UAE strengthens tax compliance

Corporate tax registration deadlines for foreign entities

By Prateek Tosniwal

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Published: Mon 22 Apr 2024, 4:48 PM

According to UAE corporate tax law, foreign juridical persons are considered UAE resident persons for tax purposes if they have a place of effective management (POEM) in the UAE. Such entities will be treated as resident taxable persons, making corporate tax (CT) registration mandatory.

On the other hand, entities that have a fixed or permanent place in the UAE through which a non-resident (‘NR’) person wholly or partly conducts business, including branches, offices, factories, or building sites, will be considered to have a “permanent establishment” (PE) in the UAE. If a non-resident juridical person earns income from immovable property in the UAE, they would be treated as having a “Nexus” in the UAE. Entities with a PE and Nexus in the UAE will be treated as non-resident taxable persons, and corporate tax registration will be mandatory for such foreign entities.

In a move aimed at streamlining the tax registration process for taxable persons, the Federal Tax Authority of the UAE has implemented deadlines for corporate tax registration. This decision, outlined in Federal Tax Authority Decision No. 3 of 2024, came into effect on March 1, 2024, marking a significant shift in the country’s tax regulations.

For foreign companies having place of effective management (POEM) in UAE deadline for tax registration varies depending on its date of establishment/incorporation. Those incorporated or established before March 1, 2024, must submit their tax registration applications by May 31, 2024. Conversely, entities established after March 1, 2024, must file their applications within three months from the end of their financial year.

Prateek Tosniwal, Partner, MICS
Prateek Tosniwal, Partner, MICS

Non-resident persons with PE established before March 1, 2024, have nine months from the establishment of their permanent establishment to submit their applications. Entities establishing Permanent Establishments after March 1, 2024, have six months from the establishment of their permanent establishment.

Meanwhile, entities with nexus established before March 1, 2024, must submit their applications by May 31, 2024. Entities establishing nexus after March 1, 2024, have three months from the establishment of nexus to submit the application for registration.

The registration for foreign entities has already begun, enabling them to submit their applications. Once submitted, the Federal Tax Authority will review the information and documents provided, with an estimated processing time of around 20 days before approving the application.

It is crucial for entities to adhere to these deadlines, as the UAE government is enforcing strict compliance measures. Entities failing to submit their tax registration applications within the specified timelines could face penalties of Dh10,000, in accordance with cabinet decision No. 75 of 2023.

In conclusion, the implementation of these deadlines underscores the UAE’s commitment to enhancing its tax regulatory framework and fostering a more transparent business environment. By ensuring timely tax registration, the government aims to promote fiscal responsibility and support the continued growth and development of businesses operating within the UAE.

The writer is partner — MICS.

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