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United Arab Emirates is renowned for its tax-free regime. This incentive has taken over the Dubai marketplace from other global markets but recently in December 2022, a law has been approved by the minister of UAE regarding the corporate sector tax regime that has been properly functional in January 2023 and according to article 43, the corporate tax imposed on mentioned corporate industries needs to submit a tax return in this financial year that starts with June 1, 2023. For this purpose, pre-registration has been started from Jan 2023 till May 2023 by FTA governing bodies in UAE.
FTA stands for Federal Tax Authority was established in 2016. It is the central tax regulating authority in UAE that is responsible for carrying out tax-related issues and helping grow the national economy to generate revenues by the collection of federal taxes based on globally renowned practices. They aim to make an electronic taxable system to ensure transparency of the system from registering to submitting due tax online on the website.
Emara Tax platform:
FTA has begun early registration for corporate tax from January 2023 to May 2023 through Emara Tax, the UAE’s digital tax services platform for companies operating in the Emirates.
Corporate tax: It is the tax levied on the business’s profit. It is paid on a company’s taxable income, which is measured by deducting the cost of goods from the profit. Corporate tax is a form of direct tax that varies from country to country.
Corporate tax rate:
The corporate tax rule confirms nine percent (9%) tax to be implied from June 1, 2023, in UAE. It will be most competitive among others in the world and this tax will be subjected to the corporate firms on business returns of more than Dh375,000 ($102,110). Its main purpose is to help the government in the generation of revenue for economic development in the UAE.
Categories of companies Subject to Corporate Tax:
All corporations established in the main zone or free zone are required to register even if their taxable income is below the threshold value of Dh375,000 per year and only those organizations that will receive SMS or E-mail from the FTA department will be applicable to file their income tax within the mentioned time.
January 2023 to May 2023 is regarded as the early registration period available for certain categories of companies operating in the UAE. This pre-registration includes additional documents required to manage and report your company tax obligation against profits made according to the financial year. Corporate Tax will be imposed on businesses on the commencement of their first financial year that starts on or after 1 June 2023.
FTA pre-registration Steps for a corporate taxi in UAE:
Under Article 51 of Tax Registration, a taxable person must fulfil the following registration steps to be a legal taxpayer in UAE.
Step 1: Tax Registration Number: Any Taxable Individual shall register for Corporate Tax with the Authorization in a proper way and within the timeline, prescribed by the Authority to obtain a Tax Registration Number.
Step 2: Documentation: The FTA shall, at its decision and based on information available to them, have the power to register a Person for Corporate Tax in effect from the date the Person became a tax Payable.
Step3: Tax Returns: Subject to Article 51 prescribed above, a Taxable Person must file a Tax Return, as appropriate, to the FTA in a way described and not more than nine months from the end of the applicable Tax Period, or by other time as directed by the Government department.
Once the registration process is over and the person is legally tax payable according to FTA, corporate tax payable must file Tax returns by end of every financial year.
Tax Returns and Clarifications:
Under Article 53, The Tax filer must include at least the following information, as appropriate:
- The Tax year to which the Tax Return belongs.
- The name, address, and Tax Registration Number of the tax Payable.
- The day/date of submission of the Tax Gain.
- The accounting source used in the financial declarations.
- The Taxable Income for the relevant Tax Period.
- The amount of Tax Loss relief claimed (if applicable).
- The amount of Tax Loss transferred (if applicable)
- The available tax credits claimed (if required)
- The Corporate Tax Payable for the Tax year.
Relief for Small businesses and sole proprietorship owners:
Corporate Tax under Article 21 of this Decree-Law – Small Business Relief, a Taxable Person that is also a resident of UAE does not exceed the minimum amount of Income tax for an Excise Period:
- The Profits of the Taxable Person for the related Tax Period and former Tax Periods do not exceed a limit to be set by the Minister or otherwise, a Taxable Person meets all other conditions and is subjected to tax payable as prescribed by the Minister.
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