TAX Update in the UAE
29

Apr 2020

The UAE Federal Tax Authority (FTA) has recently introduced a new feature on the portal for Tax registered persons which is to seek a "Tax Clearance Certificate" from the Authority. This feature will be available to a person as soon as he or she logs in to their respective portal.

After logging into the portal the person is required to fill up a form. Some of fields of this form will be prepopulated with a drop down menu and the person will have to choose the relevant option.

The details which are required to be filled up are:

  1. Trade License number of the Company

This is the field which we were talking which is prepopulated. The license number will automatically appear in the drop-down list. You need to choose from the given options in the drop-down.

  1. Reason to request the Tax Clearance Certificate

The next step is to mention what is the reason to request the certificate. There will be various different reasons mentioned in a dropdown menu to know about the purpose of requesting the Tax Clearance Certificate. The person will have to select the reason which will be applicable to the business. The following reasons are listed therein as a purpose for seeking the Certificate:

  1. Change ownership

This means that there has been an increase in the number of the owners of the business or one or more than one owners of the business has left due to some situation.

  1. Below mandatory threshold

Every business needs to fulfil certain thresholds. A business needs to mention if these thresholds are met or not.

  1. Below voluntary threshold

A business may declare certain aspects of itself voluntarily.

  1. Business closing

In case the person had started a business but this business has shut down, the person needs to mention this information.

The first (1) and the second (2) fields in the form are mandatory information, which means that these information must be provided while filling up the form. The applicant can also put comments on the webpage and upload any documentary evidence in the additional fields which are provided in the form.

Use of the Certificate

The official guideline relating to the purpose and use of the Tax Clearance Certificate is yet to be released by the UAE Federal Tax Authority (FTA). It has been predicted that this certificate will fulfil the function as a "No Liability Certificate" which will be utilized by the registrants to furnish any information to the relevant authorities who may request the same prior to the change of ownership of the Company or for cancellation of the trade license.

In the current situation, some people face a practical difficulty at the time of liquidating their Company as the relevant Authorities and Liquidators may require a UAE Tax Clearance Certificate prior to issuing the liquidators report or trade license cancellation. Hence this is a welcome move by the UAE Federal Tax Authority to address the needs of the Tax registrants.

It is also pertinent to note that the trade license detail is mandatory information, and only one of the four reasons (mentioned above) can be selected in the application. This, in effect, limits the issuance of this Certificate to registered Companies alone and for the sole purpose of reasons cited above. Further, no fee has been prescribed for issuance of this Certificate. 

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