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VAT

AUDIT & ASSURANCE

ACCOUNTING & BOOK-KEEPING

CORPORATE TAX

frequently asked questions

The Most Popular FAQ`s

VAT IN UAE

AM I ELIGIBLE FOR VAT REGISTRATION IN UAE?
  • A business must register for VAT if its taxable supplies and imports exceeded the mandatory registration threshold of AED 375,000 over the previous 12 months, or are expected to exceed it within the next 30 days. A business may also choose to register for VAT voluntarily if its taxable supplies and imports, or its taxable expenses, exceed the voluntary registration threshold of AED 187,500.
WHEN DO I HAVE TO FILE A VAT RETURN IN UAE?

  • In the United Arab Emirates (UAE), VAT-registered businesses must file VAT returns periodically, usually on a quarterly basis, although the Federal Tax Authority (FTA) may assign a monthly or other tax period depending on the business. Both the VAT return and the VAT payment are due no later than the 28th day following the end of the tax period, and returns must be submitted electronically through the FTA’s EmaraTax portal.

    In addition to filing VAT returns, businesses must keep accurate records of their financial transactions and VAT-related information, including invoices, receipts, and other supporting documents, for at least five years from the end of the relevant tax period, or 15 years for records related to real estate.

    Businesses operating in the UAE should be familiar with VAT regulations and requirements, and should comply with filing deadlines and other obligations to avoid penalties. For further guidance, businesses can seek professional advice from local tax advisors or visit the FTA’s website.

ACCOUNTING & BOOK-KEEPING

WHEN DO WE NEED ACCOUNTING AND BOOKKEEPING IN UAE?

Accounting and bookkeeping are essential activities for businesses of all sizes and types, as they provide a systematic and accurate record of a company’s financial transactions and activities.

  • Record Keeping: Accounting and bookkeeping are necessary for maintaining accurate and up-to-date records of a company’s financial transactions, including sales, purchases, and expenses. These records are critical for making informed business decisions and evaluating the company’s financial health.
  • Compliance: Accounting and bookkeeping are also necessary for complying with local laws and regulations, such as Federal Decree-Law No. (8) of 2017 on Value Added Tax and its Executive Regulation, which require businesses to keep accurate records of their financial transactions and submit periodic VAT returns.
  • Taxation: Accurate and up-to-date accounting records are essential for preparing and submitting accurate tax returns and ensuring compliance with local tax laws and regulations.
  • Reporting: Accounting and bookkeeping provide the information needed to prepare financial statements, including the statement of financial position (balance sheet), income statement, and statement of cash flows. These statements are critical for managing a business’s financial performance and communicating with stakeholders such as investors, lenders, and customers.

In conclusion, accounting and bookkeeping provide a company with the financial information and records necessary for effective financial management and compliance with local laws and regulations. Businesses should ensure they have an efficient and effective accounting and bookkeeping system in place, and may seek professional advice from local accounting and bookkeeping service providers when needed.

AUDIT & ASSURANCE IN UAE

WHY DO WE NEED AN AUDIT IN UAE?

There are several reasons why auditing is important in the United Arab Emirates (UAE):

  • Compliance: Auditing helps ensure that a company’s financial records and operations comply with local laws and regulations, such as Federal Decree-Law No. (8) of 2017 on Value Added Tax and its Executive Regulation.
  • Improved transparency: Auditing provides an independent and objective assessment of a company’s financial information, improving the transparency of its financial position and performance.
  • Detection of errors and fraud: Through the systematic examination of financial records and processes, auditing can detect errors, fraud, and other financial irregularities, helping to prevent financial losses and protect the company’s reputation.
  • Enhanced credibility: Audited financial statements are viewed as more credible and trustworthy than unaudited statements, which can improve the company’s reputation and increase investor confidence.
  • Better decision-making: Audited financial statements provide reliable and accurate information for making informed business decisions, such as securing funding, making investments, or expanding operations.
WHAT TYPES OF AUDITS ARE PERFORMED IN UAE?

Several types of audits can be performed in the United Arab Emirates (UAE), including:

  • Financial Statement Audit: This type of audit focuses on the accuracy, completeness, and reliability of a company’s financial statements, including the statement of financial position (balance sheet), income statement, and statement of cash flows.
  • Internal Audit: This type of audit is performed by the company’s internal audit function and focuses on evaluating the efficiency and effectiveness of internal controls, processes, and procedures.
  • Tax Audit: This type of audit is performed by the Federal Tax Authority (FTA) and focuses on verifying the accuracy and completeness of a company’s tax returns, including VAT and Corporate Tax returns, and its tax payments.
  • Compliance Audit: This type of audit focuses on evaluating a company’s compliance with relevant laws, regulations, and standards, including the UAE Commercial Companies Law and International Financial Reporting Standards (IFRS).
  • Operational Audit: This type of audit focuses on evaluating the efficiency and effectiveness of a company’s operations and processes, including its use of resources, performance management, and risk management.
  • Information Systems Audit: This type of audit focuses on evaluating the security, reliability, and effectiveness of a company’s information systems and technology infrastructure.

These are some of the most common types of audits performed in the UAE. The appropriate type of audit depends on the company’s needs and requirements, as well as applicable regulatory requirements.

CORPORATE TAX IN UAE

WHEN DOES CORPORATE TAX APPLY IN UAE?

Under UAE Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses (the “Corporate Tax Law”), businesses became subject to UAE Corporate Tax from the beginning of their first financial year starting on or after 1 June 2023. For example, for businesses that were already operating before 1 June 2023:

  • A company with a financial year ending on 31 May became subject to Corporate Tax from 1 June 2023.
  • A company with a financial year ending on 31 December became subject to Corporate Tax from 1 January 2024.
  • A company with a financial year ending on 31 March became subject to Corporate Tax from 1 April 2024.
WHO IS SUBJECT TO CORPORATE TAX IN UAE?
  • Companies and other juridical persons incorporated or established in the UAE, whether onshore or in a free zone.
  • Natural persons conducting a business or business activity in the UAE, where their total turnover from such activity exceeds AED 1 million in a calendar year.
  • Free Zone Persons. A Qualifying Free Zone Person may benefit from a 0% Corporate Tax rate on its qualifying income, while its non-qualifying income is subject to the standard 9% rate.
  • Foreign entities that are effectively managed and controlled in the UAE, or that have a Permanent Establishment in the UAE.
  • Banking operations.
  • Businesses engaged in real estate management, construction, development, agency, and brokerage activities.
WHO IS EXEMPT FROM CORPORATE TAX IN UAE?

Certain Persons are exempt from Corporate Tax under Article (4) of the Corporate Tax Law, subject to meeting the relevant conditions:

Automatically exempt:

  • Government Entities.

Exempt if notified to the Ministry of Finance:

  • Extractive Businesses.
  • Non-Extractive Natural Resource Businesses.

Exempt if listed in a Cabinet Decision:

  • Government Controlled Entities (in respect of their mandated activities).
  • Qualifying Public Benefit Entities.

Exempt upon application to, and approval by, the Federal Tax Authority (FTA):

  • Qualifying Investment Funds.
  • Public or private pension and social security funds.
  • Wholly owned and controlled subsidiaries of certain Exempt Persons.

Other exemptions:

  • Any other Person exempted by a Cabinet Decision, upon the recommendation of the Minister of Finance.

NATURAL PERSONS

Natural persons conducting a business or business activity in the UAE are not subject to Corporate Tax if their total turnover from such activity does not exceed AED 1 million in a calendar year.

SMALL BUSINESS RELIEF

Resident small businesses may elect to apply Small Business Relief from Corporate Tax if their revenue does not exceed AED 3 million in the current tax period and in each previous tax period, for tax periods ending on or before 31 December 2029. This relief is not automatic: it must be elected in the Corporate Tax return, and eligible businesses must still register for Corporate Tax and file their returns.

WHAT IS THE CORPORATE TAX PERIOD IN UAE?
  • A Corporate Tax return is required for each tax period, which is generally the taxable person’s 12-month financial year. The first tax period of a newly established business may be shorter or longer than 12 months.
  • The default financial year of a taxable person is the Gregorian calendar year (1 January to 31 December).
  • A business may instead adopt a different 12-month period for preparing its financial statements, in which case its Corporate Tax period will follow that financial year.
  • A taxable person may also apply to the Federal Tax Authority (FTA) to change the start and end date of its tax period, or to use a different tax period, subject to meeting the relevant conditions.
  • The Corporate Tax return must be filed within 9 months from the end of the relevant tax period.
WHAT ARE THE REGISTRATION PROCEDURES FOR CORPORATE TAX IN UAE?
  • Every taxable person must register for Corporate Tax with the Federal Tax Authority (FTA) and obtain a Tax Registration Number (TRN), within the timeline prescribed by the FTA. [Article 51 of the Corporate Tax Law]
  • It is compulsory for a person who becomes subject to Corporate Tax to:
    • notify the FTA that they are subject to Corporate Tax; and
    • submit a Corporate Tax registration application within the deadline set by the FTA.
  • Registration is completed online through the FTA’s EmaraTax platform. Once the application is approved, the FTA issues a Corporate Tax Registration Number (TRN), which the taxable person must use in all its dealings with the FTA.
  • Registration deadlines are set by FTA Decision No. (3) of 2024 and depend on the type of taxable person and, for companies, the date of incorporation or licence issuance.
  • Corporate Tax returns must be submitted to the FTA within nine months from the end of the tax period, or by such other date as determined by the FTA.
WHO CAN APPLY FOR TAX GROUP REGISTRATION IN UAE?
  • Only UAE-resident juridical persons (companies) that are taxable persons may form a Tax Group. This includes foreign companies that are effectively managed and controlled in the UAE.
  • The parent company must hold, directly or indirectly through one or more subsidiaries, at least 95% of each of the following in every subsidiary. All three conditions must be met:
      • the share capital;
      • the voting rights; and
      • the entitlement to profits and net assets.
  • Neither the parent company nor any subsidiary may be an Exempt Person or a Qualifying Free Zone Person.
  • The parent company and all subsidiaries must have the same financial year and must prepare their financial statements using the same accounting standards.

When a Tax Group is formed, the parent company is responsible for its administration, including submitting a single Corporate Tax return and settling the Corporate Tax liability on behalf of the Tax Group.

WHAT ARE FAMILY FOUNDATIONS?
  • A foundation is a legal vehicle that may be used to hold, manage, and structure wealth and assets.
  • Unlike a trust, in which assets are transferred to trustees to be managed, a foundation’s assets are administered by a Council.
  • The Council, which must have at least two members, ensures that the foundation’s affairs are conducted in accordance with its charter, by-laws, and applicable laws.
  • In the UAE, foundations can be established under the regimes of the Abu Dhabi Global Market (ADGM), the Dubai International Financial Centre (DIFC), and the Ras Al Khaimah International Corporate Centre (RAK ICC). Each regime has its own rules and requirements.
  • The DIFC regime allows a company to be converted into a foundation.
  • Foundations established as juridical persons have a separate legal personality and are therefore, by default, subject to UAE Corporate Tax in their own right.
  • However, a foundation, trust, or similar entity that meets the conditions of Article (17) of the Corporate Tax Law qualifies as a Family Foundation and may apply to the Federal Tax Authority (FTA) to be treated as an unincorporated partnership (tax transparent). In that case, its income is treated as the income of its beneficiaries rather than taxed at the foundation level.