Tim Elliott
Welcome to Lawgical, the first regular podcast navigating the latest legal updates shaping the United Arab Emirates. I’m Tim Elliott, and as always, I’m with Ludmila Yamalova. Ludmila is the managing partner of Yamalova & Plewka here in Dubai. Nice to see you.
Ludmila Yamalova
Good to see you too, and great to be chatting with you, Tim, as always.
Tim Elliott
You know, I want to start with some background, Ludmila. We’re talking about corporate tax registration today. The deadline has been extended—big news! But first, give us a background on corporate tax. It’s new for many people here, so maybe start with an overview of corporate tax itself and the initial registration deadlines.
Ludmila Yamalova
Yes, corporate tax is a bit of a scary phrase in the UAE. It can be intimidating, especially for those of us who have been here a long time. Until 2018, tax wasn’t really a part of our vocabulary. That changed when VAT was introduced as a kind of soft landing into taxation. Since then, it was expected that the UAE’s tax framework would expand, and it has.
The first major step was VAT, and then in 2022, the UAE announced the corporate tax law, formally introduced as Federal Decree Law No. 47 of 2022 on the taxation of corporations and businesses. While the law was issued in 2022, it would come into effect for reporting and compliance on March 1, 2024, which is this year.
The introduction of this law marked a major shift in the UAE’s taxation framework, moving from a tax-free environment to one that includes corporate and value-added taxation, and perhaps more types of tax in the future. The main objective of this law, and the UAE’s tax framework in general, is to diversify the UAE’s revenue sources in line with international tax standards.
Tim Elliott
Could we go through and summarize the most important aspects of the UAE’s corporate tax law?
Ludmila Yamalova
Certainly. The corporate tax applies to corporations and businesses, hence the name. The law came into effect on March 1, 2024. The corporate tax rate is 9% and applies to all taxable income exceeding AED 375,000—approximately USD 100,000. Income up to that threshold is taxed at 0%, which supports small businesses and startups.
The tax applies to corporations and businesses operating within the UAE, including those in free zones that conduct business with the mainland. Certain businesses are exempt from corporate tax, such as those engaged in natural resource extraction, which remains subject to emirate-level taxation. Exemptions also apply to government entities, charitable organizations, investment funds, and public benefit organizations. The law is comprehensive, with many layers, and exemptions are periodically updated, so it’s essential to keep an eye on changes.
For calculating taxable income, it’s based on the accounting net profit reported in financial statements, adjusted as specified in the law. Certain free zone businesses, defined as qualifying free zone businesses, may be subject to a 0% tax rate, though these cases are nuanced. Additionally, the law includes requirements for transfer pricing, with documentation in line with OECD guidelines. Notably, there’s no withholding tax on dividends, interest, or royalties paid to non-residents, which is unique.
In terms of compliance, all businesses must register for corporate tax and file annual tax returns, but only qualifying businesses are required to pay the tax. This process is managed through the Federal Tax Authority (FTA), establishing a comprehensive framework to support the UAE’s tax system on the global stage.
Tim Elliott
How have the deadlines for corporate tax registration evolved?
Ludmila Yamalova
Good question. The law was introduced in 2022, with compliance expected from March 1, 2024. But, as with many things, additional layers and clarifications have been added. In mid-2024, the FTA provided extra guidance and extended the deadline to help businesses comply, as it’s a new process.
The deadline was moved from March to November 30, 2024, which is just a few weeks away now. This extension was formalized by FTA Decision No. 3 of 2024, allowing businesses with licenses issued in October and November more time to comply. It’s a clear example of how the UAE and the FTA continue to adapt and grow this legislative practice.
This decision is binding, so if there’s another extension, it will likely require a new decision.
Tim Elliott
I can imagine the registration process isn’t simple. It’s efficient but takes time due to the backlog of businesses applying. Let’s talk a bit more about the November deadline—who does it specifically affect?
Ludmila Yamalova
The deadline applies specifically to businesses with licenses issued in October and November. The FTA has emphasized the importance of meeting this deadline. Failure to comply will result in significant administrative penalties, as outlined in Cabinet Decision No. 75 of 2023. The FTA, while extending the grace period, reminds businesses that there are serious penalties for non-compliance, even though they’re providing extra time now.
Tim Elliott
We’re recording in November, so the deadline is only two weeks away. How do you register? What steps are involved?
Ludmila Yamalova
The UAE’s digital transformation has made registration simpler. Businesses don’t need to physically go anywhere or wait in lines. The FTA has created EmaraTax, a 24/7 digital platform for tax matters, accessible at e-services.tax.gov.ae. It’s user-friendly, available in both English and Arabic, and allows businesses to manage their tax obligations directly online.
If a business is already registered for VAT or excise tax, they would have an existing FTA account, so adding corporate tax is straightforward. This gradual introduction of taxes, starting with VAT, paved the way for businesses. Most UAE businesses have been registered with the FTA since 2018, so this is just another layer.
Tim Elliott
It sounds like an accounting procedure.
Ludmila Yamalova
Exactly. But for those businesses not yet registered, they’ll need to register with the FTA and obtain a TRN (Tax Registration Number) for corporate tax. This can be done directly by businesses or through authorized tax agents or government services. However, I recommend that businesses maintain direct access to the FTA portal, even if they initially use a third party for setup. The platform is designed to be accessible for businesses to manage on their own, and having direct access ensures full control over compliance.
Tim Elliott
What do businesses need to be aware of in terms of registration criteria and penalties?
Ludmila Yamalova
Businesses should know that the registration timeline depends on their earliest license issuance date. Even expired licenses may still be subject. Failure to register by the deadline will incur significant penalties as per Cabinet Decision No. 75 of 2023.
Tim Elliott
The penalties are well outlined, so it’s essential to adhere to the deadlines to avoid them. For businesses, how can they ensure they stay compliant and avoid penalties?
Ludmila Yamalova
It’s quite logical. First, understand the corporate tax law. The UAE has made the law accessible on its website, tax.gov.ae, with explanations, charts, and diagrams to simplify complex concepts. Second, double-check deadlines and make sure to use the correct tools for registration and payment. Businesses should avoid relying solely on third parties; ultimately, they are responsible for timely payments. Planning ahead is crucial, as corporate tax is transformative for many businesses in the UAE.
Tim Elliott
That’s another Lawgical – the T word. Corporate tax is really important if you own a business in the UAE. This has been an important episode, breaking down the corporate tax landscape and the extension to corporate tax registration. Thank you for listening, and if you’re watching us on YouTube, thank you for joining us. And as always, thanks to our legal expert, Ludmila Yamalova, managing partner of Yamalova & Plewka.
Ludmila Yamalova
Thank you, Tim.
Tim Elliott
Find us across social media on Instagram, Facebook, TikTok, LinkedIn, and YouTube. The website is lylawyers.com, where you can find loads of information. And if you have a legal question, you can head to lylawyers.com for assistance from qualified UAE legal professionals, or maybe it’ll be answered in our next Lawgical episode.
