The UAE Corporate Tax Law provides the legislative basis for imposing a federal tax on corporations and Business profits.
Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (“Corporate Tax Law”) was issued on 3 October 2022 and in addition to that we have following guidelines for natural persons registration.
- Guideline issued in December 2023 addressing Registration of Natural Persons.
- Guideline issued in February 2024 addressing timeline for Registration for Natural Persons.
- Public clarification issued on June 4, 2024, on registration timelines for Corporate Tax.
Based on above guidelines and clarifications I have summarised few vital points in my article, but all above referenced guidelines must be carefully reviewed before making any decision.
Who should Register in Corporate Tax?
Article 3 states that a natural person will fall within the scope of Corporate Tax and thus be required to register for Corporate Tax purposes, where:
- he/she is a Resident Person;
- he/she is a Non-Resident Person with a Permanent Establishment in the UAE;
- he/she carries on a Business or Business Activity in respect of which he/she derives a total Turnover in excess of AED 1 million; and
- the Turnover is not derived from Wage, Personal Investment, or Real Estate Investment.
The guideline also explain the term Turnover and it is defined as the gross amount of income derived during a Gregorian calendar year. This means that the total Turnover is the sum of all the income before any costs are deducted.
Who should NOT register in Corporate Tax?
All those natural persons need not to register for corporate tax if:
- They are not conducting a business or business activity in the UAE, or
- Conduct a business or business activity generating a turnover not exceeding AED One Million within the calendar year from January to December.
Tax Period for Natural Person
The Tax Period of a natural person who conducts a Business or Business Activity that is subject to Corporate Tax, shall be the Gregorian calendar year. The Gregorian calendar year runs from 1 January until 31 December. The first potential Tax Period for a natural person is the 2024 Gregorian calendar year and the filing deadline are within nine months of the end of tax period.
Registration Process
A natural person who is required to register for Corporate Tax must:
- Submit a registration application along with the relevant documentation to the FTA on Emara Tax portal.
- The FTA will review the registration application form and respond within 20 business days from the date on which the completed registration application is received.
- Once the application is approved, the FTA will issue the Tax Registration Number.
In case a natural person who is already registered for Value Added Tax or Excise Tax can use his/her existing login details. A natural person that has not previously registered with the FTA will be required to create new login credentials the first time he/she accesses the Emara Tax portal.
As per article 5, a natural person who is already registered for Value Added Tax and/or Excise Tax will still be required to register for Corporate Tax if he/she is within the scope of the Corporate Tax regime. Once registered, he/she will be issued with a separate Tax Registration Number for Corporate Tax purposes.
Obligations after Registration
Once a natural person has registered for Corporate Tax, he/she will be subject to administrative obligations such as:
- Filing a Tax Return and paying any Corporate Tax due within 9 months of the end of their Tax Period.
- Retaining all records and documents which support his/her tax position for a period of 7 years following the end of the Tax Period to which they relate, and
- Ensuring that all of his/her registration details are up to date and informing the FTA of any changes within 20 business days to avoid any penalties.
Registration Timeline for Natural Persons
FTA Decision No. 3 of 2024 was Issued on 22 February 2024 and effective from 1 March 2024 states that a natural person conducting a Business or Business Activity during the 2024 Gregorian calendar year or subsequent years whose total Turnover derived in a Gregorian calendar year exceeds the threshold specified in the relevant tax legislation in the State shall submit a Tax Registration application and deadline is 31 March of the subsequent Gregorian calendar year and failure or delays to do so will invite penalty.
Registration | 5 – Step Process
A natural person will only have one Tax Registration Number for Corporate Tax for all his/her Business and Business Activities so before planning registration gather all information for all the business activities.
In order to register you have to log into Emara Portal on FTA web site to complete your corporate tax registration which is categorised in 5 step process as below:
Step 1: Entity Details
In this step all information about entity needs to complete like entity type, sub type, date of incorporation and tax period.
Step 2: Identification Details
In this section we are required to complete details of trade license, name in English and Arabic, business activities, branches details and if any owner holds 25% ownership then details about him/her.
Step 3: Contact Details
All contacts details required.
Step 4: Authorised Signatory
All information about authorised signatory along with source of authorisation like Power of Attorney or Memorandum of Association to be uploaded.
Step 5: Review & Declaration
Review your information and submit.
FTA has issued a guideline in November 2023 addressing natural person corporate tax and all-important articles can be viewed in my Blog:
UAE Corporate Tax of Natural Persons | Humayun Atif (CMA,CPA)
ABOUT THE AUTHOR
Humayun Atif | CMA, CPA, CA (FIN), CA Articles from Big 4, Certified Forensic Accountant (USA), Six Sigma & Oracle Certified.
Atif is passionate about Business, Tech, and the written word. He is the author of the book ‘IFRS Made Easy’. He is a tax and IFRS coach and the founder of accountingblogger.com
This topic is crucial for understanding the tax obligations and regulations affecting natural persons in the UAE. It provides essential insights into corporate tax registration procedures and compliance requirements. For detailed guidance on navigating UAE corporate tax as a natural person, check out your GSPU.