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 to the Federal Tax Authority (FTA).
The new tax regime levies a standard corporate tax rate of 9 per cent on business profits, with a 0 per cent rate for taxable profits up to Dh375,000. Corporate tax will be effective for financial years starting on or after June 1, 2023.
The corporate tax 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 comply with the law.
The payment and compliance deadline allows taxpayers a time-frame of up to 21 months from the start of their financial year to prepare for filing and making their tax payments.
For example, businesses with a financial year starting on June 1, 2023 and ending on May 31, 2024 will have the period starting from June 1, 2024 to February 28, 2025 to file their corporate tax returns and make their tax payments.
For a business where its first tax period starts on January 1, 2024 and ends on December 31, 2024, the return and payment would need to be made between January 1 and September 30, 2025.
In a further move to ease the administration process, UAE businesses will need to file only one corporate tax return per tax period and any related supporting schedules need to be prepared and submitted to the FTA for each tax period.
There is no requirement to complete a provisional tax return and make advance corporate tax payment.
In addition, to support startups and small businesses, the corporate tax regime intends to provide relief in the form of simplified financial and tax reporting obligations.
The new tax regime also streamlines corporate tax 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 corporate tax will need to register with the FTA and obtain a tax registration number. The corporate tax registration process is expected to commence from early 2023.
For a company with a first tax period starting on June 1, 2023, for example, registration would be within a 26-month period from January 1, 2023 to the final return filing date of February 28, 2025, while for a business with a first tax period from January 1, 2024 there would be a 33-month window from January 1, 2023 to September 30, 2025.
The Ministry of Finance and the FTA will be hosting a series of corporate tax awareness sessions to help businesses understand the new tax regime.
