•  UAE TAX Registration assistance and TAX Consultancy
•  Comply your business with UAE’s tax regulations.
•  Our team will assist you in tax compliance in UAE

In UAE there are two main tax regulations to be followed based on the business

• Value Added Tax
• Corporate Tax

Value Added Tax (VAT)

How prepared is your Business : VAT law in UAE mandates that business must mandatorily obtain VAT registration if the total value of taxable supply and expenses in a year exceeds AED 375000.

Contact our expert to guide you in VAT Compliance in UAE.

What is Value Added Tax in UAE

Value added tax is an indirect tax imposed on the supply of goods and services, which was implemented in the UAE since the beginning of the year 2018. FTA announced a standard Vat rate of 5%. However, the FTA categorized a few goods and services under zero-rate supply and exempt supplies where no tax is charged. It is crucial for entrepreneurs to know how VAT works. Our experts will guide you in each stage of the VAT Process.

Eligibility for VAT Registration

• Mandatory Registration : UAE resident making taxable supplies must register for VAT if their taxable supplies and imports exceed AED 375000 in the last 12 months or are expected to exceed their threshold in the next 30 days.
• Voluntary Registration : Voluntary registration is an option for a business, if the total amount of its taxable supply and expenses in the previous 12 months exceeds the voluntary registration threshold of AED 187500, or if the entire amount of the business taxable supplies and expenses is expected to cross the voluntary threshold of AED 187500 in the next 30 days. If a company fails to register before crossing the mandatory threshold, there will be AED 10000 fine for late registration.

What needs to be taken care of business under VAT?

Business must register on time once the turnover exceeds the registration threshold to avoid penalties. Choosing between standard VAT accounting and simplified VAT Accounting is crucial for compliance. Business must collect VAT from customers and remit it to the FTA, adhering to compliance requirements.VAT return must be filed quarterly or monthly, depending on the business to avoid fines.

VAT Accounting is crucial for compliance. Business must collect VAT from customers and remit it to the FTA, adhering to compliance requirements.VAT return must be filed quarterly or monthly, depending on the business to avoid fines.

Steps to follow post to VAT Registration

Registering for VAT can be an administrative and time-consuming process, so finally receiving confirmation of the VAT registration number can bring a sign of relief. However, there are than several actions that should be taken to ensure a smooth transaction from being NON-VAT registered business to a VAT registered business.

• VAT Return filing:

Return must be filed quarterly or monthly through the FTA portal, adhering to all guidelines. The registered taxpayer must complete VAT return filing and VAT payment before the 28^th day from the end of the quarter. However, the FTA may assign a different tax period to a certain group of taxable persons.

Record Maintenance:

VAT compliance is basically anchored on proper record keeping. Every business is required to keep records of all VAT related documents for at least five years. These records include:

• Input Vat and Output Vat invoices
• Credit and Debit Notes
• Vat returns and payments
• Import and Export Documents
• Correspondence with the FTA

Efficient record keeping helps the business to prepare proper VAT calculations and reclaims in case of a challenge by the FTA. For efficient record keeping our specialized accountant can help you to maintain proper books of accounts in each stage of your business.

• Handling Penalties: If companies violate VAT legislation in the UAE, they will be subject to substantial FTA VAT fines. Business must maintain VAT compliance in accordance with the FTA in-order to avoid VAT fines and penalties. Failure to pay the tax reported in the tax return within the time frame required by the tax legislation results in late VAT payment penalties.

• De-Registration: De-Registration from VAT can be beneficial under certain circumstances, but it’s essential to make this decision strategically. If your business ceases trading or no longer engages in taxable activities, it is a mandatory requirement to deregister for VAT. It is important to deregister promptly to avoid unnecessary administrative burdens and potential penalties for failing to comply with VAT registrations.

A business must notify the FTA by applying for deregistration from VAT within 20 business days from the date of occurrence of any of the following events that require deregistration under Article 21 of the VAT Law.

• The business is no longer making any taxable supplies.
• The business is making taxable supplies over a period of 12 consecutive months but below the voluntary VAT registration threshold of AED 187500.
• The business may choose to apply for VAT deregistration on a voluntary basis if it is making taxable supplies over the past 12 months that are above the voluntary VAT registration threshold of AED 187500, but below the mandatory registration threshold of AED 375000.

 

UAE VAT ADMINISTRATIVE PENALTIES 

1. (49) of 2021 on administrative penalties, such business is required to register for VAT within 30 days of exceeding the threshold. If a business fails to register with in the stipulated timeline, it will incur a fine a fine. Penalty: AED 10000 for late VAT registration.
2. Late VAT De-Registration penalty: AED 1000 in case of delay, and on the same date. Monthly thereafter, up to a maximum of AED 10000.
3. Late VAT return filing penalty: AED 1000 for the first time and AED 2000 in case of repetition within 24 months.
4. Late VAT payment penalty:

• 2% of the unpaid tax is due immediately
• 4% monthly penalty is due one month after the due date of payment, and on the same date monthly thereafter, on the unsettled tax amount to date.

5. AED 20000 for the failure in submitting the data, records and documents related to tax in Arabic to authority when requested.
6. Penalty of AED 5000 for the first time and AED 10000 in case of repetition for the failure to inform the authority of any circumstance that requires the amendment of the information pertaining to its tax record kept by authority.
7. If the registrant submit the incorrect tax return, initially AED 1000 and AED 2000 in case of repetition.
8. A penalty of AED 10000 for the first time and AED 20000 in case of repetition for the failure of the business to maintain proper books of accounts (Accounting and Bookkeeping)
9. AED 10000 for the failure of the legal representative of the taxable person to inform the authority of its appointment as legal representative within the specified time frame, in which case the penalties will be due from the legal representative’s own funds.
10. AED 1000 for the first time and AED 2000 in case of repetition for the failure of the legal representative for the taxable person to file a tax return within the specified time frame, in which case the penalties will be due from the legal representatives’ own funds.
11. For the submission of a voluntary disclosure by the taxpayer on errors in the tax return, tax assessment or refund application pursuant to article 10(1) and 10(2) of the tax procedures law.

• 5% on the difference, where the voluntary disclosure is submitted within one year from the due date of submission of the tax return, the tax assessment, or the relevant refund application.
• 10% and 20% on the difference, where the voluntary disclosure is submitted within the second and third year following the due date of submission of the tax return, tax assessment, or the relevant refund application.

12. Penalty of AED 20000 for the failure of the person conducting business to support the work of the tax auditor.
13. A penalty of 50% on the amount of error and a penalty of 4% for every month or part of the month for the failure of the taxpayer to voluntarily disclose an error in the tax return.

 

UAE CORPORATE TAX

Looking to ease your corporate tax Burden in UAE

You have reached the right place to have the right advice at the right time with our experts who provide deep insight into the compliance of tax regulation related to the corporate tax in the UAE.

 

What is Corporate Tax in UAE

Corporate tax is a form of direct tax levied on the net income or profit of corporations and other entities from their business. The UAE mandates all businesses, including freezone and mainland entities, to register for corporate tax, regardless of their taxable income.

The corporate tax rate in the UAE is 9%, but the calculation is not as simple. This 9% corporate tax will only be levied if the taxable net profit after appropriate deductions exceeds AED 375000. In other words, net profit up to AED 375000 is taxed at 0%.

 

Who need to register for Corporate Tax in the UAE.

All companies operating under a commercial license, business in banking, real estate, construction and brokerage, as well as foreign business earning income in the UAE, must register. Free zone entities must register even if they qualify for a 0% tax rate.

Under the federal Decree Law 47, as mandated by the Federal Tax Authority (FTA), all entities subject to corporate tax must obtain a corporate registration number. This includes exempted persons, who are also obligated to register. Once the corporate tax registration number has been obtained, every entity must submit their corporate tax return and settle any due taxes within nine months following the conclusion of the tax period to which the return corresponds.

Businesses obligated to comply with the UAE’s corporate tax provisions must complete registration within the prescribed time given for every company registered in the UAE.

 

Corporate Tax Return Filing

Corporate tax return filing in the UAE is the process of submitting a report to the federal tax authority that details the income and expenses of a company.

Corporate tax return need to be filed by every company registered in UAE, even the company not reached to the threshold specified in the corporate tax law for the specific tax period mentioned in the tax registration certificate.

Steps to be followed in corporate tax return filing in UAE.

• Every company registered for corporate tax must maintain proper records of all financial transactions for at least seven years as prescribed in article 56 of federal decree law no.47. it may result in fines and penalties from the federal tax authority (FTA) if failed to comply with these regulations.
• To file tax return you would need to organize certain documents to accurately calculate the corporate tax you are liable to pay. There are a few documents that will help you prepare for corporate tax filing.
• Financial statements for calculations of taxable income.
• Receipts for deductions to be claimed.
• Financial statements for estimating exempt income.
• Records of exemption status.
• Business loan documents signifying interest paid.
• Transfer pricing records.
• Records of foreign tax paid.
• Information on transactions between related parties.
• By preparing taxable income by applying all deductions of expenses, which are not considered as expenses as per the corporate tax law. Corporate tax returns need to be submitted to the official portal of federal tax authority (FTA)
• Payment of corporate tax liability needs to be done before the due date specified in registration certificate.
• After the submission of all the documents related to corporate tax return, the authority may request additional information or documents to verify the accuracy of the corporate tax return filed.

It is mandatory for taxable person to file corporate tax returns in UAE irrespective even if there is no income generated. Failure to file tax returns will attract administrative penalties as per the corporate tax law.

 

Corporate tax De-Registration

A taxpayer is eligible or is required to apply to the FTA to de-register from corporate tax based on the following criteria

• Business Cessation
• Sales of business
• Business Merger
• Re-domiciliation of business
• Modification of legal structure in the situation of mergers, acquisition, or conversion to other company forms needs a review of tax liabilities
• Any other reasons for corporate tax purpose.

 

Administrative penalties on violation of the corporate tax

• Failure of the business under the corporate tax law to keep the records and other information special in the tax procedure law, shall be liable to pay a penalty of AED 10000 for each violation and AED 20000 in each case of repeated violation within 24 months from the date of the last violation.
• Failure of the business to submit the data, records and documents related to tax in Arabic to the authority when requested will be liable to pay AED 5000.
• Failure of the registrant to submit a de-registration application within the time frame specified in corporate tax law is liable to pay AED 1000 in case of late submission of the application and on the same date monthly, up to a maximum of AED 10000.
• Failure of the registrant to inform the authority about any amendment of the information pertaining to the tax record shall be liable to pay AED 1000 for each violation and AED 5000 in each case of repeated violation within 24 months from the date of the last violation.
• Failure of the legal representative to provide notification of their appointment within the specified time frame, in which case the penalty of AED 1000 will be due from the legal representative’s own fund.
• Failure of the legal representative to file tax return within the specified time frame, in which case the penalties of AED 500 for each month, for the first twelve months and AED 1000 for each month from the thirteen months onwards
• Failure of the registrant to submit a tax return within the time frame is liable to pay AED 500 for each month for the first twelve months and AED 1000 for each month from the thirteen months onwards.
• Failure of the taxable person to settle the payable tax liable to pay a penalty of 14% per annum for each month on unsettled tax amount from the day following the due date of payment and on the same date monthly thereafter.
• If the registrant submit an incorrect tax return, is liable to pay AED 500.
• The submission of a Voluntary Disclosure by the Taxable Person in relation to errors in the Tax Return, Tax Assessment or Tax refund application pursuant to Clauses (1) and (2) of Article (10) of the Tax Procedures Law. A monthly penalty of 1% on the Tax Difference, for each month or part thereof, to be applied as of the date following the due date of the relevant Tax Return, the submission of the Tax refund application, or the Notification of the Tax Assessment and until the date the Voluntary Disclosure is submitted.
• Failure of the Taxable Person to submit a Voluntary Disclosure in relation to errors in the Tax Return, Tax Assessment or Tax refund application pursuant to Clauses (1) and (2) of Article (10) of the Tax Procedures Law, before being notified by the Authority that it will be subject to a Tax Audit. A fixed penalty of 15% on the Tax Difference. A monthly penalty of 1% on the Tax Difference, for each month or part thereof.
• Failure of a Person subject to Tax Audit, his Tax Agent or Legal Representative to offer facilitation to the Tax Auditor in violation of the provisions of Article (20) of the Tax Procedures Law, in which case the penalties will be due from the Person’s, Legal Representative’s or Tax Agent’s own funds, as applicable are liable to pay AED 20000.
• Failure of a Person to submit, or late submission of a Declaration to the Authority, as required in accordance with the provisions of the Corporate Tax Law. 500 for each month, or part thereof, for the first twelve months. 1,000 for each month, or part thereof, from the thirteenth month onwards. This penalty shall be imposed from the day following the expiry date of the timeframe within which the Declaration must be submitted, and on the same date monthly thereafter.

Our expert accountants will advise you on all corporate tax considerations and penalties which might impact your business in UAE. This will include registering your business for corporate tax and ensuring the best tax outcome for your business and file corporate tax return in right time with best outcome.