Businesses that must pay taxes must register for corporate tax registration with the Federal Tax Authority (FTA) in the UAE. Additionally, they must acquire a Tax Registration Number within a certain time frame.
Businesses in the UAE that are no longer subject to Corporate Tax are required to file for corporate tax deregistration. Within three months of the date of liquidation or cessation, the application must be submitted.
Businesses can get help from tax advisors for Corporate Tax Registration in UAE and also deregistration.
All About the Corporate Tax Registration – UAE
Let us get into the details regarding the ones who are subjected to the Corporate Tax in the UAE and the ones who are exempted from the same.
Exemptions Under the Corporate Tax
The UAE corporation tax code exempts the following sources of revenue. Before making any tax-related decisions, it is advised to speak with corporate tax specialists in Dubai:
- CT is not applied to dividends or capital gains that a UAE corporate shareholder receives from the sale of shares of a subsidiary firm.
- Including dividends paid by a free zone person who benefits from the 0% CT regime and all domestic dividends received from UAE enterprises.
- If certain conditions are met, capital gains from the sale of shares in UAE and foreign firms, as well as dividends paid by foreign corporations, will be tax-exempt.
- UAE businesses have the option of electing to claim an exemption for their profits from the foreign branches or claiming a foreign tax credit for taxes paid in the foreign branch nation.
Who Is Subject to the Corporation Tax Rate in the UAE?
In the UAE, corporation tax will apply to both Natural Persons and Legal Persons. Individual partners in an unincorporated partnership and sole proprietorships that do business or engage in commercial activity in the United Arab Emirates are examples of natural persons who will be subject to the corporation tax framework.
On the other hand, there won't be a corresponding tax on the earnings of individuals or natural persons. Companies incorporated in the UAE, as well as other categories of legal entities, are considered legal persons.
Foreign legal entities that have a permanent presence in the UAE or generate income there will also be subject to corporate Tax. Limited Liability Companies (LLC), Private Shareholding Companies (PSC), Public Joint Stock Companies (PJSC), and companies created in accordance with UAE legal provisions that have distinct legal personalities are examples of Legal Persons that are subject to the UAE corporate tax framework.
To determine if corporate Tax is applicable to their profits, businesses can consult with corporate tax advisors in Dubai. Calculation of Taxable Income The accounting net profit (or loss) position in the financial statements will be used to determine taxable income under UAE corporate tax law.
Corporate tax assessment will be based on IFRS standards. To compensate and lower compliance costs for taxpayers like start-ups and SMEs, the UAE corporate tax law would allow enterprises to adopt alternative financial reporting standards to calculate taxable revenue.
To precisely calculate taxable income, it is advisable to hire the top corporate tax advisers in the UAE.
Establishment of Tax Groups
A corporate tax group can be created by a group of businesses with UAE residents. If the parent business owns at least 95% of the voting rights & the share capital of its subsidiaries, it will be considered a single taxable person.
To be eligible for the 0% CT rate, a person must be a Free Zone Person or an Exempt Person; the parent firm and any of its subsidiaries are not eligible for either. Additionally, the group's members should all use the same fiscal year.
Companies might form a tax group with the aid of corporate tax advisers in Dubai. Every company in the UAE that is subject to corporate income tax is required to register with the FTA within the allotted time frame.
Additionally, businesses that close their doors must submit a deregistration application. Our staff can help you with registration and deregistration under the UAE Corporate Tax Code after the law is enacted.
Also, Read About Jaxa Is Now an FTA-Approved Tax Consultant in Dubai.
The UAE Corporate Tax Registration for the Free Zones
According to Article 3 of the Corporate Tax Law, the qualified free zone person's qualifying income is subject to 0% corporate tax (CT). All other income received by a qualified, free-zone individual is subject to 9% tax, with the exception of income that is exempt or outside the scope.
As can be seen from the aforementioned legislative requirement, residents of free zones are required to pay corporation tax, with the rate varying from 0% to 9%, depending on the type of revenue. Since they are subject to taxation, residents of free zones are required to abide by corporate tax law.
In accordance with the legislation, they must register for corporation tax, ascertain their taxable income, complete and file an annual tax return, pay the necessary taxes, and follow other regulations. To be clear, a company does not need to be registered at any level to pay corporation taxes.
A business must register for corporation tax registration even if it is losing money, generated no revenue the previous year, and expects to have none the following year. It is important to comprehend the meanings of the terms "free zone," "free zone individuals," "qualified, free zone persons," and "qualifying income" in order to accurately apply the corporate Tax to businesses that are registered in free zones.
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