UAE corporate tax: Why it’s important to take note of new deadlines

Companies risk incurring a Dh10,000 penalty if they fail to register on time

Failing to initiate the registration of your business for corporate tax on time will bring a Dh10,000 penalty. Silvia Razgova / The National
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The Federal Tax Authority has just released new corporate tax registration deadlines for eligible businesses in 2024. This has changed our understanding of the timing requirement of registration for corporate tax.

I was surprised that it did not also offer direction to registrants, where there is an element of doubt, on what a business's fiscal year might be. Given these legislative decisions tend to be quite tight, it may be slated for a future release.

While this approach has the advantage of each release being a one-stop shop for required action, it also means that businesses need to consciously track and understand every legislative release.

That said, more information on the fiscal year would be a welcome addition to the growing volume of page-light releases.

The addition of a marker highlighting that the release is related to corporate tax would also help, since the releases are not issued in numerical order.

The task of registering an entity would, in western economies, come under the remit of a position generally known as a company secretary.

While this has not traditionally been required in the UAE, with FACTA, CRS, ESR, AML, KYC, VAT and now corporate tax requirements, along with the penalties for non-compliance, it is something that should be addressed formally.

Until now, it was thought possible to register for corporate tax right up until the day you submitted and settled any tax liability. The earliest date in this scenario would have been February 28, 2025.

As of now, depending on the date your trade licence was issued, there are defined dates. Failing to initiate the registration of your juridical entity on time will incur a Dh10,000 ($2,722) penalty.

While it’s certainly best to complete the registration process well ahead of whatever date applies to your business, the penalty is for not starting the process.

There’s no penalty if you start the process and it’s not completed by the deadline.

Also, what happens if an application is rejected? I’ve seen this happen a few times.

In this case, when you reapply, does it constitute a fresh first attempt? If it does, then you would probably find yourself having the penalty imposed.

Could you appeal against this on the basis that you had already started the process? You can always appeal, so yes. Would you be successful? I don’t know.

Additionally, there are numerous other implications and issues, mostly system related. Let’s dive in.

Most businesses registering for corporate tax are likely to have already registered for VAT. The portal for both is the same. Some data fields are shared. This means that once you upload your trade licence for, say, VAT, when you apply for corporate tax, it will auto fill, which is convenient.

Until 2020, the Federal Tax Authority portal required you to keep your supporting documents current. This meant that you needed to upload the latest version of, for example, your Emirates ID. However, this requirement had been discontinued.

UAE corporate tax: What you need to know

UAE corporate tax: What you need to know

In the past month, a reminder has arrived highlighting which documents are out of date. When you first entered the information you were asked to note the expiry date.

If you try to register for corporate tax while one of these messages shows, you cannot do so. Until the document is updated, you cannot even start the process.

Updating your expired documents is easy. The issue is that your submission must first be reviewed.

If very few entities have updated anything since 2020 and trade licences are typically for two or three years, then every business from that era faces this issue – as does the Federal Tax Authority, which is responsible for ensuring the information provided is accurate.

Do they have time to review hundreds of thousands of documents? I don’t know.

What if there are questions or an issue about updating your documents?

Maybe your trade licence issuing authority has merged or moved emirates. Maybe your entity was upgraded or otherwise changed but still uses the same trade licence number.

How long will it take for all these queries to be answered so you can meet the deadline to start the corporate tax registration process?

Since the decision was announced, there was an instant online reaction. One particularly erroneous line was that the penalty would be levied on all companies not registered by February 29, 2024.

So, get good advice and act ahead of the deadlines.

David Daly is a partner at the Gulf Tax Accounting Group in the UAE

Updated: March 06, 2024, 8:51 AM