FTA Decision No. 3 of 2024

Under the Corporate Tax framework established by the Federal Decree-Law No. 47 of 2022, businesses operating within the UAE are required to complete Corporate Tax registration within the specified timeline. This legal obligation underscores the critical importance of compliance with tax regulations in the country. To avoid the risk of non-compliance and potential administrative penalties, it’s essential for businesses to understand these regulations and ensure adherence.

In a recent initiative to further strengthen the Corporate Tax framework and facilitate a smoother registration process, the Federal Tax Authority has issued Decision No. 3 of 2024. This decision outlines an elaborative timeline for the Corporate Tax registration process.

Corporate Tax is a direct tax levied on the profits of businesses, and is applicable to various companies, partnerships, unincorporated entities, and natural persons conducting business or business activities in the UAE. This tax is paid annually, and the Tax Return must be filed within nine months from the end of the Taxable Person’s Financial Year.

The FTA Decision No.3 of 2024 is effective from 1 March 2024 and is applicable to Resident or Non-resident  Natural and Juridical Persons. Additionally, Cabinet Decision No. 49 of 2023 specifies that the turnover derived from certain sources, including wages, personal investment income, and real estate investment income, will not be classified as business activities for both resident and non-resident individuals, regardless of the turnover amount.

Deadline for Tax Registration of Resident Juridical Person

The Federal Tax Authority has used the month of license issuance as a determining factor for the timeline for Corporate Tax Registration.  

A Resident Juridical Person established, incorporated, or recognized before March 1, 2024, must register for corporate tax in accordance with the month their license is issued as per the below deadlines:

Note: The year in which the license is issued is not taken into consideration.

If a Juridical Person does not have a license by the effective date of this decision, i.e., March 1, 2024, they should apply for Corporate Tax Registration within three months from this date. Additionally, a juridical person having more than one license must use the license with the earliest issuance date.

A Resident Juridical Person or Free Zone person incorporated, established, or recognized under the applicable legislation of UAE on or after March 1, 2024, should submit a Tax Registration application within three months from the date of incorporation, recognition, or establishment.

A Resident Juridical Person effectively managed and controlled in the UAE but incorporated, established, or recognized under the applicable legislation of a foreign jurisdiction must submit a Tax Registration application within three months of the end of the Financial Year.

Deadline for Tax Registration of Non-Resident Juridical Persons

A Non-resident Juridical Person prior to March 1, 2024, who has a permanent establishment in the country must register for Corporate Tax through an application within 9 months from the date of the start of the permanent establishment. If the person is a Non-Resident Juridical Person on or after 1 March 2024, the application must be submitted within 6 months from the date of start of the permanent establishment.

A Juridical Person who is Non-Resident before March 1, 2024, and has a nexus in the state must register for Corporate Tax through an application within three months from the date of start of the permanent establishment. However, A Non-Resident Person having a nexus on or after 1 March 2024 in the state should register within 3 months from the date of establishing the relationship in the partnership of the natural person.

Deadline for Tax Registration of Natural Persons Conducting Business or Business Activity

A Resident Natural Person conducting business or business activity during the year 2024 or subsequent years, with a total turnover generated for each year exceeding AED 1,000,000, must complete, and submit the corporate tax registration application before March 31 of the subsequent year.  

A Non-Resident Natural Person conducting business or business activity during the year 2024 with a total turnover exceeding AED 1,000,000 must submit a Tax Registration application within three months from the date of fulfilling the requirements outlined to determine the taxable person.

Administrative Penalty for Corporate Tax Delayed Registration

In addition to establishing a timeline for the registration of Corporate Tax by the FTA, The UAE Ministry of Finance has recently issued Cabinet Decision No. 10 of 2024 as an amendment to the previous Cabinet Decision No. 75 of 2023, which states the penalties for Corporate Tax violations.

The Cabinet Decision No. 10 of 2024 amends the administrative penalties and schedule of violations of the Cabinet Decision No. 75 of 2023.

This decision specifies that the failure to submit a Corporate Tax Registration application within the specified timeframe will result in an administrative penalty of AED 10,000.  Along with the violation of failure to register for Corporate Tax, the penalties associated with the incorrect filing of the tax return, failure to file the Tax Return within the specified time, and the failure to maintain the required records are also specified in the decision.

If a person files an incorrect Tax Return, a fine of AED 500 will be imposed unless the Tax Return is corrected before the expiry of the deadline.

Failure of a person to maintain necessary records and information as required will lead to either one of the following penalties:

• A fine of AED 10,000 for each violation.
• A fine of AED 20,000 for each repeated violation within 24 months from the date of the last violation.

Failure of the Registrant to submit a Tax Return within the timeframe specified in the Corporate Tax Law will lead to the following penalties:

• A fine of AED 500 for each month or part thereof for the initial twelve months of delay.
• A fine of AED 1,000 for each month or part thereof starting from the thirteenth month onwards.

To ensure effective compliance with the Corporate Tax, businesses operating in the UAE must meticulously adhere to the registration deadlines and requirements specified by the authority. Proactive fulfillment of these obligations can avoid the risk of administrative penalties and uplift businesses' regulatory standing. To gain an in-depth understanding of the UAE Corporate Tax Regulations, contact AMCA, a successful and proven Corporate Tax advisory firm in the UAE