The UAE has long been known as a business-friendly place with enticing tax rules to lure investment from home and abroad (those operating here often pay VAT on goods and services, for example). However, alongside this, certain governments have also continued to align their local taxation systems with international standards, creating a sustainable economic environment to ensure growth, and thus, the UAE implemented a corporate tax. There are the corporate tax regime covers many business forms, and UAE companies will be required to meet registration and filing obligations.
A detailed guide on everything about corporate tax registration in the UAE, including how to register for corporate tax, who is required to pay, and whether free zone companies are subject to corporate tax.
How to Register for Corporate Tax in the UAE?
Taxable businesses are required to register for taxes in the UAE. Registration under the corporate tax framework will be managed by the Federal Tax Authority (FTA), which will also be responsible for ensuring that all qualifying businesses complete the registration process. Here’s a step-by-step process of registering for corporate tax in the UAE:
Step 1: Determine Tax Eligibility
Businesses also need to identify their tax eligibility before starting the registration process. The corporate tax covers a diverse range of legal entities, such as mainland companies, free zone entities, and multinational companies conducting business in the UAE.
Step 2: Create an FTA Account
Businesses are required to register on the official Federal Tax Authority to start the process of registering for corporate tax. If their business is already registered for VAT they can use the same credentials to log in.
Step 3: Provide the Necessary Documentation
Generally, for corporate tax registration to be accomplished, the following documents are necessary:
- Trade license copy
- Owner/shareholder passports and Emirates ID
- Articles of the Memorandum (Articles of Incorporation)
- Financial statements or audited reports
- Data under Details of business activities
- UAE establishment card
Step 4: Fill out the Online Registration Form
After preparing the required documents, the online registration form in the FTA portal must be filled by the businesses. The form asks for information like:
- Business name and activities
- The legal structure of the entity
- Taxpayer identification number, if applicable
- Financial year details
Step 5: Receive Tax Registration Number (TRN)
On successful submission, the FTA will review the application. Once this is approved, a Corporate Tax Registration Number (TRN) will be issued to confirm that the business meets tax compliance.
Step 6: Compliance and Filing Taxes
After registration, businesses are required to keep proper accounting and file corporate tax returns promptly or face penalties.
Who is Eligible for Corporate Tax in the UAE?
Various businesses fall under the UAE corporate tax regime based on their legal format and operating model. Corporate tax is levied on the following entities:
Mainland Companies
Corporate tax applies to all companies operating on the mainland of the UAE that are involved in commercial, industrial, or professional activities. This exemption applies to limited liability companies (LLCs), sole proprietorships, and partnerships engaged in taxable business activities.
Free Zone Companies (with Conditions)
Those companies established in free zones are eligible for certain tax incentives as long as they fulfill certain conditions (detailed in the subsequent section). Yet, if they have business dealings with the mainland UAE, they could potentially fall under the corporate tax.
International Companies Operating in the UAE
Corporate tax applies at the UAE level to foreign companies that have a permanent establishment as defined by this law or derive income from UAE-based sources.
Persons Committing Business Activities
Freelancers and sole traders are examples of people who are engaged in business activities that would require a commercial license, and these activities are also subject to corporate tax if their income exceeds the taxable threshold.
Exempt Entities
Some entities do not incur corporate tax:
- Disbarred government entities and public institutions
- Entity involved in extractive nature-resources activities or non-extractive nature resources activities
- Public benefit organizations
- Race-aligned investment funds that pass certain tests
Do Free Zone Companies Pay Corporate Tax in the UAE?
There are more than 40 free zones in the UAE, each attracting businesses with various tax and business incentives. Free zone companies may be beneficially rated under the corporate tax regime, but their tax liability will depend on the specific nature of their activities.
Qualifying Free Zone Persons (QFZP )
To be classified as a Qualifying Free Zone Person (QFZP), a free zone company must satisfy the following:
- Within the UAE it retains enough substance
- It receives qualifying income (as defined by FTA guidelines)
- It complies with the rules on transfer pricing
- It does not engage in business with UAE mainland entities (other than in very limited circumstances).
As a QFZP, a company enjoys a 0% corporate tax rate on qualifying income.
Non-Qualifying Free Zone Companies
If a free zone company does not comply with the criteria set by the QFZP or engages in taxable activity with the mainland, the company will not benefit from this provision and will be subject to the standard 9% corporate tax rate.
Activities Subject to Corporate Tax
- Free zone businesses trading with another free zone company: 0% tax (if they exist as a QFZP)
- Free zone companies conducting business with the UAE mainland: 9% tax
- 0% tax on passive income (dividends, interest, royalties for free zone companies
- Free zone companies (income not qualifying): 9% tax
Mandatory Tax Filing
However, a free zone company subject to the 0% corporate tax rate is still required to register for corporate tax and file annual tax returns.
UAE corporate tax registration | UAE corporate tax Businesses need to know free zone eligibility criteria, tax liabilities, and tax benefits to optimize their tax strategy.
How to register: Businesses need to register via the FTA portal, upload relevant documentation, and obtain a Tax Registration Number (TRN).
Who is eligible: Corporations based in the mainland, as well as foreign entities that operate in the UAE, as well as some individuals, will be taxed for corporate tax, while some government entities and non-profit organizations are exempt.
Do free zone companies pay corporate tax: free zone companies may qualify for a 0% tax rate if they meet QFZP conditions but may be taxed at 9% if they conduct business with the mainland.
With the UAE’s ongoing development of taxation requirements, professionals should keep up with FTA regulations and consult expert tax advisory once in operation. Drezinex