Generous deadlines give taxpayers sufficient time to prepare and comply with UAE Corporate Tax

ABU DHABI, 14th December, 2022 (WAM) -- Businesses in the UAE will have up to nine months from the end of the relevant tax period to submit their tax return and pay the federal Corporate Tax (CT) to the Federal Tax Authority (FTA).

The new UAE CT regime levies a standard corporate tax rate of 9 percent on business profits, with a 0 percent rate for taxable profits up to AED 375,000. CT will be effective for financial years starting on or after 1 June 2023.

The CT regime is based on a self-assessment principle which means businesses are required to ensure that the documents submitted to the FTA are correct and complies with the law.

The regime’s payment and compliance deadline allows taxpayers a generous time-frame of up to 21 months from the start of their financial year to prepare for filing and making their tax payments — a move that is in line with the UAE’s commitment to ensuring the implementation of the CT regime is as smooth as possible.

The deadline means, for example, that businesses with a financial year starting on 1st June 2023 and ending on 31st May 2024 will have the period starting from 1st June 2024 to 28th February 2025 to file their CT returns and make their CT payments.

For a business where its first tax period starts on 1st January 2024 and ends on 31st December 2024, the return and payment would need to be made between 1st January and 30th September 2025.

In a further move to ease the administration process, UAE businesses will need to file only one CT return per tax period and any related supporting schedules need to be prepared and submitted to the Federal Tax Authority (FTA) for each tax period.

There is no requirement to complete a provisional tax return and make advance CT payment.

In addition, to support start-ups and small businesses, the UAE CT regime intends to provide relief in the form of simplified financial and tax reporting obligations.

The new tax regime also streamlines CT compliance processes for groups of companies. A UAE resident group of companies, for example, can form a tax group to be treated as a single taxable entity if they meet specific conditions. Benefits include efficient cost and time administration, a single tax return for the group and being able to consolidate the amount of group tax paid where some companies make a taxable profit and others have a tax loss.

A business that is subject to CT will need to register with the FTA and obtain a Tax Registration Number. The CT registration process is expected to commence from early 2023.

For a company with a first tax period starting on 1 June 2023, for example, registration would be within a 26-month period from 1st January 2023 to the final return filing date of 28th February 2025, while for a business with a first tax period from 1st January 2024 there would be a 33-month window from 1st January 2023 to 30th September 2025.

The Ministry of Finance and the Federal Tax Authority will be hosting a series of CT awareness sessions across the UAE to help businesses understand the new tax regime and be fully prepared for its introduction.

Details of the sessions will be announced soon.