Small Business Relief under Corporate Tax
Small Business Relief under Corporate Tax A Boon for UAE Startups and Entrepreneurs The introduction of Corporate Tax in the UAE brought a wave of concern for small businesses. However, the government also introduced the Small Business Relief (SBR) program to mitigate this impact. SBR is a tax exemption program offered by the UAE government to qualifying small businesses. This means that eligible businesses are not required to pay Corporate Tax on their profits. Who Qualifies for SBR? Several factors determine your eligibility for SBR. Here’s a quick rundown: Revenue Threshold: Your business’s annual revenue must be AED 3 million or less for the relevant tax period and all previous tax periods ending on or before December 31, 2026. This threshold is temporary and may change in the future. Business Structure: You must be a “Resident Person” for Corporate Tax purposes. This means your business is registered and managed in the UAE mainland. You cannot be part of a Multinational Enterprise Group (MNE Group). You cannot be a business operating in a Free Zone with a reduced tax rate. How to Claim SBR? Claiming SBR is a simple process. You just need to include an election for SBR in your tax return for the respective tax period. There’s no separate application required. Benefits of SBR SBR offers significant financial benefits for small businesses: Reduced Tax Burden: This exemption frees up capital that can be reinvested in growth initiatives, marketing, or hiring additional staff. Simplified Compliance: SBR eliminates the need for complex tax calculations and filings, saving you time and resources. The current AED 3 million threshold applies until December 31, 2026. It’s advisable to stay updated on any future changes. SBR applies only to mainland businesses. Free Zone companies with reduced tax rates are not eligible for this specific relief program. The UAE’s Small Business Relief program is a welcome initiative that recognizes the importance of fostering a vibrant entrepreneurial ecosystem. By understanding the eligibility criteria and claiming SBR if applicable, you can ensure your business thrives under the new Corporate Tax regime. Have questions about how Corporate Tax provisions apply to your business? Reach out to our team for expert advice. Team TFAB For inquiries
A Guide for Taxpayers
A Guide for Taxpayers Demystifying Foreign Source Income and Corporate Tax in the UAE The introduction of the UAE’s Corporate Tax (CT) regime in 2023 brought with it complexities for businesses with foreign operations. Understanding how foreign source income (FSI) is treated under the CT system is crucial for ensuring compliance and optimizing your tax obligations. This blog aims to provide a simplified overview of this topic for UAE taxpayers. What is Foreign Source Income (FSI)? FSI refers to any income earned by a taxable person that originates from sources outside the UAE. This can include: Profits from foreign branches and subsidiaries Dividends, interest, and royalties received from foreign entities Capital gains from the sale of assets located abroad Is FSI Taxable in the UAE? The answer depends on the category of the taxpayer and the type of FSI: Tax Resident Juridical Persons: These entities are subject to CT on their worldwide income, including FSI. However, certain exemptions and reliefs may apply. Tax Non-Resident Juridical Persons: These entities are only subject to CT on: a. Income attributable to their Permanent Establishment (PE) in the UAE (if applicable). b. Income sourced from the UAE (subject to a 0% Withholding Tax). c. FSI is generally not taxable for them unless they have a PE in the UAE and the FSI is attributable to that PE. Tax Resident Individuals: These individuals are only subject to CT on their UAE source income exceeding AED 1 million per year. Their FSI is generally exempt unless it’s related to their taxable business activities in the UAE. Tax Exemptions & Reliefs for FSI: The UAE CT regime offers specific exemptions and reliefs for FSI: a. Participation Exemption: Dividends received from qualified subsidiaries are generally exempt, preventing double taxation. b. Foreign Tax Credit (FTC): Taxpayers can claim a credit against their CT liability for foreign income taxes paid on FSI, subject to specific conditions. c. Exempt Income: Certain types of FSI, such as dividends from UAE government entities, are completely exempt from CT. Navigating the complexities: While this blog provides a basic overview, the UAE CT regime on FSI can be intricate. Have questions about how Corporate Tax provisions apply to your business? Reach out to our team for expert advice. Team TFAB For inquiries
CT Audit requirements
CT Audit Requirements The audit requirement for books of accounts under the UAE’s Corporate Tax (CT) regime is not mandatory for all businesses. However, there are specific categories of businesses that are required to have their financial statements audited by a licensed auditor. Businesses Required to Have Audited Statements: Companies with revenue exceeding AED 50 million: Businesses whose annual revenue surpasses AED 50 million must prepare and maintain audited financial statements for corporate tax purposes. This includes full IFRS financial statements for companies exceeding AED 50 million and IFRS for SMEs (if applicable) for smaller companies choosing this standard. Qualifying Free Zone Persons: Irrespective of their revenue, all Qualifying Free Zone Persons are required to have their financial statements audited for CT purposes. Qualifying Free Zone Persons are businesses operating within specific free zones with a 0% CT rate, but only on their non-qualifying income earned outside the free zone. Businesses Not Required to Have Audited Statements: Companies with revenue below AED 50 million: Businesses with an annual revenue not exceeding AED 50 million and not classified as Qualifying Free Zone Persons are not required to have their financial statements audited for CT purposes. They can rely on their unaudited financial statements for tax filings. While not mandatory for all companies, having your financial statements audited can offer additional benefits, such as increased transparency, improved financial control, and enhanced credibility with stakeholders For inquiries
A Guide to Green Visa Eligibility and Procedures
Unlock Your Future in the UAE A Guide to Green Visa Eligibility and Procedures Are you an ambitious professional, a skilled freelancer, or an innovative investor seeking a thriving environment to live, work, and invest? Look no further than the UAE Green Visa, a revolutionary residency option offering long-term stability and exciting possibilities. This blog serves as a comprehensive guide, navigating you through the Green Visa’s eligibility criteria and application procedures. Who is eligible for the Green Visa? The Green Visa welcomes individuals across various categories, including: Skilled workers: Employed with a valid contract. Classified in the 1st, 2nd, or 3rd occupational level as per the Ministry of Human Resources and Emiratisation (MOHRE). Hold a minimum of a bachelor’s degree or equivalent qualification. Earn a monthly salary of at least AED 15,000. Freelancers and self-employed individuals: Possess a freelance/self-employment permit from MOHRE. Hold a bachelor’s degree or specialized diploma. Demonstrate an annual income from self-employment of AED 360,000 or more in the past two years, OR prove financial solvency throughout their stay. Investors: Invest a minimum of AED 10 million in property within the UAE. Fulfill specific additional requirements as per the chosen investment category.. Embarking on your Green Visa journey: Gather the required documents: This penalty is imposed for non-compliance with the scheme Apply online: Visit the official UAE government portal (https://u.ae/en/information-and-services/visa-and-emirates-id/residence-visas) and initiate the application process, selecting the appropriate Green Visa category. Pay the application fees: These fees vary depending on the visa category and chosen duration. Attend medical fitness tests: Once your application is approved, you’ll be required to undergo mandatory medical tests. Emirates ID processing: Upon successful completion of all stages, you’ll receive your Emirates ID, the official residency permit. Other points: The Green Visa offers a validity of five years, renewable for further periods. It allows sponsorship of family members under certain conditions. Certain professions might require additional licensing procedures. Embrace the opportunities: The Green Visa opens doors to a world of possibilities in the UAE. From experiencing a dynamic work environment to exploring vibrant cultural scenes, this visa paves the way for a fulfilling and enriching life.By understanding the eligibility criteria and following the application procedures, you can unlock your path to a thriving future in the UAE with the Green Visa. For inquiries
Job Loss Protection Premiums and Fines in the UAE
Don’t Lose Out Understanding Mandatory Job Loss Protection Premiums and Fines in the UAE The UAE’s Involuntary Loss of Employment (ILOE) scheme provides financial security to employees who lose their jobs unexpectedly. It’s a mandatory program, meaning all eligible employees must contribute to the scheme by paying monthly premiums. But what happens if you miss a payment? This blog sheds light on the importance of timely payments, explains the associated fines, and helps you stay secure. Understanding the ILOE scheme: Who is eligible? All private and federal government sector employees (excluding specific categories like investors, domestic helpers, and retirees) are required to participate. Premium structure: There are two categories based on your basic salary: Category A (up to AED 16,000): AED 5 + VAT per month Category B (above AED 16,000): AED 10 + VAT per month Benefits: In case of job loss due to reasons beyond your control, you can receive up to 60% of your basic salary for a maximum of 3 months, subject to fulfilling eligibility criteria. Consequences of missed payments: Non-payment for more than 3 months: Cancellation of your insurance coverage: This means you won’t be eligible for benefits if you lose your job during this period. Fine of AED 200: This penalty is imposed for non-compliance with the scheme. Fines remain unpaid for 3 months: The Ministry of Human Resources and Emiratisation (MOHRE) can take further action, including: Deduction of the outstanding amount from your wages: This will happen through the Wage Protection System. Withholding your end-of-service gratuity: This is the final payment you receive upon leaving a job. Other alternative methods deemed appropriate by MOHRE. Staying on top of your payments: Set up reminders: Use calendar alerts or banking features to ensure timely payments. Choose a convenient payment method: Several options are available, including online payments, bank transfers, and payroll deductions. Check your insurance status: Regularly review your policy details to confirm active coverage. Remember: Timely premium payments ensure you and your family are financially protected in the unfortunate event of job loss. Don’t let missed payments lead to financial hardship and loss of valuable benefits. By staying informed and making timely payments, you can reap the benefits of the ILOE scheme and navigate any job loss situation with greater financial security. For inquiries
A Guide to the UAE’s Tourist Refund Scheme on VAT
Shop Smart, Save More A Guide to the UAE’s Tourist Refund Scheme on VAT The United Arab Emirates (UAE) is a paradise for shopaholics, offering a vibrant retail scene with everything from luxury brands to traditional souks. But did you know that as a tourist, you can claim a refund on the Value Added Tax (VAT) you pay on your purchases? This blog will guide you through everything you need to know about the UAE’s Tourist Refund Scheme on VAT, helping you save some money while indulging in your shopping spree. Who is eligible? The scheme is open to all overseas tourists above 18 years old who are visiting the UAE on a temporary visa. What can I claim a refund for? You can claim a VAT refund on most goods purchased from stores registered with the Tourist Refund Scheme. This includes items like clothing, electronics, jewelry, and carpets. However, there are some exceptions, such as groceries, tobacco products, and services. How much can I claim? You can claim a refund on up to 85% of the VAT amount paid on your purchases. A small administration fee of AED 4.80 per tax-free tag will be deducted from your refund amount. The minimum purchase amount per tax invoice to be eligible for a refund is AED 250. What do I need to do? Look for the Tax Refund for Tourists Scheme logo displayed at participating stores. Keep your receipts and tax-free tags safe throughout your trip. Head to the designated Tax Refund counter at your departure airport, seaport, or land border. Present your passport, boarding pass, receipts, and tax-free tags to the officials for validation. Choose your preferred refund method: cash in AED or credit card refund. Important points to remember: You must export the purchased goods within one year from the date of purchase to be eligible for a refund. The goods must be in unopened and unused condition with the original tags attached. You may be required to show the purchased goods to customs officials upon request. By following these simple steps, you can take advantage of the UAE’s Tourist Refund Scheme and save some money on your shopping spree. Now, go forth and explore the vibrant world of retail therapy in the UAE, knowing you can get a little something back! For inquiries
Tax Registration deadline for Corporate Tax Purposes
Tax Registration deadline for Corporate Tax Purposes Category: Tax Important Updates on Corporate Tax Registration In a significant move aimed at streamlining tax procedures and ensuring compliance with Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, the Federal Tax Authority (FTA) has issued Decision No. 3 of 2024. This decision, effective from March 1, 2024, outlines crucial timelines and requirements for the registration of taxable persons for corporate tax purposes. Article 1– Definitions The words and expressions contained in this Decision shall have the same meaning assigned against each in the Federal-Decree Law No. 47 of 2022 referred to above, unless the context otherwise requires. Article 2– Registration of Persons for Corporate Tax Purposes For the purposes of Clause 1 of Article 51 of the Federal Decree-Law No. 47 of 2022 referred to above, any Taxable Person shall submit an application for Tax Registration in accordance with the timelines prescribed in Articles 3, 4 and 5 of this Decision. Article 3– Timeline for the Tax Registration of Resident Juridical Persons 1. A juridical person that is a Resident Person, incorporated or otherwise established or recognised prior to the effective date of this Decision, shall submit the Tax Registration application, in accordance with the following table: 2. For the purposes of Clause 1 of this Article, where a juridical person has more than one Licence, the Licence with the earliest issuance date shall be used. 3. A juridical person that is a Resident Person incorporated or otherwise established or recognised on or after the effective date of this Decision, shall submit a Tax Registration application, in accordance with the following table: Article 4– Timeline for the Tax Registration of Non-Resident Juridical Persons 1. A juridical person, that is a Non-Resident Person prior to the effective date of this Decision, shall submit a Tax Registration application in accordance with the following table: 2. A juridical person, that is a Non-Resident Person on or after the effective date of this Decision, shall submit a Tax Registration application in accordance with the following table: Article 5– Timeline for Tax Registration of Natural Persons A natural person conducting a Business or Business Activity in the State shall submit a Tax Registration application in accordance with the following table: Article 4– Late Registration for Corporate Tax Where Persons referred to in Articles 3, 4 and 5 of this Decision fail to submit a Tax Registration application as per the timelines stated above, Administrative Penalties shall be applied in accordance with Cabinet Decision No. 75 of 2023 referred to above. Article 4– Abrogation of Conflicting Provisions All provisions contrary to or inconsistent with the provisions of this Decision shall be abrogated. Article 4– Publication and Application of this Decision This Decision shall be published in the Official Gazette and shall come into effect as of 1 March 2024. For inquiries
Tax Group Provisions under Corporate Tax
Tax Group Provisions under Corporate Tax Category: Tax Chapter Twelve – Tax Group Provisions Article 40 – Tax Group 1. A Resident Person, which for the purposes of this Decree-Law shall be referred to as a “Parent Company”, can make an application to the Authority to form a Tax Group with one or more other Resident Persons, each referred to as a “Subsidiary” for the purposes of this Chapter, where all of the following conditions are met: a)The Resident Persons are juridical persons. b) The Parent Company owns at least 95% (ninety-five percent) of the share capital of the Subsidiary, either directly or indirectly through one or more Subsidiaries. c) The Parent Company holds at least 95% (ninety-five percent) of the voting rights in the Subsidiary, either directly or indirectly through one or more Subsidiaries. d) The Parent Company is entitled to at least 95% (ninety-five percent) of the Subsidiary’s profits and net assets, either directly or indirectly through one or more Subsidiaries. e) Neither the Parent Company nor the Subsidiary is an Exempt Person. f) Neither the Parent Company nor the Subsidiary is a Qualifying Free Zone Person. g) The Parent Company and the Subsidiary have the same Financial Year. h) Both the Parent Company and the Subsidiary prepare their financial statements using the same accounting standards 2. Notwithstanding paragraph (e) of Clause 1 of this Article, one or more Subsidiaries in which a Government Entity directly or indirectly owns at least a 95% (ninety-five percent) ownership interest as specified in paragraphs (b), (c) and (d) of Clause 1 of this Article can form a Tax Group, subject to the conditions to be prescribed by the Authority. 3. An application made under Clause 1 of this Article shall be made to the Authority by the Parent Company and each Subsidiary seeking to become members of the Tax Group. 4. A Tax Group formed under Clause 1 of this Article is treated as a single Taxable Person for the purposes of this Decree-Law, represented by the Parent Company. 5. The Parent Company shall comply with all obligations set out in Chapters Fourteen, Sixteen and Seventeen of this Decree-Law on behalf of the Tax Group. 6. The Parent Company and each Subsidiary shall be jointly and severally liable for Corporate Tax Payable by the Tax Group for those Tax Periods when they are members of the Tax Group. 7. The joint and several liability under Clause 6 of this Article for a Tax Period can be limited to one or more members of the Tax Group following approval by the Authority. 8. The Parent Company and each Subsidiary shall remain responsible for complying with the provisions under Article 45 of this Decree-Law. 9. A Subsidiary can join an existing Tax Group following submission of an application to the Authority by the Parent Company and the relevant Subsidiary. 10. A Subsidiary shall leave the Tax Group in the following circumstances: a) Following approval by the Authority of an application by the Parent Company and the relevant Subsidiary. b) Where the relevant Subsidiary no longer meets the conditions to be a member of the Tax Group as specified in Clause 1 of this Article. 11. A Tax Group shall cease to exist in any of the following circumstances: a) Following approval by the Authority of an application by the Parent Company. b) Where the Parent Company no longer meets the conditions to form a Tax Group as specified in Clause 1 of this Article, subject to the provisions of Clause 12 of this Article. 12. The Parent Company of a Tax Group can make an application to the Authority to be replaced by another Parent Company without a discontinuation of the Tax Group, in any of the following circumstances. a) The new Parent Company meets the conditions under Clause 1 of this Article relating to the former Parent Company. b) The former Parent Company ceases to exist and the new Parent Company or a Subsidiary is its universal legal successor. 13. Notwithstanding Clauses 11 and 12 of this Article, the Authority may, at its discretion, dissolve a Tax Group or change the Parent Company of a Tax Group based on information available to the Authority, and notify the Parent Company of such action taken. Article 41 – Date of Formation and Cessation of a Tax Group 1. For the purposes of Article 40 of this Decree-Law, a Tax Group shall be formed, or a new Subsidiary shall join an existing Tax Group from the beginning of the Tax Period specified in the application submitted to the Authority, or from the beginning of any other Tax Period determined by the Authority. 2. For the purposes of paragraph (a) of Clause 10 of Article 40 and paragraph (a) of Clause 11 of Article 40 of this Decree-Law, the relevant member of a Tax Group shall be treated as leaving that Tax Group from the beginning of the Tax Period specified in the application submitted to the Authority, or from the beginning of any other Tax Period determined by the Authority. 3. For the purposes of paragraph (b) of Clause 10 of Article 40 and paragraph (b) of Clause 11 of Article 40 of this Decree-Law, the relevant member of a Tax Group shall be treated as leaving that Tax Group from the beginning of the Tax Period in which the conditions under Clause 1 of Article 40 of this Decree-Law are no longer met. Article 42 – Taxable Income of a Tax Group 1. For the purposes of determining the Taxable Income of a Tax Group, the Parent Company shall consolidate the financial results, assets and liabilities of each Subsidiary for the relevant Tax Period, eliminating transactions between the Parent Company and each.
An Introduction to Corporate Tax in the UAE
An Introduction to Corporate Tax in the UAE Category: Tax A New Era of Taxation As of June 1st, 2023, the United Arab Emirates embarked on a new chapter in its economic journey with the introduction of a federal corporate tax system. This landmark decision marks a significant shift in the UAE’s traditionally low-tax environment, and understanding the implications is crucial for businesses operating in the region. Key Pillars of the Corporate Tax Regime The UAE’s corporate tax framework is designed to be transparent, predictable, and globally competitive. Here are some key aspects to keep in mind: Taxable base: Corporate income exceeding AED 375,000 will be subject to a 9% tax rate Exemptions: Certain entities, such as natural resources companies and public interest entities, are exempt from the tax. Deductions: A range of expenses, including business costs and employee salaries, are deductible from taxable income. Filing requirements: Companies must file corporate tax returns electronically within nine months of the financial year-end. Navigating the Nuances While the overall framework is straightforward, certain complexities exist within the UAE’s corporate tax system. These include: Transfer pricing regulations: Transactions between related entities need to be conducted at arm’s length to avoid artificial shifting of profits. Permanent establishment rules: Foreign companies with a physical presence in the UAE may be subject to corporate tax on their UAE-sourced income. Anti-avoidance measures: The tax law includes provisions to prevent the misuse of tax treaties and other exemptions. Seeking Expert Guidance With its unique nuances, navigating the UAE’s corporate tax landscape can be challenging. Seeking professional advice from experienced tax advisors is crucial for ensuring compliance and optimizing tax liabilities. A qualified tax advisor can: Help you understand your specific tax obligations under the new regime. Guide you through the process of registering for corporate tax and filing returns. Advise on tax efficient structuring and business practices. Empowering Your Business in the New Tax Era While the introduction of corporate tax represents a change, it also presents opportunities for businesses operating in the UAE. By proactively managing your tax affairs and leveraging available exemptions and deductions, you can minimize your tax burden and ensure long-term financial success. Stay Informed and Engaged The UAE’s corporate tax regime is still evolving, with further regulations and clarifications expected in the coming months. It’s important to stay informed about the latest developments by regularly checking updates from the Federal Tax Authority. Moving Forward with Confidence With careful planning and professional guidance, you can navigate the new era of corporate tax in the UAE with confidence. By understanding the key principles, regulations, and available resources, you can ensure your business remains competitive and thrives in the dynamic economic landscape of the Emirates.Additional Resources Federal Tax Authority website: https://www.tax.gov.ae/en/ Ministry of Finance website: https://mof.gov.ae/ Remember, this information is for general awareness purposes only and should not be taken as tax advice. Always consult with a qualified tax professional for personalized guidance.We hope this content provides a helpful overview of Corporate tax in the UAE. Please let us know if you have any questions or require further information on specific aspects of the topic. For inquiries
Guidance to taxpayers of foreign source income
Coporate tax law general guidence of foreign sourced income Category: Tax General guidance to taxpayers on the taxation of foreign source income under the Corporate Tax Law. Relevance of foreign source income under the Corporate Tax Law What is considered foreign source income for Taxable Persons under the Corporate Tax Law? Which Taxable Persons are subject to tax on foreign source income? A Resident Person in the UAE, or a Non-Resident Person with a Permanent Establishment in the UAE, may earn income from a foreign jurisdiction i.e. “foreign source income” due to activities, operations or assets in another jurisdiction. The UAE Corporate Tax treatment of foreign source income depends on the type of Person receiving the income, the nature of the income and the availability of exemptions and reliefs. In the case of a Taxable Person, foreign source income may be subject to Corporate Tax as follows: A juridical Resident Person, for example a company incorporated in the UAE, is subject to tax on its worldwide income. Hence, any foreign source income may be subject to Corporate Tax in the UAE. A natural Resident Person is subject to tax on any income derived from a Business or Business Activity they conduct in the UAE if the total Turnover from such a Business or Business Activities is above AED 1 million within a Gregorian calendar year. Thus, any foreign source income which is linked to the Business or Business Activity they conduct in the UAE may be subject to Corporate Tax in the UAE. A Non-Resident Person having a Permanent Establishment in the UAE is typically taxed on the income generated from activities conducted in the UAE. Thus, if it receives any foreign source income attributable to its Permanent Establishment in the UAE, that income may be subject to Corporate Tax. The next step is to consider if any exemptions are available with respect to the foreign source income, typically to reduce or eliminate potential double taxation. For example: the Participation Exemption with respect to Dividends, profit distributions and capital gains derived from juridical Non-Resident Persons. Where no exclusion or exemption applies, the foreign source income is taxable in the UAE. However, if taxes are paid in the foreign jurisdiction on the foreign source income, this may give rise to a Foreign Tax Credit, potentially reducing the Corporate Tax Payable in the UAE. How TFAB can support you! We have a dedicated team equipped to make your Corporate Tax compliance journey hassle free. Please get in touch with us via email indicating ‘Corporate Tax’ in the subject line for any inquiries. For inquiries