The UAE’s corporate tax landscape is evolving rapidly, requiring businesses to stay informed about new regulations, deadlines, and incentives. Recent developments include the introduction of a Corporate Tax in June 2023, a Domestic Minimum Top-Up Tax, and significant advancements in tax digitalization, all aimed at enhancing compliance and aligning with international standards.
Urgent Corporate Tax Deadlines Loom for UAE Businesses
Businesses in the UAE that have not yet completed their corporate tax registration are facing a critical deadline. Those who failed to register within the initial due dates have just over 30 days to file their tax returns for the January to December 2024 period by the end of July. Meeting this deadline is crucial for these businesses to receive a waiver from the AED 10,000 fine for late registration. For businesses that registered on time, the deadline for filing returns for the 2024 period is extended to September, or October 2025 for those with a financial year starting April.
- The Federal Tax Authority (FTA) introduced a penalty waiver to encourage compliance, provided that late registrants file their returns within seven months from the end of their first tax period, rather than the standard nine months.
- Many small and medium-sized enterprises (SMEs) reportedly confused corporate tax registration requirements with VAT registration thresholds, leading to delays. Unlike VAT, corporate tax registration is mandatory regardless of sales volume.
- The FTA is actively conducting awareness sessions to educate the business community on these regulations.
Navigating the Evolving Tax Landscape and Incentives
The GCC region, including the UAE, is actively reforming its tax systems to diversify economies and align with global standards. The UAE’s Corporate Tax, introduced in June 2023, and the announced Domestic Minimum Top-Up Tax (DMTT) are part of this broader effort. Other GCC nations are also implementing new tax policies, such as Kuwait’s planned DMTT and business profit tax, and updates to VAT and excise tax rules in Bahrain and Saudi Arabia.
To support businesses, the UAE offers several tax incentives and reliefs:
- Small Business Relief: Businesses with revenue below or equal to AED 3,000,000 in a relevant tax period can qualify for this relief, reducing administrative and financial burdens. Eligibility requires corporate tax registration and an election in the tax return for each period.
- Qualifying Free Zone Persons (QFZPs): Companies operating in Free Zones can benefit from a 0% corporate tax rate on qualifying income if they meet stringent criteria, including maintaining adequate substance within the Free Zone.
The Role of Technology in Tax Compliance
Digitalization is a key trend in GCC tax administration, with authorities adopting advanced software to streamline processes. The UAE and Saudi Arabia are significantly enhancing their e-invoicing systems:
- UAE E-invoicing: The UAE plans a phased rollout of a decentralized Continuous Transaction Control and Exchange (DCTCE) model via the PEPPOL network, with Phase 1 starting in July 2026. Legislative amendments (Federal Decree-Law No. 16 of 2024 and No. 17 of 2024) have been enacted to integrate e-invoicing into VAT and Tax Procedures Laws.
- Saudi Arabia E-invoicing: The Zakat, Tax, and Customs Authority (ZATCA) is advancing its e-invoicing system, with the 11th wave of Phase 2 integration targeting taxpayers with a taxable turnover above SAR 15 million for 2022 or 2023.
Additionally, the UAE Federal Tax Authority launched the ‘Maskan’ smart application on July 16, 2024, to facilitate 100% digital VAT recovery for citizens building new residences, streamlining the refund process and enhancing service efficiency.
