Corporate Tax Registration on EmaraTax: The Complete Guide

Corporate Tax Registration on EmaraTax The Complete Guide featured img

Insights

Corporate Tax Registration on EmaraTax The Complete Guide featured img

Corporate Tax Registration on EmaraTax: The Complete Guide is a comprehensive look at the legal requirements related to corporate tax registration, documents required, procedures to follow, and mistakes to avoid. Read the article for a step-by-step guide for Corporate Tax Registration on the EmaraTax portal.

Understanding the Basics of Corporate Tax in UAE

Examples:

Who should register for Corporate Tax?

Every taxable, including Free Zone Persons, must register with the Federal Tax Authority (FTA) under the CT Law regime. Every person carrying out business or business activities in the UAE under the license must obtain a tax registration number.

Timeline for Corporate Tax Registration

All the Taxable persons must register under the Corporate Tax regime within 9 months from the end of the relevant first Tax Period.

Description of Violation
Fiscal year-end
First reporting period
CT registration and due date of filing the first CT return and payment
1
December 2023
January 2024 to December 2024
30th Sep 2025
2
June 2023
July 2023 to June 2024
31st March 2025

What is the EmaraTax Platform?

EmaraTax Platform is the Official website managed by the FTA (Federal Tax Authority of the UAE) that offers various digital services to UAE Businesses. The services include handling Tax Registration, Filing of Returns, Payment of Taxes and Applying for tax refunds under the UAE CT Law regime. Read further to know how to register for corporate tax in UAE.

What are the Documents Required for Corporate Tax Registration on EmaraTax?

Documents required for CT Registration on EmaraTax Portal:

What are the Steps for Corporate Tax Registration on EmaraTax?

Steps to apply for CT Registration on the EmaraTax Portal:

Step 1 : Create an account

on the EmaraTax portal by registering with your email ID and Phone number or logging in using your existing ID and password.

Create an account image
Step 2 : Entity Details Section
Entity Details Section image

1. Select the appropriate option for Entity Type and Entity Sub Type.

Step 3 : Identification Details
Identification Details image

1. Depending on the ‘Entity Type’ selected, you must provide the main trade license details in the identification details section.

2. Click ‘Add Business Activities’ to enter all the business activity information associated with the trade license.

3. Enter the mandatory business activity information and click on Add.

4. Click on ‘Add Owners’ to enter all the owners that have 25% or more ownership in the entity being registered.

5. Select ‘Yes’ if you have one or more branches, and add the local branch details.

Step 4 : Contact Details
Contact Details image

1. Enter the registered address details of the business.

2. Do not use another company’s address (for example, your accountant). If you have multiple addresses, provide details of the place where most of the day-to-day activities of the business are carried out.

3. If you are a foreign business applying to register for UAE CT, you may choose to appoint a tax agent in the UAE. In such cases, provide the necessary details.

Step 5 : Authorized Signatory
Authorized Signatory

1. Click ‘Add Authorized Signatory’ to enter the Authorized Signatory details.

2. Evidence of authorisation may include a Power of Attorney or Memorandum of Association for legal persons.

Step 6 : Review & Declaration

1. This section highlights all the details you entered across the application. You are requested to review and submit the application formally.

2. After submitting your application successfully, a Reference Number is generated for your submitted application. Note this reference number for future communication with FTA.

Other Important Aspects:

Is it compulsory to register for corporate tax in UAE?

Yes, every taxable person must register for corporate tax in UAE and get a corporate tax registration number.

Registration of Foreign Entity under UAE CT Law Regime:

The option for registration of foreign owners on the Emara Tax Portal has not been enabled yet. Consequently, branches of foreign companies cannot register for the UAE CT Regime through this platform. The Federal Tax Authority (FTA) will soon provide information regarding the timeline for enabling the registration of foreign owners on the Emara Tax Portal.

What are the Mistakes to Avoid During UAE Corporate Tax Registration on EmaraTax?

Incomplete Documentation:

It is to be ensured that the documents submitted support the information you entered in the application. This would help to avoid any rejection or resubmission of the application later.

Expired Documents:

Please ensure all legal documents, such as the trade license, are current and not expired when submitting your application. Expired documents will delay processing, and FTA may raise queries accordingly.

Inappropriate Information:

The applicants are supposed to provide a ‘Date of Incorporation’ while applying for CT registration. Applicants commonly make a mistake to provide a Trade License Renewal date. However, here, it is expected to provide the Date of Incorporation of the entity. Such mistakes may lead to the rejection of the CT registration application by the FTA, UAE.

Selection of Options while applying for CT Registration with the FTA:

If the entity has selected entity Type as ‘Legal persons – Other’ in VAT Registration, then at the time applying for CT Registration Application, Applicant cannot edit the Type of Entity and it will be auto populated as ‘Legal Persons-other’. And eventually such application are getting rejected by the FTA Authority and entities will have to wait for the update on the Emara Portal.

Post-Registration Responsibilities and Compliance

Regular Tax Return Filing:

Article 53 ‘Tax Returns’ provides that every taxable person is liable to file a return of income online within 9 months from the end of the tax period or by any other such date as directed by the FTA. Information to be disclosed in the tax return:

It is mandatory for the taxable person to disclose the following information in the tax return:

Exempt categories of persons are also needed to register under UAE CT Law and need to file a declaration with FTA for the same.

Due date to submit the tax return:

Return is to be filed within 9 months from the end of the relevant tax period or by such other date as may be decided by the FTA.

Audits and Assessments:

Audit & Accounts:

A taxable person with revenue exceeding AED 50,000,000 (fifty million dirhams) during the relevant tax period and a Qualifying Free Zone Person will be required to prepare and maintain Audited Financial Statements.

Taxable and exempt persons shall maintain all records and documents for a period of (7) seven years.

Assessments:

Once the taxpayer files the return of income, the next step is processing the return of income by the FTA. The FTA examines the return of income for its correctness, commonly referred to as ‘Assessment.

The FTA shall issue a tax assessment to determine the corporate tax payable, corporate tax refundable or any other matters as prescribed by the CT law and notify the taxable person within 10 business days of its issuance in any of the following cases:

1. The taxable person fails to apply for registration within the prescribed time frame;

2. The registrant fails to submit a tax return within the prescribed timeframe;

3. The taxable person fails to pay the payable tax as per the tax return submitted within 9 months from the end of the tax period;

4. The taxable person submits an incorrect tax return;

5. The registrant fails to calculate tax on behalf of another person when he is obligated to do so under the tax law;

6. There is a shortfall in the payment of tax as a result of a person evading tax or as a result of a tax evasion in which such person was involved;

7. Any other cases in accordance with the CT Law.

Penalties for Non-Compliance:

Administrative Penalties:

If the taxable person fails to submit a tax registration application within the prescribed time limit, then the administrative penalty would be as follows:-

Description of Violation
Administrative Penalty Amount in AED
Failure of the Person Conducting a Business or Business Activity to keep required records and information as per the provisions of UAE Corporate Tax Law.
One of the following penalties shall apply:
1. 10,000 for each violation OR 2. 20,000 for each repeated violation within 24 months from the date of the last violation.
Failure of the Person Conducting a Business or Business Activity to submit the data, records and documents related to Tax in Arabic to the Authority when requested.
AED 5,000

Seeking Professional Help for Tax Registration on Emara Tax

Hiring a tax consultant in the United Arab Emirates (UAE) to comply with the country’s Corporate Tax (CT) laws can offer multiple benefits. The following are a few advantages:

Smart Advice:

They know UAE tax rules inside out and talk to you like a friend, not a tax robot.

Custom Plans:

They make tax plans that fit your business like a glove—no generic stuff.

Time Saver:

They handle the tax fuss, giving you more time for your job.

No Fines, No Stress:

Keep up with deadlines, avoid fines, and wave goodbye to tax stress.

Audit Buddy:

If a tax audit happens, they’ve got your back. Less stress, more support.

Save Money, Not Spend:

Yeah, you pay them, but it’s an investment. Saves more than it costs.

Money Talk, Plain and Simple:

They explain how tax moves affect your money. No fancy talk, just straightforward advice.

Connections Beyond Tax:

Need more than tax help? They’ve got a network for legal and money matters.

So, a corporate tax consultant isn’t just an expense. It’s a wise move. They bring smarts, keep you in the tax game, and set you up for business success.

Conclusion:

The UAE government has introduced the Corporate Tax (CT) and positioned the country as a business and investment hub. It demonstrates the UAE authorities’ commitment to bringing transparency into business dealings. The introduction of corporate tax in the UAE will boost the economy and attract foreign direct investment.

Businesses in the UAE need to assess the applicability of the corporate tax law for their entities and establish sound record-keeping and compliance practices to comply with the legal requirements. The businesses need to train their staff and follow the updates and ministerial decisions issued by the UAE Federal Tax Authority.

The Federal Tax Authority maintains the EmaraTax Portal. It provides a streamlined process for Corporate Tax Registration in the UAE.

Leave a Reply

Your email address will not be published. Required fields are marked *

UAE Corporate Tax Group: Pros, Cons, and Considerations

UAE Corporate Tax Group

Insights

UAE Corporate Tax Group
In the UAE Corporate Tax Law, a tax group refers to a special arrangement where two or more resident companies can come together to operate as a single taxable entity, subject to the conditions of Article 40 of the Corporate Tax Law.
This means If the companies meet the requirements to form a Tax Group, and their application to form a Tax Group is approved by the Federal Tax Authority, they can file a single UAE CT return covering all the members of the Tax Group.

Who Can Form a UAE Corporate Tax Group?

A resident parent company, along with its one or more subsidiaries, resident in the UAE (taxable person), can form a tax group, functioning as a single taxable entity for corporate tax purposes.

What Conditions need to be fulfilled to form a UAE corporate tax group?

The following conditions need to be fulfilled to form a Tax Group under the UAE Corporate Tax Law:

Juridical persons

Each person forming part of the ‘Tax Group’ should be a juridical person. The natural persons (Individuals) cannot constitute a ‘Tax Group’.

Tax Residents

All members of the group must be resident companies in the UAE. Non-resident persons or foreign companies cannot be added to the tax group.
Parent Company
Subsidiary
Allowed?
Resident
Resident
Yes
Resident
Non- Resident
No
Non- Resident
Non- Resident
No
Non- Resident
Resident
No
A foreign juridical person effectively managed and controlled in the UAE would be treated as a resident person for the purpose of tax grouping subject to maintenance of the following documentation that such an entity is not a resident in any other country:
(a) A confirmation from the relevant tax authority of the other country; or
A confirmation from the relevant competent authorities for the purpose of the application of tax treaties in force supporting non-residency in another country.

1. The parent company should own at least 95% of the ownership interest

A Parent Company can form a tax group with its resident subsidiary if it meets the Ownership Requirement as stated in Article 40(1) of the Corporate Tax Law, accordingly – the parent company must hold, directly or indirectly, at least 95% of the following in each subsidiary:

2. None of the company is an Exempt Person:

Neither the parent nor any subsidiary can be an exempt person or a Qualifying Free Zone Person (QFZP).

3. Shared Financial Year and Standards:

To ‘Tax group’, the CT Law mandates that the financial year of each taxable person should end on the same date. The Parent Company and subsidiaries cannot follow two different financial years. Also, each tax group should have prepared their financial statements using the same accounting standards.

Pros of forming a Corporate Tax Group

Single corporate tax registration in the UAE

Single filing required

No applicability of Arm’s length principles and Transfer Pricing Documentation

Transactions between group members are exempt from arm’s length requirements and transfer pricing documentation. This significantly reduces the burden and complexity of proving fair market value for intra-group transactions

Losses of one company set off in the same year with another company leading to cash benefits

Losses incurred by one group member can be used to offset the profits of other members in the same tax year. This allows profitable companies to utilize the losses of loss-making companies within the group, potentially reducing the overall tax liability and generating immediate cash flow benefits

Lower compliance burden due to single Corporate Tax return

Under the UAE Corporate tax law, tax group to apply for only one corporate tax registration on behalf of all the companies of tax group and such tax group is required to file only one consolidated return instead of filing separate returns for every member company of the Tax Group. This will simplify the overall administration part for the tax group, and it also reduces the compliance cost as well.

Cons of Forming a Corporate Tax Group

Single exemption limit irrespective of tax group members

Mandatory to prepare consolidated financial statements

Triggers joint as well as several liabilities

Potential complications on engaging in M&A activity

Limited to parent-subsidiary relationships, resident, and taxable persons

Conclusion

A Tax Group is a specialized arrangement wherein two or more resident companies consolidate their financials and operate as a single taxable entity. Key prerequisites include the following: each member should be a juridical person, each participant should be a UAE tax resident and not exempt under UAE CT Law, the parent company should own at least 95% of the ownership interest, and shared financial years and accounting standards are mandated among all the subsidiaries of the Tax Group.
As an entity, a Tax Group enjoys multiple benefits, including a simplified registration process, consolidated tax filing, exemption from transfer pricing documentation, and the flexibility to offset losses against profits within the group. However, Tax Groups face various challenges, including a collective exemption limit for the entire group, mandatory preparation of consolidated financial statements, joint and several liabilities for tax obligations, complexities during mergers and acquisitions, and limitations to parent-subsidiary relationships among resident and taxable entities.
Forming a Tax Group under the UAE Corporate Tax Law can offer several advantages, but careful analysis is crucial before deciding. An assessment of the potential benefits against the drawbacks, considering your specific group structure, financial situation, and future plans, is essential.

FAQs

Being owned by a foreign parent company does not preclude UAE subsidiaries from forming a Tax Group, but the UAE subsidiaries must be held by an intermediary UAE parent company that will be the “parent” of the Tax Group for UAE CT purposes.
Yes. The AED 375,000 threshold for Taxable Income subject to the 0% Corporate Tax rate will apply to the Tax Group as a single Taxable Person, irrespective of the number of entities in the Tax Group.
Pre-Grouping Tax Losses are Tax Losses that are accrued by a Taxable Person before joining or forming a Tax Group.

Leave a Reply

Your email address will not be published. Required fields are marked *

Determining a Non-Resident Person’s Nexus in UAE for Corporate Tax Purposes

Insights

The Corporate Tax Law has been introduced in the UAE and provides special treatment for the non-resident person’s taxation. Here is the article dealing with determining a non-resident person’s nexus in UAE.

Non-Resident Person’s Nexus in UAE: An Overview

Who is considered a Non-Resident Person?

As per the UAE CT Law, a Non-Resident Person is:

I. Natural Person who is not a Resident but

1. Has a permanent establishment (PE) in the United Arab Emirates Or

2. Derives state-sourced income

An individual who is not a resident but has a Permanent Establishment (PE) in UAE and an annual turnover of AED 1 million or more attributable to PE is considered a Non-Resident Person.

II. A Juridical Person incorporated outside of UAE and not effectively managed and controlled in the UAE will be regarded as a Non-Resident Taxable Person to the extent:

When shall a Non-Resident Person be said to have a Nexus in the UAE?

Any non-resident juridical person would be treated as having a UAE nexus if he earns income from “immovable property” in the UAE.

A non-resident juridical person with a UAE nexus must register with the Federal Tax Authority ( “FTA”) and obtain a Tax Registration Number.

Income Attributable to Immovable Property:

Taxable income attributable to Immovable Property includes “income derived from the right in rem, sale, disposal, assignment, direct use, letting, including subletting and any other form of exploitation” of Immovable Property located in the UAE.

What shall be the Taxable Income if there is a Nexus in the UAE?

Income attributable to a Permanent Establishment or nexus:
Business or Business Activities of a non-resident natural person that are subject to Corporate Tax:

Non-resident individuals deriving income from the UAE are subject to Corporate Tax if annual turnover attributable to their Permanent Establishment in the UAE exceeds AED 1,000,000.

However, the corporate tax does not apply to income earned by salary, wages, income from personal investment, real estate investments without a license, etc.

State Sourced Income:

Article 13(1) of the Corporate Tax Law defines instances under which an income is considered State Sourced Income. Such State-Sourced Income earned by a Non-Resident Person is subject to Corporate Tax.

How to determine the Permanent Establishment in UAE

The definition of ‘Fixed Place PE’ refers to the following essential criteria:
Places that constitute Fixed Place PE:

Article 14(2) defines permanent establishments where business operations occur. These include:

Explanations:
Place of Effective Management (PoEM):

Place of Effective management is an internationally recognised test for determining the residential status of a company incorporated in a foreign jurisdiction. A Fixed Place PE is where essential day-to-day business decisions are made. While international terms use “Place of Management,” UAE CT refers to “Place of effective management,” defined in the explanatory guide as daily operational decisions, not just strategic or board meeting decisions.

Business Premises:

Branches, offices, factories, workshops, land, buildings and other real estate property are also examples of fixed-place permanent establishments

Installation or Construction PE:

Any installation for natural resource exploration, including mines, oil or gas wells, and quarries, creates a PE. A PE is also formed if a building site, construction project, or related activity lasts over six months. This includes not only construction but also infrastructure projects and equipment installation. The ‘six-month’ duration considers all sites, projects, and activities, including time spent by related parties. This threshold is sometimes exploited for tax avoidance, with work distributed among related entities to stay within the limit.

Dependent Agent Permanent Establishment

Multinational companies often appoint dependent agents in the UAE to conduct business and avoid creating a Fixed Place Permanent Establishment.

As per Article 14(1)(b), Where a Person has and habitually exercises the authority to conduct a Business or Business Activity in the State on behalf of the Non-Resident Person, such non-resident person is said to have a nexus in UAE.

‘Habitually exercising authority’ means consistently finalising or negotiating contracts leading to non-resident approval without significant changes. If an agent in the UAE routinely handles orders approved by the non-resident, they are deemed a dependent agent PE. T Independent agents, promoting goods without contract conclusions, are not considered dependent agents.

Preparatory or Auxiliary Activities do not constitute PE:

If a fixed place of business in the UAE is used only for the following specific purposes, it does not create a permanent establishment, including:

1. Storing, displaying, or delivering goods for the non-resident.

2. Keeping goods for processing by another party.

3. Purchasing goods or collecting information for the non-resident.

4. Engaging in preparatory or auxiliary activities for the non-resident.

5. Combination of all the above activities, as long as the overall activity is preparatory or auxiliary.

For instance, if an Indian company sells goods directly from India but maintains a warehouse in the UAE for quick deliveries, the warehouse does not create a permanent establishment in the UAE under these rules.

Use of place for job work:

Sometimes, a non-resident utilises job work services from providers in a different country. The non-resident sends and stores goods in the job work service provider’s location. This storage, specifically for processing by another party, does not create a permanent establishment.

Use of place for procurement:

If a non-resident uses a fixed place of business only for buying goods and does not conduct sales operations there, it doesn’t create a permanent establishment.

Any other place used for similar purposes:

If a place of business in the UAE is used for preparatory or auxiliary activities or a combination of such activities, it won’t create a permanent establishment. The place of business should not provide services to any other entity. Also, if someone outside the area uses the location for their specific activities, it doesn’t count as a permanent establishment.

Comprehensive Example:

Fixed Place Permanent Establishment:

XYZ Engineering Inc., an international firm, forms a subsidiary, XYZ Engineering Middle East LLC, in Sharjah, UAE, for a significant infrastructure project, which is responsible for making critical managerial and commercial decisions necessary for the successful execution of the project. The Sharjah branch is a fixed place Permanent Establishment (PE) per Article 14(1)(a) of the UAE Corporate Tax Law.

Dependent Agent Permanent Establishment:

ABC Tech Innovations, a foreign IT company, hires Mr. Khalid in the UAE as a consultant. Mr. Khalid, with the authority to negotiate and close deals, consistently secures new tech projects for the company. This makes him a dependent agent PE under Article 14(1)(b) of the UAE CT Law.

Exemptions for preparatory or auxiliary activities:

ABC Tech Solutions, a tech company in Dubai, leases a warehouse in the city to store its IT equipment. An external logistics provider manages the warehouse. This storage arrangement is considered a preparatory or auxiliary activity, per Article 14(3)(a) of the UAE Corporate Tax Law. Consequently, the warehouse does not qualify as a permanent establishment.

Exceptions to Exemption for Preparatory or Auxiliary Activities:

XYZ Tech Solutions has two offices. 1) in Dubai, UAE, and 2) has its principal office and research facility in Abu Dhabi. The research facility has been actively involved in significant activities related to the main office for more than six months. This collaboration goes beyond just supporting activities and forms a united business operation. According to Article 14(4)(b) of the UAE Corporate Tax Law, both places could be considered permanent establishments, meaning both the Dubai office and the Abu Dhabi facility may be liable to pay corporate taxes.

Other UAE Corporate Tax requirements for a Non-resident person

Record keeping and preparation of Financial Statements:

Tax Return submission:

Both Resident and Non-Resident individuals must submit a Tax Return to the FTA and settle Corporate Tax within nine months after the relevant Tax Period ends.

Application of General Anti Avoidance Rules (GAAR) provisions

The Corporate Tax Law’s Permanent Establishment rules have an anti-fragmentation provision to prevent abuse.

While there is an exemption from PE for activities of a preparatory and auxiliary nature, the CT law takes into account Action Plan 7 of the OECD’s BEPS Project on anti-fragmentation where a non-resident or its related party carries out activity in the UAE through another PE in the UAE and on the combined basis the otherwise auxiliary activities form a cohesive business operation of non-resident in the UAE.

This rule is a measure to prevent abuse where a unified business activity is intentionally broken into smaller parts. This rule ensures that businesses cannot claim each fragment as having only preparatory or auxiliary significance. Factors like geographical coherence, the nature of the activity, and the commercial reasoning behind outsourcing or fragmenting determine if the combined activities qualify as preparatory or auxiliary.

Examples:

For instance, if Company ABC from Country X expands to UAE and splits its operations into manufacturing, sales, and customer service in Country Y, the anti-fragmentation rule would assess the geographical connection, nature of activities, and reasons for division. If these fragmented operations still form a substantial business presence, they could be treated as a Permanent Establishment, subject to tax.

In summary, this law prevents businesses from exploiting tax loopholes by artificially fragmenting their operations, ensuring the genuineness and coherence of business activities.

Conclusion

FAQ?

No, NRIs don’t pay double tax as Article 25 of the DTAA between India and UAE provides for the measures that can help eliminate double taxation on the same income for citizens of both countries:

An Indian resident who has capital or earns income as per the convention may have to pay taxes in the UAE. However, they can get a deduction of the income tax paid in the UAE, but the deduction can’t be more than what they would owe in India before the deduction.

Similarly, if a UAE resident has to pay taxes in India under the agreement, they can get a credit for the income tax paid in India from their UAE tax obligation.
Yes, a Double Taxation Avoidance Agreement (DTAA) exists between India and UAE. The India-UAE Double Taxation Avoidance Agreement (DTAA), formed in 1993, has been crucial in preventing double taxation and fostering economic collaboration. This pact addresses different taxes like income, wealth, and capital gains, offering clarity and relief to taxpayers in both countries. The agreement has enhanced the strategic and economic ties between India and the UAE by easing investment, technology transfer, and job creation.

Leave a Reply

Your email address will not be published. Required fields are marked *