UAE Corporate Tax Registration Mandatory For All, Relief for Small Businesses

In the wake of the UAE’s initiation of its first full-year corporate tax period, businesses are urged to expedite auditing processes and ensure registration with the Federal Tax Authority for compliance. Regardless of a business’s age or profitability status, registration is mandatory, debunking misconceptions that it can wait until profits approach the Dh375,000 mark. This registration process commenced in June of the previous year, and businesses following the calendar year for their finances will pay their 2024 corporate tax by September 2025.

For those falling below the Dh375,000 profit level, a tax consultant highlights the option of ‘Small Business Relief.’ Eligible taxable persons can elect for this relief on their tax return, allowing them to complete a simplified tax return and benefit accordingly. To qualify, a business’s revenue must be below or equal to Dh3 million for the latest and all previous tax periods. If revenue exceeds Dh3 million, the relief package becomes inaccessible, but the obligation to register for corporate tax persists.

Despite recent workshops and guidelines from the UAE tax authorities, confusion persists among SME owners. Corporate tax, set at 9% of annual profits once the Dh375,000 threshold is surpassed, applies to all businesses “incorporated, effectively managed, and controlled” in the UAE. Registration remains mandatory, emphasizing that it transcends profits or revenue generated.

While the UAE has experience with VAT requirements, corporate tax compliance involves different rules. Even new businesses setting up in the UAE are advised to promptly register for corporate tax, emphasizing the immediacy of this requirement. The process necessitates businesses to prove eligibility, submit tax returns, and maintain necessary records. For those opting for ‘Small Business Relief,’ careful consideration of revenue thresholds is crucial.

Using accounting software is recommended as part of tax best practices, although some businesses still opt for Excel-based accounting. Independent auditors are also an option, with costs varying based on operational volume and complexity. Despite the initial confusion, businesses are encouraged to view corporate tax registration as a critical step, aligning with the UAE’s evolving tax landscape.