Dubai: Have you recently established a company in the UAE? If so, it's crucial to prioritize registering for corporate tax, even as you focus on building your business, hiring staff, and setting up your office.
New companies incorporated in the UAE are required to register for corporate tax within a 3-month window. Failure to do so could result in penalties, a setback no new business wants to face.
Despite frequent alerts from authorities, many new business owners are missing the registration deadline or submitting incomplete applications, leading to rejections, according to tax consultants.
To avoid these pitfalls, new businesses should follow these steps:
Register for Corporate Tax Within 3 Months: This is non-negotiable to avoid penalties and complications later.
Evaluate Eligibility: Assess whether your business qualifies for 'Qualifying Free Zone Person' status, the 3-year SME Relief program, and other relevant factors such as transfer pricing applicability.
Maintain Proper Accounts: Ensure accurate bookkeeping and avoid mixing non-business expenses with business finances.
Consider VAT and Other Laws: Keep in mind the applicability of VAT and other relevant legal requirements.
"Every company formed on or after June 1, 2023, in the UAE is subject to the corporate tax regime from day one"
The Federal Tax Authority (FTA) issues regular alerts on tax registration deadlines based on the incorporation date of each company. However, many founders are delaying the necessary paperwork, leading to missed deadlines for obtaining a Tax Registration Number (TRN).
"Early registration ensures that a newly formed company is prepared to meet its tax obligations from the start." This can prevent last-minute rushes and errors, which could lead to penalties and complications.
Another critical decision for new businesses is choosing the appropriate financial year. Options include the standard January to December timeline, an April to March fiscal year, or a different 12-month period.
"The financial year and tax period will depend on the company's Memorandum of Association or Articles of Association," For companies incorporated on or after June 1, 2023, the first tax period will start from the date of incorporation and must be at least 6 months but not exceed 18 months."
For example, if a company selects a January to December financial year, the first tax period would be from June 1, 2023, to December 31, 2023—spanning 7 months. Alternatively, if the fiscal year is April to March, the first tax period would be June 1, 2023, to March 31, 2024—a 10-month period.
To avoid penalties, businesses must prioritize meeting the tax registration deadlines.
