UAE Corporate Tax Defined

Corporate tax in UAE is a federal tax imposed on the profits earned by companies operating in the country. The tax is currently set at a rate of 5% on the taxable profits of companies, with some exceptions for certain industries and government-owned companies.

Companies that are required to pay corporate tax in UAE include those that are tax residents in the country, meaning they are either incorporated in UAE or have their management and control based in the country. Non-resident companies may also be subject to tax if they have a permanent establishment in the country.

The taxable profits of a company are calculated by deducting allowable expenses and losses from its gross income. The allowable expenses include items such as salaries, rent, and depreciation, while the allowable losses may include bad debts and inventory write-downs.

Companies that are liable to pay corporate tax in UAE must register for tax, obtain a Tax Registration Number (TRN), and file their tax returns annually. Failure to comply with tax regulations can result in penalties and fines.

It is important for companies operating in UAE to seek professional advice to ensure compliance with tax laws and to properly manage their tax liabilities.

Registration for UAE corporate tax

Companies that are required to register for corporate tax in UAE should follow these steps:

1. Obtain a Tax Registration Number (TRN): Companies that are liable to pay corporate tax in UAE must first obtain a TRN. The application can be submitted through the Federal Tax Authority (FTA) website, and the TRN is typically issued within a few days.
2. Register for tax: Once the TRN is obtained, the company must register for tax with the FTA. The registration process can be completed online through the FTA’s e-services portal.
3. Maintain records: Companies must maintain records of their financial transactions and tax-related documents for a period of at least 5 years. The records should be accurate, complete, and in compliance with the tax regulations in UAE.
4. Submit tax returns: Companies must submit their tax returns annually through the FTA’s e-services portal. The tax returns should be filed within 4 months from the end of the financial year.
5. Pay tax: Companies must pay their corporate tax liabilities within 30 days from the date of the tax assessment. The payment can be made online through the FTA’s e-services portal or through other designated channels.

It is important to note that failure to register for corporate tax or comply with the tax regulations in UAE can result in penalties and fines. Companies should seek professional advice to ensure compliance with the tax laws in UAE.

5 Things To Know About Corporate Tax UAE

1. Tax system: UAE has a federal tax system, where each Emirate is responsible for implementing its own taxation policies. However, in 2017, the UAE introduced a federal corporate tax of 5% on the profits of all companies operating in the country, with some exceptions.
2. Exceptions: The federal corporate tax in UAE does not apply to companies engaged in certain activities such as oil and gas production, and companies that are at least 51% owned by the federal or local government.
3. Tax residency: In order to determine the tax liability of a company in UAE, the concept of tax residency is used. A company is considered tax resident in UAE if it has been incorporated in the country or if its management and control are based in the country.
4. Tax returns: Companies in UAE are required to file their tax returns annually, even if they have not generated any profits in the country. The tax returns should be filed within 4 months from the end of the financial year.
5. Penalties: Failure to comply with the tax regulations in UAE can result in penalties and fines. For example, failure to file tax returns on time can result in a penalty of AED 1,000 for the first month, followed by AED 100 for each subsequent day of delay. Additionally, intentional tax evasion can result in a penalty of up to AED 50,000 and imprisonment for up to five years.

Faq’s:

Q: Which companies are exempt from corporate tax in UAE?

A: Companies engaged in certain activities such as oil and gas production, and companies that are at least 51% owned by the federal or local government are exempt from corporate tax in UAE.

Q: How is a corporate tax in UAE calculated?

A: Corporate tax in UAE is calculated on the taxable profits of a company, which is determined by deducting allowable expenses and losses from its gross income. The tax rate is currently set at 5%.

Q: When are corporate tax returns due in UAE?

A: Corporate tax returns in UAE must be filed annually within 4 months from the end of the financial year.

Q: What are the penalties for non-compliance with corporate tax regulations in UAE?

A: Non-compliance with corporate tax regulations in UAE can result in penalties and fines. For example, failure to file tax returns on time can result in a penalty of AED 1,000 for the first month, followed by AED 100 for each subsequent day of delay. Intentional tax evasion can result in a penalty of up to AED 50,000 and imprisonment for up to five years.

Q: Can companies offset losses against their tax liability in UAE?

A: Yes, companies in UAE can offset their losses against their taxable profits for up to 5 years, subject to certain conditions and limitations.