UAE Corporate Tax: Navigating Mandatory Registration for Small Businesses

As the annual tax season approaches, small and medium-sized enterprises (SMEs) in the UAE should focus on enrolling for corporate tax. In this period, numerous small business proprietors in the UAE need to give precedence to the registration process for corporate tax. This applies not only to businesses experiencing losses but also to those that are newly established.

corporate tax small business registration

Now that the UAE’s initial full-year corporate tax period has commenced, businesses should intensify their auditing procedures. Crucially, they must ensure registration with the Federal Tax Authority from a compliance standpoint.

Whether a business is relatively new or undergoing financial losses, it is imperative to register, regardless of whether their annual profit surpasses or falls below the Dh375,000 threshold.

“There still appears to be uncertainty among some SME owners regarding the timing of corporate tax registration, thinking it can wait until their profits reach the Dh375,000 mark,” mentioned a tax consultant. “This perception is incorrect.”

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The registration for corporate tax has been accessible since June of the previous year. According to UAE regulations, businesses following the calendar year as their financial year will settle their 2024 corporate tax by September 2025.

There exists a program known as 'Small Business Relief.'

“Businesses must demonstrate their eligibility by submitting tax returns and maintaining necessary records. If they do not reach the Dh375,000 profit threshold, eligible taxable individuals, such as business owners, have the option to choose ‘Small Business Relief’ on their tax return.

“Upon making this selection, they can then complete a simplified tax return and take advantage of the relief.”

Here is information to be aware of regarding Small Business Relief.

1. To qualify for the relief, the business’s revenue must be below or equal to Dh3 million for the most recent and all previous tax periods.

2. If the revenue surpasses Dh3 million, the business can no longer opt for the relief package, even if the revenue falls below the threshold in subsequent tax periods. However, the fundamental requirement remains unchanged – these businesses still must register for corporate tax.

Throughout recent weeks, the UAE tax authorities have conducted workshops and provided regular guidelines on various aspects of corporate tax, set at 9 percent of the annual profit once the Dh375,000 threshold is exceeded.

“The UAE Corporate Tax applies to all businesses ‘incorporated, effectively managed, and controlled’ in the UAE,” stated Ahmed. “This effectively means registration is mandatory, regardless of the profit or revenue a business generates.

“We strongly recommend companies utilize accounting software as part of their best tax practices, though some companies opt for Excel-based accounting. If a business chooses independent auditors, the costs are competitive in the UAE, but the actual expense depends on the volume and complexity of the operations.”

The Value Added Tax (VAT) registration threshold.

UAE businesses have a track record of complying with Value Added Tax (VAT) requirements. Under the VAT registration, companies had the choice to voluntarily register if their taxable supplies reached Dh187,500 and were required to register if it reached Dh375,000.

However, there is a significant distinction – VAT revolves around a tax levied on each transaction, and the rules of compliance are markedly different from those governing corporate tax.

“Even if a new business is currently being established in the UAE, the owner(s) would be wise to register for corporate tax,” advised a consultant. “It’s a crucial step that requires immediate attention.”

The information provided herein is for the general information of the user and is provided in good faith. We make no representation or provide warranty of any kind, express or implied, regarding the adequacy, suitability, validity, or completeness of the information. Our advice in regard to UAE corporate tax and value added tax is based on our understanding of the relevant laws and the regulations issued. We cannot be held responsible for new regulations and/or interpretation of existing regulations by the FTA that is not consistent with our advice. Under no circumstance shall we have any liability to any user of this information or to third parties for any loss or damage of any kind incurred as a result of the use or reliance of this information.

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