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The Crucial Role of Accounting and Compliance in the Corporate Tax Landscape in the UAE

November 13, 2024

As global companies continue investing in the UAE, the importance of compliance comes to the spotlight. During the UAE Growth and Investment Forum, the panel discussion on Corporate Tax highlighted the importance for business owners to shift their mindset towards robust accounting and compliance practices. This is essential to optimize tax benefits amidst the evolving tax regulations in the country.

With new regulations shaping the corporate tax environment in the UAE, the importance of maintaining accurate financial records cannot be overstated. Naturally, forward-thinking businesses are consulting reputed teams of professionals for accounting services in Dubai. According to experts in the field, conscious effort towards internal discipline and proper financial practices is vital to ensure that businesses remain compliant. With the right guidance from tax consultants, they can also optimize their tax structures.

The Need for a Shift in Mindset

An expert speaking at the Forum pointed out that the tax environment in the UAE has significantly changed. He explained that businesses here never had any compliance for so long in the country. However, the need for a conscious shift in their mindset is evident. The days of operation without any structured tax laws are over. Therefore, businesses in the UAE need to adapt with proper accounting procedures in place. They must meticulously follow International Financial Reporting Standards (IFRS) to ensure adherence to standards and optimize their tax obligations.

Tax Regulations Growing Complex in the UAE

The rapid expansion of corporate tax regulations in the UAE is clear as businesses need to be well-informed and proactive. Another expert pointed out that the once concise 60 pages of corporate tax regulations have now grown to over 2,000 pages.

The FTA (Federal Tax Authority) has been actively releasing clarifications and updates, which makes it crucial for businesses to remain informed. The tax authority body has done a wonderful job in raising awareness through educational seminars. It has helped businesses understand the evolving corporate tax environment.

Smart businesses, particularly those operating in free zones, can potentially benefit from exemptions within this framework. However, it requires a clear understanding of the finer details of the law.

Striking the Right Balance

Businesses operating in the UAE need to understand the new corporate taxation laws accurately. The anti-abuse clause within the tax law is one of the major provisions. The FTA evaluates and identifies whether or not a transaction or arrangement contains any element to abuse tax norms. Therefore, businesses must make sure that their transactions are valid for commercial use and refrain from gaining undue tax advantages. Mistakes in this area can lead to serious legal or compliance issues. This demonstrates the need for meticulous tax planning and execution. Businesses must seek professional support from experts specializing in accounting and compliance services in Dubai to remain compliant.

Importance of Accurate Data Collection and Tax Planning

Businesses must allocate resources optimally to prevent potential pitfalls related to compliance. Top accounting firms use advanced tools and software to ensure compliance for their clients. For businesses, it’s crucial to restructure and classify their accounts correctly.

As the corporate tax environment in the UAE continues to evolve, robust accounting practices and compliance have gained unprecedented importance. The shift in mindset from informal to formal accounting and tax procedures, along with a deep understanding of the complex and growing regulations will help businesses optimize their tax benefits.

Established tax advisory professionals like the IMC Group provide reliable accounting and compliance services in Dubai to global businesses. With detailed tax planning and a disciplined approach to data collection, businesses can remain compliant with the new corporate tax norms in the UAE.

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Corporate Tax Regulations in the UAE and the Impact on Auditing Practices in 2024

November 12, 2024

The UAE incorporated a new corporate tax framework in 2024 amidst booming global business in the region. The new policies directly affect businesses operating in the country, impacting the corporate earnings of foreign companies. Moreover, the reform reshapes the field of auditing, as companies need to comply with new standards of corporate tax.

As tax professionals adopt these changes, there’s a visible shift in their approach to helping their clients ensure compliance and meet higher standards for accuracy.

Established corporate tax consultants in Dubai, are proactive on the latest norms and assist forward-thinking businesses ensure compliance in the evolving financial environment.

Overview of the Corporate Tax Structure in the UAE

The new corporate tax policy was introduced in the UAE to ensure economic diversification. The new policy levies a tax of 9% on businesses when their profits exceed AED 375,000. This taxation affects a wide range of businesses, and the new policy also presented tax professionals with greater responsibilities.

Currently, auditing bodies in Dubai need to integrate these regulations into the scope of their policies to ensure businesses adhere to their tax system. The process involves an in-depth review of financial records and accurate tax reporting. Under these new regulations, businesses must maintain clear profit and loss accounts. Auditors need to play a crucial role in verifying compliance, thereby minimizing associated risks.

As Dubai continues to impose corporate taxation norms, accuracy and transparency in financial reporting have become essential. Now, auditors must ensure that the reports are thorough and that they adhere to regulatory requirements.

Emphasis on Financial Documentation

The importance has now shifted to detailed financial documentation as per the new tax obligations in Dubai. For businesses operating in the city, it’s imperative to present statements that show taxable income as per the regulations. This has led to a higher demand for tax consultancy services in Dubai to ensure compliance with the new tax standards in the UAE.

Currently, tax professionals are channelling greater attention to verify that businesses in the UAE adhere to tax norms, scrutinizing all financial activities for accuracy. Naturally, the auditing process has grown more demanding as tax professionals aim to mitigate the risk of penalties arising from reporting discrepancies.

Moreover, companies now need to submit detailed financial reports like income statements. Transparency in these aspects is crucial to determining tax responsibilities. These financial documents detail revenue, expenditure, and net income, and need thorough scrutiny to prevent misreporting.

Shifts in Auditing Practices Following Tax Reform

With the introduction of stricter corporate tax norms in Dubai, auditing practices have undergone a visible shift. This shift also requires tax consultants to remain abreast with the latest regulatory updates as the corporate tax framework in Dubai continues to evolve.

The Role of Auditors in Supporting Compliance

The role of auditors is crucial in ensuring compliance with the tax environment in the UAE. They meticulously evaluate financial records to identify areas of potential non-compliance. Thankfully, leading tax professionals are aware of the latest norms on how to calculate corporate tax in Dubai, UAE. They assist companies in avoiding fines or other legal consequences.

Besides ensuring compliance, these consultants can also optimize tax reporting, which enables businesses to minimize their tax obligations lawfully. They analyze financial operations to facilitate accurate adjustments to tax liabilities. Thus, firms can shift to the new tax structure with professional support.

Professional Tax Consultancy Services from Industry Experts

With new corporate tax norms implemented in the UAE, tax professionals are serving international businesses operating in Dubai as strategic partners to ensure compliance. They provide the necessary guidance to ensure compliance with the new requirements. Thus, these experts go a long way in mitigating financial risks effectively.

The IMC Group continues to be one of the leading corporate tax consultants in Dubai. Seasoned tax professionals and accountants in this proficient team understand the latest tax norms in the UAE and ensure compliance with the same. Businesses, therefore, can maintain accurate financial records to adhere to the norms in the evolving regulatory environment in the country. With professional tax advisory consultation and support, companies expanding to the UAE can remain compliant with corporate tax laws.

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The UAE Solidifies its Role as GCC Startup Hub, Registers 5,600 New Firms in Q2 2024

November 12, 2024

As global businesses boom in the Middle East, the UAE has solidified its regional standing as one of the most sought-after hubs for startups. Its favorable investment environment and attractive policies make it a key destination for international businesses. The strong legislation of the UAE further makes it a great destination for global firms.

Reports from leading international organizations position the UAE at the top, considering various global startup metrics. This is a result of its initiatives to create a favorable business environment that hails innovation. The ongoing efforts have also boosted the ranking of the UAE in global competitiveness reports.

According to recent data from Statista, the UAE continues to be a prominent player among the GCC nations. As many as 5,600 startups registered across the UAE by the end of Q2 2024.

UAE’s Dominance in Fintech Startups

Statistics also reveal the leadership role of the UAE in the fintech sector within the region. Currently, over 550 fintech startups are active in this sector. A reputed consulting and research firm released a report, which shows the rapid rise of the USE in global startup rankings. It is currently the fastest-growing entrepreneurial ecosystem in the GCC.

Between the second half of 2021 and the end of 2023, the value of the startup ecosystem in the country was $4.2 billion. Forward-thinking firms from all around the globe are looking for new company formation in Dubai with professional advisory solutions from seasoned experts like the IMC Group.

Several emirates, including Abu Dhabi, Dubai, and Sharjah witnessed this growth trajectory. Each of these cities has fostered an environment of continuous and sustainable growth, offering support and incentives for the development of startups in crucial sectors.

The Growth of Abu Dhabi in the Startup Sector

Abu Dhabi has retained its position as the fastest-growing startup ecosystem in the Middle East and North Africa. Between the second half of 2021 and the end of 2023 Abu Dhabi secured $224 million in initial funding. The overall venture capital investments from mid-2021 to 2023 surpassed $1 billion. This boost in investments has been driven partly by Hub71, the global tech ecosystem in Abu Dhabi.

An expert stated that the tech ecosystem is experiencing growth interest from tech-based startups that tackle global issues. It is striving to create economic value and provide the emirate with new job prospects.

Dubai and Sharjah Continue to Lead Entrepreneurial Ecosystems

Meanwhile, Dubai has bolstered its efforts to develop a vibrant startup ecosystem. Currently, it ranks at the top among Gulf nations and second in the region based on its startup ecosystem valuation. The startup ecosystem of Dubai was valued at over $23 billion at the end of 2023.

On the other hand, Sharjah has also made a significant impact on the startup ecosystem in the UAE. The city currently hosts around 60,000 small, medium, and startup enterprises across its six free zones and 33 industrial zones. The startup ecosystem in Sharjah was valued at valued at $424 million, with $39 million in early-stage funding by the end of last year.

The UAE Drives Economic Diversification through Innovation

Abu Dhabi, Dubai, and Sharjah are collectively strengthening the position of the UAE as a prime tech hub for entrepreneurship and innovation. Naturally, the UAE appeals to global investors looking for expansion in the Middle East.

Foreign companies looking to capitalize on the dynamic commercial environment can seek holistic support from reputed business set up consultants in Dubai, like the IMC Group. These professionals provide comprehensive assistance to establish a business in Dubai, paving the path to compliance and success in the Middle East.

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Tax Benefits and Infrastructure Investments Set to Fuel UHNWI Surge in the UAE

September 11, 2024

The UAE continues to solidify its position as a global commercial hub. It has been attracting ultra-high-net-worth individuals (UHNWIs), largely due to its tax benefits, ongoing investments in infrastructure, and favorable regulations. According to experts, the country will witness a significant influx of UHNWIs relocating to the region. This trend is reshaping the wealth management sector and fueling new opportunities for businesses and service providers catering to the global elite population. Particularly, those seeking a Golden Visa in UAE often seek professional assistance from reputed establishments like the IMC Group.

The UAE Continues to Witness a Rise in the UHNWI Population

A report reveals that the global population of UHNWIs has surged, and the UAE has been leading the list of countries attracting this wealthy class. Currently, the country is home to more than 116,500 millionaires. It also houses 20 billionaires and 308 centi-millionaires. The strategic location of the country, along with its stable political and economic environment continues to attract investors from all over the world.

By 2024, around 128,000 millionaires are expected to migrate globally. In this context, too, the UAE remains a prime destination. This influx serves as a specimen of the favorable tax policies of the country, along with its regulatory framework. These factors have positioned the UAE as a preferred hub for UHNWIs looking for stability, wealth preservation, and business opportunities.

From Holiday Homes to Permanent Residency

In the past, UHNWIs considered the UAE as a destination for holidays, investing in holiday homes and secondary residences. However, the trend has now shifted, with many of these families establishing permanent bases in the country. This is evident from the growing number of UHNWIs purchasing local assets. These include both residential and commercial real estate.

The favourable regulatory environment in the country, along with strong legal frameworks provides them with the confidence to make long-term investments.

Thanks to local legislation, this crucial transition has been possible in recent decades. The country has witnessed several regulatory reforms in recent months to enhance the business environment. This projects the UAE as a favorable destination for wealthy families. Particularly, certain laws have been introduced to enhance asset ownership and ease tax burdens. With better inheritance laws, UHNWIs have consistently increased their investments in the region.

Infrastructure Investments to Support the Influx of UHNWIs

The UAE is heavily investing in infrastructure to accommodate the needs of the growing UHNWI population. From luxury real estate developments to world-class hotels and transportation networks, the country is rapidly expanding its offerings. As a part of major projects, as many as 26,000 new homes have been constructed in the country in 2023. By 2025, another 32,000 properties have been planned to cater to the high-end clientele.

The real estate market in the UAE has witnessed growth, particularly in locations like Jumeirah Bay Island, Palm Jumeirah, and Emirates Hills. There has been a record-breaking number of property transactions, evident from the high sales volumes. This clearly indicates a strong demand from the UHNWIs looking to invest in the luxury housing sector in the country.

Tax Benefits and Regulatory Reforms Driving the Interest of UHNWIs

The favorable tax regime in the UAE has been a critical factor in attracting UHNWIs. Some of the provisions they benefit from include the zero-income tax policy, no capital gains tax, and no inheritance tax. This makes it an ideal location for those looking to preserve their wealth across generations.

Some of the recent regulatory reforms in the financial hubs like the Dubai International Financial Centre (DIFC) have also enhanced the appeal of the UAE. New family office regulations have been introduced in the country, which allows UHNWIs to manage their wealth without stringent oversight. This provides them with greater flexibility and control over their assets.

The UHNWI Growth Trend is Likely to Continue

In the coming years, the UAE is poised to witness consistent growth in its UHNWI population. A 30% spike in this population is projected by 2028, which will have a lasting impact on the economy of the country. Sectors like real estate, finance, and luxury goods are likely to benefit the most from this growth trajectory.

As the UAE continues to adapt its regulatory environment and invest in infrastructure, the country is set to maintain its status as the leading destination for UHNWIs in the Middle East. With the popularity of family offices for wealth management, an increasing number of affluent families are turning to these service providers. The IMC Group is one of the leading partners for family office setup in the UAE. With proper infrastructure and support from experienced professionals for wealth management, the region is well-positioned to attract and retain the world’s wealthiest individuals.

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UAE Defines Its Economic Resilience as Post-Pandemic Policies Fuel a Surge in Companies and Investment

September 11, 2024

Since the onset of the Covid-19 pandemic, the UAE has witnessed remarkable economic growth. The post-pandemic business environment has seen a 2X growth in the number of companies registered in the country in just four years. As of the middle of 2024, the UAE recorded 1.021 million registered companies, marking a staggering 152% growth from 405,000 companies recorded at the end of the first half of 2020. This massive growth trajectory is the result of a series of initiatives taken by the UAE government, along with reforms to boost the economy when global uncertainty loomed large.

On 2nd September, a recent UAE Cabinet meeting was chaired by Sheikh Mohammed bin Rashid Al Maktoum, Vice President, Prime Minister of the UAE, and Ruler of Dubai. The meeting highlighted the economic achievements of the country. The authorities discussed the impact of 30 economic decisions, laws, and policies that the UAE government implemented during and after the pandemic. All these measures fostered an economic environment conducive to the growth of business and foreign investments, leading to long-term economic sustainability.

Key Achievements of the UAE in the Post-Pandemic Period

During the period, one of the crucial achievements of the UAE was its record-breaking inflows of foreign direct investments. In 2023, the UAE attracted AED112 billion ($30.5 billion) in foreign investments. This cemented its status as one of the most attractive business destinations in the world. Globally, the country was placed just behind the US in terms of the number of new FDI projects. It marked a 33% increase in such projects compared to the previous year. This surge in investments defines the growing resilience of the UAE on the global economic stage and its ability to compete with the largest economies of the world.

Sheikh Mohammed bin Rashid Al Maktoum stated that these were not just accidental achievements. They are the result of a clear and decisive strategy. He highlighted the efforts made by the government in positioning the UAE among the top five countries globally recording real growth in GDP, and within the top 10 in different global competitiveness indices.

The success of the country is also evident from its rapid transition towards a knowledge-based, innovation-driven economy. Over the past four years, the country has enacted more than 30 updated economic laws. This makes the country a compelling business hub for modern technology-based industries. Currently, the country hosts over 24,000 companies specializing in e-commerce. This further solidifies its position as a global leader in digital commerce.

Consolidated Government Financial Statistics for 2023 Reviewed

Along with the phenomenal increment in the number of companies, the UAE cabinet has also reviewed the consolidated financial statistics of the government in 2023. According to the report, the revenues of the government amounted to AED546 billion ($149 billion), while the total expenditures came to AED 402 billion ($109 billion). Substantial expenses of the government were made in sectors like public security, health, education, and social protection. With these investments, the infrastructure, social services, and overall economic environment continue to thrive in the UAE.

The UAE has also made significant strides in non-oil trade, achieving record figures. Foreign trade of non-oil goods in 2023 exceeded AED2.614 trillion ($712 billion) in 2023. Compared to 2022, this marked a 14.3% growth rate. The value of non-oil exports reached AED440 billion ($120 billion), marking a 16.3% growth compared to the previous year. This also marked a significant increase compared to the pre-pandemic levels. These developments reflect the commitment of the UAE to diversifying its economy and reducing its dependence on oil revenues.

The proactive approach of the UAE to international trade is also evident from its conclusion of 15 Comprehensive Economic Partnership Agreements (CEPAs) across four continents. These agreements have opened up new opportunities for the business community in the UAE. Four of the agreements are already in force. The economic partnership efforts are likely to result in a 33% increment in exports and contribute another AED153 billion ($42 billion) to the GDP of the country by 2031.

Professional Assistance to Ensure Compliance in the UAE

As the UAE attracts foreign investments and promote business-friendly policies, it remains committed to long-term economic growth. The UAE Foreign Direct Investment Trends and Predictions in 2024 reveal the investment potential of the country. The IMC Group continues to be a reliable partner for businesses expanding to the UAE, providing comprehensive assistance in establishing a commercial footprint in the country. With its foreign investment inflows and a robust legislative framework, the UAE is well-poised to maintain its status as a key economic player globally.

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The Critical Role of Transfer Pricing in the UAE Corporate Tax Framework

August 14, 2024

In the wake of the newly implemented corporate tax regime in the UAE, businesses must diligently adhere to transfer pricing (TP) rules. For entities, it is crucial to ensure that these transactions comply with the arm’s length principle to avoid penalties and maintain tax integrity.

In this edition, we will take a look at the critical role that transfer pricing plays in the corporate tax framework in the UAE.

What Does Transfer Pricing Refer To?

Transfer pricing is a set of norms that govern how transactions with Related Parties and Connected Persons are priced. These transactions, termed Controlled Transactions, must reflect market conditions as if conducted between unrelated entities. Here are some examples to help you grasp the concept better.

Intra-group loans and purchases
Sales and asset sharing
Management services and agency commissions
Intellectual property transfers and royalty payments
Cost-sharing agreements and guarantees
Leases and remuneration, including salaries, fees, bonuses, and retirement benefits for partners and directors

The Significance of Transfer Pricing Compliance

Proper transfer pricing compliance is crucial for several reasons

Preventing financial penalties: Adhering to TP regulations helps businesses avoid hefty fines and tax disputes.
Ensuring fair profit allocation: TP practices ensure that profits are distributed fairly, preventing tax base erosion.
Enhancing credibility: Accurate TP practices boost the credibility of a company with tax authorities, investors, and stakeholders.

Transfer pricing is an ongoing requirement, not a one-time task. Companies must continually update their TP policies to stay compliant with evolving regulations. This is particularly important for businesses that exceed specific thresholds of revenue, which involves detailed documentation.

Which Businesses Need To Comply With Transfer Pricing?

Any business engaged in Controlled Transactions must adhere to TP rules. Companies with substantial revenues, particularly the ones that are a part of multinational groups, face stringent scrutiny for documentation. Even smaller entities must adopt best practices to avoid tax disputes.

Companies above the documentation threshold must maintain both a master file and a local file as prescribed by the Federal Tax Authority (FTA). SMEs should also follow these guidelines to remain safe from any issue related to Controlled Transactions Successful businesses expanding overseas seek transfer pricing services from established service teams of professionals.

Transfer Pricing for Free Zone Entities

For a Qualifying Free Zone Person to benefit from a 0% corporate tax rate on qualifying income, it is mandatory to comply with transfer pricing regulations and maintain proper documentation. TP compliance aligns with international standards, making it crucial for companies operating within the UAE and across borders.

Steps to Comply with TP Requirements

A comprehensive approach to adhere to transfer pricing policies includes:

Analyzing related party transactions: Assessing functions, assets, and risks.
Applying suitable pricing methods: Determining the most appropriate methods for pricing.
Benchmarking: Identifying and analyzing comparable transactions or companies to establish an arm’s length range of prices or profit margins.

Professional Assistance for Fulfilling TP Requirements and Corporate Tax Regulations

Amidst the evolving tax regime in the UAE, it’s imperative for entities above the documentation threshold to maintain a master file and a local file as prescribed by the FTA. Advance Pricing Agreements (APAs) can provide pre-emptive clarity on transfer pricing methods, reducing the risk of disputes. Businesses must partner with one of the reputed tax consultants like the IMC Group for a detailed understanding of corporate tax requirements in 2024. The experts will take care of your transfer pricing requirements, ensuring proper compliance with tax regulations.

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Compliance Essentials for Free Zone Companies Handling Corporate Tax in UAE

August 13, 2024

The corporate tax framework in the UAE for free zone entities has been structured to foster economic growth, providing businesses with a favourable tax environment. Companies operating within specific free zones significantly benefit from a 0% tax rate on qualifying income. However, it’s imperative for organizations to understand the essentials regarding qualifying and non-qualifying activities and know the clauses that the tax regime presents to them.

Forward-thinking companies look out for professional assistance for business set up in Dubai. In this edition, let’s have a look at the prime conditions businesses should fulfil to qualify for the Free Zone Person (QFZP) Status.

Conditions to Meet to Qualify as a Free Zone Person

Here are certain conditions entities in the UAE must meet to qualify as a QFZP. Accordingly, they need to address their corporate tax filings.

Juridical person: The entity must be incorporated, established, or registered within a free zone.
Adequate assets: The entity must maintain adequate assets, full-time employees, and operating expenditures within the free zone.
Qualifying income: The income of the business should be derived from transactions with other free zone persons, activities classified as qualifying, or the ownership/exploitation of qualifying intellectual property.
Arm’s Length principle: Transactions with related parties must comply with this principle to ensure fair market value.
Transfer pricing documentation: Proper documentation must be maintained for transfer pricing.
Audited financial statements: The entity must prepare and maintain audited financial statements.
De Minimis requirements: Non-qualifying revenue should not exceed the lower of AED 5 million or 5% of total revenue.

Identifying Qualifying Activities

Businesses, in order to take advantage of the 0% corporate tax rate, must engage in certain qualifying activities. These include:

Production of goods within the free zone

Trading in minerals, energy, raw metals, and agricultural commodities
Owning, managing, and operating ships
Fund and wealth management services
Treasury and financing services
Distributing goods from designated zones
Logistics services

Non-Qualifying Activities

Certain activities are categorized as non-qualifying. These include:

Transactions with natural persons
Insurance and banking activities
Leasing and financing
Ownership or exploitation of immovable property outside the free zone

De Minimis Requirements

The de minimis rule allows for a small amount of non-qualifying income without losing QFZP status. For example, if a free zone entity earns AED 10 million, with AED 600,000 from non-qualifying sources, the non-qualifying revenue constitutes 6% of the total. This exceeds the permissible limit, resulting in the loss of QFZP status for the current and subsequent four taxable years.

Dealing with Real Estate

If an income is derived from an immovable property which is situated outside a free zone, it is considered to be non-qualifying. However, income generated from commercial property transactions within a free zone with other entities in the same area can qualify for the 0% corporate tax rate. Proper classification and compliance are essential to maintain this favorable tax treatment.

General Anti-Avoidance Rule (GAAR) Provisions

The GAAR is an essential aspect of the tax framework in the UAE. It has been developed to prevent tax evasion and ensure that businesses don’t reap tax benefits through abusive arrangements. The Federal Tax Authority (FTA) can disregard or re-characterize transactions lacking commercial substance or those primarily designed to gain a tax advantage. Therefore, companies must have robust tax planning strategies in place. These strategies must be commercially driven and compliant with GAAR to avoid penalties.

4 Compliance Strategies Recommended by Tax Experts

Here are a few compliance strategies that tax experts recommend businesses.

Maintaining adequate substance: Companies must ensure they have sufficient assets, employees, and operational expenditures within the free zone to retain their QFZP status.
Proper transfer pricing: Businesses need to comply with the arm’s length principle and maintain comprehensive transfer pricing documentation. This ensures that transactions with related parties reflect fair values and are ready for scrutiny from tax authorities.
Fulfilling de minimis requirements: Organizations must monitor the sources of their revenue regularly to ensure compliance with de minimis requirements. In case they exceed the threshold, they may lose their QFZP status as well as the associated tax benefits.
Complying with GAAR: For businesses, it’s important to assess their tax arrangements and make sure that they remain commercially substantive, and aren’t designed only for tax benefits. A proactive stance regarding GAAR provisions significantly mitigates the risk of adverse tax assessments and penalties.

Businesses operating in the free zones in the UAE must adhere to the strict tax regulations and comply with the established norms. With evolving tax regulations, most organizations reach out to established tax consultants to know how to calculate the corporate tax in UAE. Top consultants like the IMC Group can assist rapidly expanding organizations with professional advice, ensuring their compliance with GAAR. With seasoned experts on the side, businesses can secure their favourable tax status within the free zones in the UAE.

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UAE Corporate Tax: New Businesses Must Adhere to 3-Month Registration Deadline

July 11, 2024

With a surge of new businesses in the UAE, immediate tax registration has turned out to be a crucial priority. Across the country, free zones are promoting their perks actively to draw investors, offering exciting incentives. New enterprises must carefully consider their corporate tax registration obligations and potential eligibility for a 0% tax rate. Forward-thinking businesses often consider seeking professional assistance from a leading corporate tax consultant in Dubai to remain on the right track.

Regardless of the location of the free zone, every newly incorporated business in the UAE must prioritize corporate tax registration. The tax authorities in the country have explicitly stated that businesses with mainland, free zones, or offshore licenses are required to register for corporate tax. This clearly defines the corporate tax registration requirements for businesses operating in the UAE.

Chambers of commerce and leading free zones in the UAE have reported an increase in the number of businesses looking for incorporation in the country. This is the result of the different Comprehensive Economic Partnership Agreements (CEPA) that the UAE has secured with multiple countries. As a result, the nation is witnessing a higher influx of new businesses of late.

Key Steps for New Businesses

New businesses in the UAE must file for tax registration within three months from their date of incorporation. Failure to meet this deadline will result in fines for non-compliance. In the UAE, new entities benefit when they integrate into an established tax regime. This makes it easier for them to understand the requirements of corporate tax.

Many businesses are currently confused over whether they can complete the tax registration simultaneously while obtaining their trade license. To clarify this point, they can’t carry out these two processes together.

On the other hand, existing businesses face challenges in understanding their corporate tax liabilities between mainland and free zone operations. A professional team of experts like the IMC Group, which specializes in UAE Corporate tax registration, can comprehensively assist both new and existing businesses in this regard.

Trade License and Tax Registration

Businesses applying for tax registration need to submit a copy of their trade license. With a 3-month deadline, businesses enjoy some flexibility to complete their registration with the Federal Tax Authority (FTA). Once registered, the FTA will issue a Tax Identification Number (TIN) within 20 working days.

FTA Guidelines and Deadlines

The UAE tax regulator has adopted a proactive stance while issuing updates and reminders for both old and new entities regarding registration and obtaining their TIN. The FTA has stated that it doesn’t want to amend any provisions of the legislation, maintaining the deadlines for various taxable persons, both resident and non-resident.

According to the latest decision of the FTA, the timeline for applying for exemptions remains unchanged. Therefore, all taxable persons need to submit their tax registration application to the FTA by the specified deadlines.

Professional Assistance from a Corporate Tax Consultant in Dubai

With an increasing number of businesses willing to expand to the UAE, the free zones in the country have ramped up their incentives to attract new enterprises. Initiatives like providing physical and digital access 24/7 ensure that all the transactions would be completed on schedule. Some free zones offer premium office spaces and multiple licensing options, including dual licenses for businesses holding a Dubai Department of Economy and Tourism license, as well as multi-year licenses for long-term setups.

The IMC Group continues to be a leading Corporate Tax Consultant In Dubai, partnering with both new and existing companies and offering comprehensive assistance. Foreign businesses expanding to the UAE can trust this group of experts to ensure a seamless incorporation and corporate tax registration process, adhering to legal norms.

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Clarification on Corporate Tax Registration Deadlines by Federal Tax Authority

June 18, 2024

Extension of Deadline for Filing First Corporate Tax Return and Settling Tax for Companies Incorporated After June 1, 2023

Federal Tax Authority Announces Decision No. 7 of 2024

On September 25, 2024, the Federal Tax Authority (FTA) issued Decision No. 7 of 2024, which grants an extension for filing the Corporate Tax Return and settling the tax liability for certain companies, as outlined in the Federal Decree-Law No. 47 of 2022 on Corporate Taxation.

Key Details of the Decision: The new deadline for filing and settling Corporate Tax has been extended to December 31, 2024, provided the following conditions are met:

The company was incorporated, established, or recognized on or after June 1, 2023.
The company’s tax period ends on or before February 29, 2024.

It is essential to comply with this new deadline to avoid penalties. Take action now and ensure your taxes are filed and settled on time to prevent last-minute rush and fines!

Under Article 51 of Federal Decree Law No. 47 of 2022, known as the “Taxation of Corporations and Businesses” (UAE CT Law), taxable entities are required to register. The Federal Tax Authority (FTA) is empowered to set the registration timelines for all taxable persons.

The FTA issued Decision No. 3 of 2024, outlining the necessary registration deadlines, which are likely to be effective from 1st March, 2024. On 4th June 2024, the FTA released a ‘Corporate Tax Public Clarification’ titled “Registration Timelines for Taxable Persons for Corporate Tax”. It presents taxable persons with detailed timelines for submitting their tax registration applications. As a part of the clarification, the FTA has given examples to help taxpayers adhere to the prescribed timelines.

Every taxable individual, including those operating within a free zone, must secure a corporate tax registration number. Taxable individuals are required to retain all pertinent records and documentation for a duration of seven years after the end of the tax period. Upon request by the FTA, taxpayers are obligated to provide the financial statements that were used to calculate their income for the specified tax period. Corporate tax applies to all “taxable persons,” whether they are residents or non-residents.

For all taxable entities, it’s imperative to register with the FTA by the specified deadlines. In case of non-compliance, they need to shell out AED 10,000 as an administrative penalty for late submissions. Depending on the type of taxable person, the deadlines in FTA Decision No. 3 vary.

Natural Person
Non-Resident Juridical Person
Resident Juridical Person

Analysis

A. Resident Juridical Person

This includes Offshore Companies and Free Zone Persons recognized under UAE legislation.

Incorporated or Established Before 1st March 2024

A juridical person incorporated or recognized before 1st March 2024 must submit a Tax Registration application based on the month of the issuance of their license, within the deadlines specified in FTA Decision 3 of 2024, regardless of whether the license is valid or expired.

Example: Company X possessed a license that expired on 31 March 2022.

Company X, being a Resident Person incorporated in the UAE, must submit its Tax Registration application referencing the month of the issuance of its license. Although the license expired, the application for Corporate Tax registration must reference April, with a submission deadline of 30 June 2024.

Incorporated or Established on or After 1st March 2024

For juridical persons newly incorporated or recognized in the UAE on or after 1st March 2024, a Tax Registration application must be submitted within three months of their incorporation, establishment, or recognition.

Example: Company Y, incorporated on 16 June 2024 in Sharjah, is a Resident Person because it was established in the UAE. Since it was incorporated after 1st March 2024, the company must submit its Tax Registration application by September 16th, 2024, which is within three months of its date of incorporation.

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Juridical Person with POEM in the UAE Before 1st March 2024

A juridical person incorporated or recognized abroad but managed and controlled (POEM) in the UAE is considered a Resident juridical person under UAE CT Law. In case such a person doesn’t hold a license as of the effective date of FTA Decision 3 of 2024, it’s imperative to submit a Tax Registration application within three months from that date, which is by 31st May 2024.

Example: Company Z, incorporated on 1 April 2019 in the UK, has had its POEM in the UAE since 1 April 2022. It is a Resident Person as of 1 June 2023 due to its POEM in the UAE. Since it is a Resident Person before 1 March 2024, Company Z must submit a Tax Registration application referencing its date of license issuance.

Given that Company Z doesn’t hold a UAE licence since its board meetings are only conducted in the country, it needs to submit its application for Tax Registration within 3 months of the effective date of FTA Decision No. 3 of 2024, which is by 31 May 2024.

Juridical Person with POEM in the UAE After 1st March 2024

A juridical person incorporated, established, or recognized under foreign legislation but with POEM in the UAE on or after 1st March 2024, must submit a Tax Registration application within three months from the end of its financial year.

Example: Company A, incorporated on 1 April 2024 in Germany, follows a financial year from April to March. All its strategic decisions and board meetings and 2024 and 2025 are organized in the UAE.

Company A is a Resident Person due to its POEM in the UAE for the financial year that ends on 31 March 2025. Since Company A became a Resident Person in the UAE after 1 March 2024, it needs to submit a Tax Registration application within 3 months from the end of its financial year. This deadline has been fixed on 30 June 2025.

Key Considerations

If a juridical person holds an expired license which is not yet cancelled as of 1 March 2024, they should submit their Tax Registration application based on the month of the original license issuance.

If a juridical person holds multiple licenses as of 1 March 2024, they should use the license with the earliest issuance date to determine deadline of the Tax Registration application. The earliest issuance date should be based on the year of license issuance, but only the month of issuance is relevant for deciding the deadline.

Determining whether or not a juridical person is effectively managed and controlled in the UAE requires an assessment of the specific circumstances and facts of the entity and its activities.

B. Non-Resident Juridical Persons

For Non-Resident Juridical Persons, the deadline for submitting a CT Registration application depends on whether they have a Permanent Establishment (PE) or nexus in the UAE.

Non-Resident Juridical Person with a PE in the UAE Pre-1st March 2024

For a Non-Resident Juridical Person having a Permanent Establishment (PE) in the UAE before 1st March 2024, the CT Registration application deadline is within 9 months from the recognition of the PE for CT purposes in the UAE. This timeline may be extended if an International agreement on Double Taxation Avoidance (DTAA) stipulates a longer duration for PE recognition in the UAE, in which case the provision of the DTAA remains valid.

Example: Company B, established on 15th July 2008 in the UAE (FY from June to May), established a branch in Dubai on 01 May 2023. The company falls under CT regulations from 01 June 2023 (as per UAE CT Law, effective from this date).

Assuming all PE criteria are met, the permanence of PEs in the UAE is assessed over a six-month period, ending on 01 December 2023.

Non-Resident Person with a PE in the UAE On or After 1st March 2024

In case a Juridical Person has a Permanent Establishment (PE) in the UAE, the deadline to submit a CT Registration application is within 6 months from the recognition of the PE for UAE CT purposes. Also, if a Double Taxation Avoidance Agreement (DTAA) extends the duration for recognizing a PE in the UAE, the provision of DTAA remains valid.

Example: Company C, incorporated on 22 October 2019 in Luxembourg, established a branch in Abu Dhabi on 01 July 2024. Considering that it met all other PE requirements, the permanence of the PE in the UAE is evaluated over a six-month period, concluding on 01 January 2025.

Therefore, the PE recognition date for Company C is 01 January 2025 (6 months from 01 July 2024). The company must submit its CT Registration application within 6 months from the recognition date of the PE, by 01 January 2025. Therefore, the due date for CT Registration is 01 July 2025.

Non Resident Person having nexus in the UAE prior to 01 March 2024

For a Non-Resident Juridical Person having a nexus in the UAE where it derives its income from Immovable Properties in the country, the due date to file the CT Registration application will be from 3 months from the effective date of FTA Decision no. 3 of 2024.

Example: Company D was incorporated on 3 January 2024 in Oman, and it purchased residential property for investment purposes in Dubai on 10 January 2024. On 15th February, the company rented out the property. Company D does not have a Permanent Establishment in the UAE. In this case, it will be considered as a Non-Resident Person because Company J is a Non-Resident Person because it is not a Resident Person and has a nexus in the UAE. Even though it purchased the property on 10th January 2024, it had no income from it till February 15th. Therefore, its nexus in the UAE is considered to be on 15th February 2024.

Company D, being a Non-Resident Person with a nexus in the UAE before 1st March 2024, should have submitted its Tax Registration application within 3 months from the effective date of FTA Decision No. 3 of 2024, on 31 May 2024.

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Non-Resident Person with Nexus in the UAE After 1st March 2024

For a Non-Resident Juridical Person with a nexus in the UAE, implying that it derives income from its immovable properties in the country, the deadline to file a CT Registration application is within 3 months from the date of establishing the nexus in the UAE.

C. Natural Person (Resident and Non-Resident)

For a Resident Natural Person with a business turnover exceeding AED 1 million during a Gregorian calendar year in the UAE, the deadline to submit a Tax Registration application is by 31 March of the subsequent Gregorian Calendar Year (starting from 1 January 2024).

A Non-Resident Natural Person with a business turnover from a Permanent Establishment (PE) in the UAE exceeding AED 1 million during a Gregorian calendar year needs to submit the application within 3 months of fulfilling the requirements for which the entity needs to pay Corporate Tax.

Example: Mr. X is considered a tax resident in Spain as per an international double taxation avoidance agreement between the two countries. However, he travels to the UAE from 27th January 2024 to carry out business as an independent IT consultant. Thus, he creates a PE in the country as per the applicable international agreement to avoid double taxation. The business turnover for Mr. X in the 2024 Gregorian calendar year amounts to AED 1.2 million, which exceeds the AED 1 million threshold on 10th November 2024.

As a Non-Resident Natural Person, Mr. B meets the requirements of being subject to Corporate Tax with a turnover of AED 1.2 million from a PE in the UAE. Thus, he needs to submit his Tax Registration application within 3 months of fulfilling the criteria of being subject to Corporate Tax. Calculating 3 months from 10th November 2024, this date comes to 10th February 2025.

Points to Remember

If a Non-Resident Juridical Person has both a PE and a nexus in the UAE, the due date of the CT registration application is the earlier of the two deadlines
If a Double Taxation Avoidance Agreement (DTAA) extends the duration for recognizing a PE in the UAE, the DTAA provision remains valid

NEWSLETTER,U.A.E

Dubai Industrial City Expands by 13.9 Million Sq.Ft. to Bolster Manufacturing Sector in the UAE

June 12, 2024

Dubai Industrial City, a leading industrial and logistics hub in the region and part of TECOM Group PJSC, has announced a significant expansion that can strengthen the manufacturing sector in the UAE. It has acquired a massive space of 13.9 million square feet of additional land as a part of this strategic move. The announcement was made on May 27-28 during the Make it in the Emirates Forum in Abu Dhabi program. This acquisition promises a boost to the country’s manufacturing sector, enhancing local supply chains and expanding the home-grown manufacturing sector in Dubai and the UAE. The significant acquisition by Dubai Industrial City is likely to encourage foreign players eyeing a business setup in Dubai to benefit from its growth trajectory.

Dubai Industrial City secured this expansion through a massive transaction of AED 410 million. It was announced in the presence of notable figures like the UAE Minister of State for Public Education and Advanced Technology, Sarah Al Amiri. Other key figures present during the announcement include Omar Al Suwaidi, the Undersecretary of the UAE Ministry of Industry and Advanced Technology, Malek Al Malek, Chairman of TECOM Group, Abdulla Belhoul, the Chief Executive Officer of TECOM Group, and Saud Abu Alshawareb, Executive Vice President of Industrial at TECOM Group.

The new operational capacity comes as a response to the remarkable performance and demand evident in recent months. The Dubai Industrial City recorded an occupancy rate of 97% in the first quarter of 2024 in its land lease portfolio. This marks an impressive Y-o-Y increment of 12%. This phase comes after a robust growth trajectory in 2023, with its customer base recording a 17% increment. This portfolio includes more than 1000 international, regional, and local companies.

One of the key attractions of the newly acquired plots is its strategic location. It is seamlessly connected to the rest of the country, enhancing the land bank of Dubai International City. This expansion is strategically aligned with other growth initiatives in the country like the Make it in the Emirates, Operation 300bn, and the Dubai Economic Agenda ‘D33’. All these initiatives collectively fuelled increased demand for high-quality industrial spaces in the region.

With this expansion, the role of Dubai Industrial City as a premier destination for manufacturing and industrial activities further solidifies. Dubai continues to make significant contributions to the vision of the UAE to establish itself as a global manufacturing hub. The city aims to attract more investment by providing high-quality industrial space and supporting local manufacturers. Thus, it supports the diversification and economic resilience of the UAE.

Professional support for company formation in Dubai

With its expanding land bank, Dubai Industrial City continues to attract global businesses in hundreds. Reputed teams of professionals like the IMC Group continue to be one of the most trusted partners, comprehensively assisting new businesses in company formation in Dubai. Enterprises willing to capitalize on the economic resilience and growth potential in Dubai must reach out to the experts for professional consultation and guidance. An experienced team of advisors can guide new businesses with crucial legal issues, and tax compliance besides helping form a company in Dubai.

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