Deadlines for Registering for UAE Corporate Tax – What Businesses Need to Know

Businesses in UAE should note the timeframes for registration under the new corporate tax regime in 2024.

By Arendse Huld

The UAE’s Federal Tax Authority (FTA) has issued a new Decision specifying the time frames for businesses to register for corporate tax (CT) under the country’s new CT regime. The registration deadlines vary depending on the month in which a company obtained its business license. The new Decision took effect on March 1, 2024.

In 2022, the UAE’s Ministry of Finance (MOF) published the Corporate Tax Law (CTL), officially named the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, announcing that the country would begin imposing CT for the first time on businesses with profits over a certain threshold. The new 9 percent CT rate came into effect from June 1, 2023, for businesses with a tax year running from June to May.

Companies that were issued business licenses in the months of January or February (regardless of the year in which they were issued) will need to apply for CT registration before May 31, 2024, the nearest deadline. Businesses that fail to register within the set timeframes will be liable to a fine.

In this article, we explain the requirements under the UAE’s new CT regime and outline the deadlines for applying for CT registration.

What is the CT rate in the UAE

Under the CTL, the UAE will impose a two-tier CT regime:

• 0 percent CT rate for taxable income up to AED 375,000 (US$100,737); and
• 9 percent CT rate for taxable income above AED 375,000.

Additionally, a 15 percent CT rate will be imposed on large multinationals that meet specific criteria to comply with the “Pillar Two” initiative of the OECD Base Erosion and Profit Shifting Project.

Who needs to pay CT in the UAE?

According to the MOF, the above CT rates will apply to the following entities:

1. UAE companies and other legal entities that are incorporated or effectively managed and controlled in the UAE;
2. Natural persons (individuals) who operate a business or conduct business activity in the UAE (details of which will be specified in a Cabinet Decision at a later time); and
3. Non-resident entities (foreign legal entities) that have a permanent establishment in the UAE.

Any company or legal entity that is incorporated or otherwise formed or officially recognized under UAE law will be automatically considered a resident for tax purposes.

Foreign companies that are effectively managed and controlled in the UAE will also be treated as residents for CT purposes. Whether or not the company is managed or controlled in the UAE is determined based on the specific circumstances of the company and its activities, “with a determining factor being where key management and commercial decisions are in substance made.”

Individuals are also subject to CT on income derived from a business or business activity conducted in the UAE, whether that income is from domestic or foreign sources. Any other income earned by the individual is not subject to CT.

A non-resident person is an entity that is not resident in the UAE, and:

• Has a permanent establishment in the UAE; or
• Derives state-sourced income.

Non-residents are only required to pay CT on the taxable income that is derived from their permanent establishment.

Meanwhile, the UAE follows the OECD’s definition of “permanent establishment” set out in Article 5 of The Model Convention with Respect to Taxes on Income and on Capital.

Who is exempt from paying CT?

A “Free Zone Person” that meets the conditions required to be considered a “Qualifying Free Zone Person” can enjoy a 0 percent CT rate on their “Qualifying Income”. Free Zone Persons are entities that are operating in one of the UAE’s 40-plus Free Zones. In these areas, foreign investors can enjoy various benefits, most importantly being permitted 100 percent ownership of companies. Free Zones are contrasted by “mainland” areas, in which these benefits don’t apply.

According to the MOF, to be considered a Qualifying Free Zone Person, the Free Zone Person must:

• Maintain adequate substance in the UAE;
• Derive “Qualifying Income”;
• Not have chosen to be subject to CT at the standard rates; and
• Comply with the transfer pricing requirements under the Corporate Tax Law.

A Cabinet Decision released in May 2023 categorizes Qualifying Income as:

1. Income derived from transactions with other Free Zone Persons, except for income derived from excluded activities.
2. Income derived from transactions with a Non-Free Zone Person, but only in respect of Qualifying Activities that are not Excluded Activities.
3. Any other income provided that the Qualifying Free Zone Person satisfies the de minimis requirements (where the non-qualifying revenue earned by a Free Zone Person does not exceed either 5 percent of their total revenue or AED 5 million (US$x) in a given tax year, whichever is lower).

Note that the Qualifying Free Zone Person is only exempt from paying CT on their Qualifying Income; other income will still be subject to CT. Free Zone Persons that derive income from mainland areas of the UAE will be required to pay CT on that income.

In addition to the Qualifying Income of Qualifying Free Zone Persons, CT will not be levied on the following types of businesses and income:

• Businesses engaged in the extraction of natural resources (these businesses will remain subject to the current Emirate-level corporate taxation, meaning they are taxed based on the CT rates set in each Emirate).
• Dividends and capital gains earned by a UAE business from its qualifying shareholdings.
• Qualifying intra-group transactions and reorganizations.

Registering and filing CT in the UAE

When are the deadlines for applying for CT registration?

The deadline for applying for CT registration depends on the month in which the taxpayer was issued their business license. Note that the year in which the license was issued does not affect the registration deadline.

The specific deadlines are outlined in the table below.

In addition to the above deadlines, the FTA’s Decision on timeframes for CT registration sets a range of other registration deadlines depending on the entity’s circumstances:

1. Entities that do not have a license by the time the Decision took effect March 1, 2024, must apply to register within three months of this date, that is, May 31, 2024.
2. Entities that hold multiple licenses must adhere to the registration deadline that corresponds to the date of their last issued license.
3. Resident entities, including Free Zone Persons, and businesses that are incorporated, established, or otherwise recognized under UAE law on or after March 1, 2024, must apply within three months from the date of incorporation, establishment, or recognition.
4. Resident entities that are incorporated, established, or otherwise recognized under the laws of another country or foreign jurisdiction, but are effectively managed and controlled in the UAE on or after March 1, 2024, must apply within three months from the end of their financial year.
5. Non-resident entities with a permanent establishment in the UAE before March 1, 2024, must apply within nine months from the date of the existence of the permanent establishment, while non-resident entities with a nexus in the country must apply to register by May 31, 2024.
6. Entities that are non-resident on or after March 1, 2024, and have a permanent establishment must apply within six months of the existence of the permanent establishment, while entities that are non-resident with a nexus in the UAE on or after March 1, 2024, must apply within three months from the date of establishing the nexus.
7. Resident individuals who engage in business or conduct business activities during the 2024 calendar year, and who have exceeded the turnover threshold (AED 375,000), must apply by March 31, 2025.
8. Non-resident individuals who engage in business or conduct business activity during the 2024 calendar year 2024 and subsequent years, and whose turnover has exceeded the specified threshold, must apply within three months from the date of fulfilling the conditions to be considered a taxable person.

When are the deadlines for filing CT returns?

Taxpayers are required to file CT returns for each tax period within nine months of the end of each tax period. Any CT that taxpayers are liable for must generally also be paid within this timeframe.

The specific deadline for filing and paying CT, as well as the start of the first tax year since the CTL took effect, depends on the company’s financial year, as shown in the table below.

What are the consequences for failing to register and pay CT on time?

Under a Cabinet Decision and a subsequent amendment released by the MOF, individuals and entities that violate any of the requirements set out in the CTL and related regulations may be liable to a variety of administrative penalties. These vary depending on the type and severity of the violation.

Entities that fail to apply for CT registration within the specified deadline will result in a penalty of AED 10,000 (US$2,722), which aligns with penalties imposed for the late registration of excise tax and value-added tax.

Meanwhile, failure to file the CT returns within the specified timeframes will incur a fine of AED 500 (US$136) for each overdue month (or part thereof) for the first 12 months, and AED 1,000 (US$272) for each month from the 13th month onward (or part thereof).

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