED FINANCIAL STATEMENTS
A corporate tax-registered person is required to prepare and maintain audited financial statements for corporate tax purposes, regardless of their revenue.
For more information on how Creation Business Consultants can assist with tax services in the UAE, contact us today!