FTA announces deadlines for corporate tax registration

Background

In recent months, the Federal Tax Authority (FTA) has conducted a public awareness campaign to help taxpayers understand and meet their obligations under the Corporate Income Tax (CIT) Law¹. As part of this initiative, the FTA actively encouraged businesses to register for CIT through its social media channels and by organising various awareness sessions across the UAE.

Now that the registration process is open to various categories of taxpayers, including natural persons, foreign businesses, partnerships, and free zone entities, many companies have begun the registration process. However, since no specific deadlines had been announced yet, many businesses delayed their tax registration, especially those anticipating corporate restructuring, or changes in licensing or ownership.

The CIT Law grants the FTA the authority to set specific deadlines for taxpayers to register for CIT². However, without a clear directive from the FTA establishing specific registration deadlines, businesses and tax practitioners believed taxpayers were only required to register for CIT prior to submitting their initial tax return, which is due within nine months after the end tax period^{3 4} .

On 22 February 2024, the FTA made a significant update by defining specific deadlines for CIT registration⁵. At the same time, a new penalty of AED 10,000 was introduced for taxpayers who fail to submit their tax registration application within the specified timelines⁶. The new penalty came into effect on 1 March 2024, which led to a misunderstanding among many tax professionals and incorrect reporting by some media, suggesting that businesses were required to register by this date. However, the correct registration deadlines vary depending on the business category (i.e., resident, non-resident, or natural person), as outlined below.

Category 1: Resident Juridical Persons

A resident juridical person refers to an entity established or otherwise recognised under the laws and regulations of the UAE, including a Free Zone Person, that has a legal personality separate from its founders, owners and directors. It also includes entities that are incorporated, established or otherwise recognised under the laws of a foreign jurisdiction, if the entity is effectively managed and controlled in the UAE.

• Resident juridical person established prior to 1 March 2024

The registration deadlines for resident juridical person that were incorporated or established prior to 1 March 2024 are based on the date their license was issued, in accordance with the below table. If a juridical person has more than one licence, they should refer to the licence with the earliest issuance date.

If a resident juridical person does not have a license as of 1 March 2024, they will have 3 months to submit their application (i.e., until the end of May 2024). This is mainly relevant for foreign businesses that are managed and controlled in the UAE as most foreign businesses will typically not have a UAE trade license.

• Resident juridical person established on or after 1 March 2024

Resident juridical person that are incorporated or established in the UAE on or after 1 March 2024 will need to submit their application withing three months from the date or incorporation or establishment.

Resident juridical persons that are incorporated or established under the laws of a foreign jurisdiction on or after 1 March 2024 will need to submit their application to submit their application within 3 months following the end of their financial year.

Category 2: Non-Resident Juridical Persons

For non-resident juridical persons, the applicable timelines differ depending on when the entity became subject to UAE CIT, and on what basis (i.e., whether the non-resident has a permanent establishment or nexus in the UAE).

• Prior to 1 March 2024

Non-resident juridical persons with a UAE permanent establishment before 1 March 2024 must register their permanent establishment within 9 months from the date it came into existence.

Non-resident juridical persons with a UAE nexus prior to 1 March 2024, will have 3 months to submit their application starting from this date (i.e., until the end of May 2024).

• On or after 1 March 2024

Non-resident juridical persons with a UAE permanent establishment on or after 1 March 2024 must register their permanent establishment within 6 months from the date it came into existence.

Non-resident juridical persons with a UAE nexus on or after 1 March 2024, will have 3 months from the date of establishing the nexus to submit their application.

Category 3: Natural Persons

If a natural person conducts business or business activities in the UAE and generates a turnover exceeding AED 1 million within a Gregorian calendar year, they must register for CIT purposes⁷.

• Natural persons who are residents will need to register before 31 March of the subsequent Gregorian year.
• Natural persons who are considered non-residents will need to register within 3 months from the date they became a UAE taxpayer.

It should be noted that for natural persons, their physical residence in the UAE is irrelevant in determining whether they qualify as residents or non-residents for CIT purposes. Regardless of physical residency, any natural person who conducts a business or business activity in the UAE is considered a resident person for (UAE domestic) CIT purposes.

Where a natural person resides in a country that has concluded a Double Tax Treaty with the UAE, they could be considered as a non-resident for UAE tax purposes as a result of applying the treaty. In such case, the natural person could have a permanent establishment in the UAE if the turnover attributable to that permanent establishment exceeds AED 1 million within a Gregorian calendar year.

Exceptions

The following persons are not considered UAE taxpayers and are not required to register for CIT purposes with the FTA⁸:

• Government entities⁹
• Government-controlled entities¹⁰
• Persons that are engaged in extractive¹¹  or non-extractive¹² business
• Non-resident person that only derive UAE sourced income and that do not have a UAE permanent establishment¹³

Exempt persons

The FTA had previously set deadlines and outlined registration processes for certain persons exempt from CIT¹⁴:

Public benefit entities that meet specific criteria were eligible to register for CIT starting 1 October 2023¹⁵.

Starting 1 June 2024, the following exempt persons will also be able to register for CIT:

• Qualifying investment funds
• Regulated pension funds or social security funds, whether public or private
• Juridical persons that are owned and controlled by a government or government-controlled entity, a regulated pension or social security fund, or any other person specified by the Minister of Finance.

After registering, these entities can submit an application to the FTA to be exempt from CIT. This application must be made within 60 days from the end of the financial year. If the y the FTA approves the application, the exemption becomes effective from the beginning of the tax period for which they applied.

Conclusion

Key takeaway The FTA’s announcement of specific deadlines for CIT registration marks a significant shift in its approach to enforcing CIT compliance.

Businesses and individuals should familiarize themselves with the registration timelines which are relevant to their specific category, be it resident juridical persons, non-resident juridical persons, or natural persons, to avoid the risk of incurring a penalty of AED 10,000 for late registration.

Reference: FTA Decision No. (3) of 2024 on Registration Timeline for Corporate Tax