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End July represents the third deadline for corporate tax registrations based on when a particular company was issued with its license. Companies incorporated after March 1, 2024, have three months to register. Image Credit: Shutterstock

Dubai: Even with the UAE tax regulator issuing advance notices, many businesses are failing to meet tax registration deadlines and putting them at risk of being hit with Dh10,000 fines.

Which is unfortunate because the registration requirements are fairly straight-forward, and many of these businesses would already have experience of doing it for VAT purposes.

“Many foreign investors and some small startups with-flexi desks operating from free zones are not updating their corporate tax registration,” said Jitendra Gianchandani, Chairman of the audit consultancy JCG. “This is making them miss the deadline - or register at the last minute.

"What's more, even companies under liquidation have to register. Failing to do so will still attract the Dh10k fine."

Even registering at the last minute would give them a reprieve from a fine that could seem quite hefty for small businesses. The Federal Tax Authority, meanwhile, has consistently been delivering the message that businesses should stick to deadlines based on when their company license was issued.

A majority of corporate tax registration applications are cleared quickly. In a few cases, mostly involving foreign ownership, FTA takes longer to review

- Sumayya Zain of Hallmark International

So far, two deadlines have passed – end May and end June – and another rolls up at the end of this month. All companies that were issued a license in May should complete their tax registration on or before July 31.

‘Accurate info’

The FTA also makes a point that the correct and updated supporting documents must be provided along with the electronic registration application. The documents include the commercial licence, the Emirates ID card, the passport of the authorized signatory, and proof of authorization for the authorized signatory.

The FTA's corporate tax registration does pick up details from the earlier VAT registrations (if these are in place). Many businesses are required to modify VAT details before the corporate tax registration is approved by FTA, which is to ensure data is matching

- Atik Munshi of Finexpertiza UAE

“The registration is done under the assumption that the entity is complaint with the legal and corporate tax requirements of the UAE,” said Atik Munshi, Managing Partner at Finexpertiza UAE.

“One aspect is to register with the FTA for corporate tax. The other crucial aspect is to ensure your records and processes are in line with requirements.

“Such requirements differ for a mainland and free zone assesse. These businesses must maintain a robust accounting system for the bifurcation of qualifying and non-qualifying income; calculation of de-minimis threshold; bifurcation of disallowed expenses, dividend income, etc.. These are major items that need special attention. And entities are expected to maintain documents for 7 years.”

Dh10,000 penalty

“The FTA has started imposing penalties of Dh10,000 for late registrations - but it is unclear how the reconsideration applications (from business) will be handled by the FTA for a waiver of the penalty,” said Sumayya Zain, Managing Partner at Hallmark International.

“The FTA has 20 business days to review applications, approve requests, issue a TRN (Tax Registration Number), or ask for additional information.

“For entities that already have VAT or excise tax registration, their details are auto-populated for corporate tax registrations.

“Any changes in details must be updated on the EmaraTax portal before applying for corporate tax registration.

“Some entities find it difficult to correct or update certain details if needed. Also, the FTA portal does not allow the upload of more than one license details. Challenges remain, such as the inability to upload multiple branch licenses for a single foreign company - but ongoing updates aim to address these issues.”

Some businesses, especially free zone owners operating out of the UAE, are still not aware of their registration deadline

- Jeet Gianchandani of JCG

What should newly formed businesses do?

Companies that were incorporated after March 1, 2024, have three months to register. If an entity holds more than one license as of March 1, 2024, the license with the earliest issuance date will be used.

For the application, submission and registration process, entities must use the 'EmaraTax' platform.

"This platform is available 24/7 and enables unregistered persons to create a new user profile and obtain a tax registration number easily and conveniently via their email and phone number," the FTA says. "Additionally, direct service provision is available through accredited tax agents listed on the FTA’s website and at government service centers across the UAE."

More reasons why businesses should not be having any problem with the tax registration...