Public Clarification CTP001

#Issue

Corporate Tax in the UAE is regulated by Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses and its amendments (“ Corporate Tax Law”) , and its implementing decisions.

The Corporate Tax Law gives the Federal Tax Authority (“ FTA ”) the authority to prescribe a timeline for any Taxable Person to register for Corporate Tax.¹

This timeline is prescribed in FTA Decision No. 3 of 2024 on The Timeline specified for Registration of Taxable Persons for Corporate Tax for the purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses and its amendments (“FTA Decision No. 3 of 2024 ”).

FTA Decision No. 3 of 2024 is effective from 1 March 2024.

This Public Clarification intends to clarify the timeline when a Taxable Person is required to submit a Tax Registration application to the FTA for Corporate Tax purposes.

#Summary

All Taxable Persons are required to submit a Tax Registration application for Corporate Tax to the FTA by no later than the timeline set by the FTA. The timelines specified in FTA Decision No. 3 of 2024 also apply to juridical persons wishing to apply for the exemption referred to under Article 4(1)(f) to (i) of the Corporate Tax Law.

Therefore, the registration timeline referred to in FTA Decision No. 7 of 2023 is overridden by FTA Decision No. 3 of 2024.

However, this will not affect the timeline to apply for exemption as stated in FTA Decision No. 7 of 2023, which is still applicable.

The timelines specified in FTA Decision No. 3 of 2024 apply equally to juridical persons whose first Tax Period has already begun, irrespective of the person intending to or having ceased Business or Business Activities, or liquidating after the start of their first Tax Period.

Any Taxable Person failing to submit a Tax Registration application within the timeline specified by the FTA will incur an Administrative Penalty of AED 10,000.

The timeline specified by FTA Decision No. 3 of 2024 differs depending on whether the Taxable Person is:

•A juridical person that is a Resident Person;

•A juridical person that is a Non-Resident Person; or

•A natural person.

#Detailed analysis

The analysis explains the different registration timelines and provides examples to explain how they apply to different Taxable Persons.

Any reference to international agreements is included for illustration purposes only and Taxable Persons should assess the provisions of the relevant international agreement on a case-by- case basis based on the facts and circumstances applicable to them.

#Registration timeline for juridical persons that are Resident Persons

A juridical person that is a Resident Person shall submit a Tax Registration application for Corporate Tax taking into consideration the date it was incorporated, or otherwise established or recognised under the applicable legislation in the UAE.

This includes a Free Zone Person incorporated, established or otherwise registered in a Free Zone. This equally applies to ‘’O ffshore Companies ’’ that are incorporated, or otherwise established or recognised under the applicable legislation in the UAE.

1.Incorporated or otherwise established or recognised prior to 1 March 2024

Where a juridical person was incorporated or otherwise established or recognised prior to 1 March 2024, it shall submit a Tax Registration application for Corporate Tax to the FTA based on the month of their Licence issuance, in accordance with the table below.

The date of their Licence issuance should be considered, irrespective of the year of issuance.

#Example 1

Company A was incorporated in Ajman on 11 November 2023 and its Licence was issued on the same day.

Company A is a Resident Person as it was incorporated in the UAE.

Company A was incorporated prior to 1 March 2024, so it must submit a Tax Registration application by reference to the month of its Licence issuance.

The Licence issuance date is 11 November so Company A must submit a Tax Registration application for Corporate Tax by 30 November 2024.

Where a juridical person does not hold a Licence as at 1 March 2024, the Tax Registration application deadline is 31 May 2024, i.e. three months from the effective date of FTA Decision No. 3 of 2024.

#Example 2

Company B was incorporated in the United Kingdom on 1 April 2019.

Since 1 April 2022, Company B has been effectively managed and controlled in the UAE.

Company B is a Resident Person because it is effectively managed and controlled in the UAE as of 1 June 2023.

As Company B is a Resident Person prior to 1 March 2024, it must submit a Tax Registration application by reference to its Licence issuance date.

Company B does not hold a Licence because it only holds board meetings in the UAE, so it must submit a Tax Registration application for Corporate Tax within three months from the effective date of the FTA Decision No. 3 of 2024, i.e. by 31 May 2024.

Where a juridical person holds a Licence at 1 March 2024 that has expired but has not been cancelled, it must submit a Tax Registration application by reference to the month of its original Licence issuance.

#Example 3

Company C was incorporated in Abu Dhabi on 1 April 2020 and received a Licence that was valid for two years, until 31 March 2022.

Company C did not renew or cancel their Licence, so they only hold an expired Licence.

Company C is a Resident Person as it was incorporated in the UAE.

Company C was incorporated prior to 1 March 2024, so it must submit a Tax Registration application by reference to the month of its Licence issuance.

Even though Company C does not hold a valid Licence, it must submit a Tax Registration application for Corporate Tax by reference to the month of its Licence issuance, i.e. April, and, hence, must submit a Tax Registration application for Corporate Tax by 30 June 2024.

Where a juridical person holds more than one Licence as at 1 March 2024, it should use the Licence with the earliest issuance date when determining the deadline by which it should submit the Tax Registration application.

The earliest issuance date should consider the year of issuance of the Licence.

However, when determining the Tax Registration application deadline for Corporate Tax, only the month of Licence issuance is relevant.

#Example 4

Company D was incorporated in the UAE on 13 August 2022 and was issued a Licence to manufacture furniture on the same day.

On 4 July 2023, Company D expanded its business and obtained another Licence to open a retail shop for the distribution of chairs.

Company D is a Resident Person as it was incorporated in the UAE.

It was incorporated on 13 August 2022, prior to 1 March 2024, so it must submit a Tax Registration application by reference to its Licence issuance date.

Since Company D has two Licences, it should consider the Licence with the earliest issuance date.

In this instance, the earlier Licence date is 13 August 2022.

As the relevant Licence issuance date is 13 August, Company D must submit a Tax Registration application for Corporate Tax by 31 October 2024.

2.Incorporated or otherwise established or recognised on or after 1 March 2024 Where a juridical person is incorporated or otherwise established or recognised in the UAE on or after 1 March 2024, it shall submit a Tax Registration application within three months from the date of incorporation, establishment or recognition.

#Example 5

Company E is incorporated in Sharjah on 16 June 2024.

Company E is a Resident Person, as it is incorporated in the UAE.

The incorporation date is after the 1 March 2024, so Company E must submit a Tax Registration application for Corporate Tax by 16 September 2024, i.e. three months from the date of incorporation.

Where a juridical person is incorporated, established or otherwise recognised under the legislation of a foreign jurisdiction but effectively managed and controlled in the UAE, it shall submit a Tax Registration application within three months from the end of its Financial Year.

#Example 6

Company F is incorporated in Germany on 1 April 2024.

All its board meetings and strategic managerial decisions for 2024 and 2025 take place in the UAE. Company F’s Financial Year is 1 April to 31 March, so its first Financial Year as a Resident Person will end on 31 March 2025.

Company F is a Resident Person because it is effectively managed and controlled in the UAE for the year ending 31 March 202 5 .

As Company F is a Resident Person after 1 March 2024, it must submit a Tax Registration application for Corporate Tax within three months from the end of its Financial Year, i.e. by 30 June 2025.

#Registration timeline for juridical persons that are Non-Resident Persons

A juridical person that is a Non-Resident Person shall submit a Tax Registration application for Corporate Tax to the FTA depending on when it became a Non-Resident Person.

1.Being a Non-Resident Person prior to 1 March 2024 Where a juridical person is a Non-Resident Person prior to 1 March 2024, it shall submit a Tax Registration application for Corporate Tax to the FTA based on whether it has a Permanent Establishment in the UAE or a nexus in the UAE. If the juridical person has a Permanent Establishment in the UAE, it shall submit a Tax Registration application within nine months from the date of existence of the Permanent Establishment.

The date of existence of the Permanent Establishment is when the Permanent Establishment is recognised for UAE Corporate Tax purposes.

#Example 7

Company G was incorporated in the USA on 15 July 2008.

Company G’s Financial Year is 1 June to 31 May.

On 1 May 2023, Company G decided to expand into the UAE and opened a branch in Dubai.

Company G intends to continue to operate the branch for the foreseeable future.

The operations that are conducted in the Dubai branch fulfil all the conditions for a Permanent Establishment in the UAE under the Corporate Tax Law.

Company G is a Non-Resident Person because it is not a Resident Person and has a Permanent Establishment in the UAE.

Even though the branch was opened on 1 May 2023, Company G was not subject to Corporate Tax until 1 June 2023, therefore, the Permanent Establishment shall be deemed to have started its activity on 1 June 2023.

The existence of the Permanent Establishment will, therefore, be on 1 December 2023, when its place of Business had established a degree of permanence of six months in the UAE, assuming all the other requirements to have a Permanent Establishment have been met.

Company G is a Non-Resident Person with a Permanent Establishment prior to 1 March 2024, so it must submit a Tax Registration application for Corporate Tax within nine months from the existence of the Permanent Establishment, i.e. by 1 September 2024.

If an international agreement for the avoidance of double taxation provides for a longer duration to recognise a Permanent Establishment in the UAE than the Corporate Tax Law, the provision in the international agreement shall prevail.

#Example 8

Company H was incorporated in the UK on 31 August 2019.

On 1 August 2023, Company H entered into an agreement and began operations to construct a hotel in Dubai.

The construction took 11 months to complete, after which Company H’s operations in the UAE ceased.

Under the UAE Corporate Tax Law, a Permanent Establishment is recognised after the construction lasts more than six months.

However, the international agreement for the avoidance of double taxation between the United Kingdom and UAE provides for a construction to only constitute a Permanent Establishment if it lasts more than 12 months.

Therefore, Company H is considered as not having a Permanent Establishment in the UAE and, therefore, is not a Taxable Person.

Hence, Company H does not need to submit a Tax Registration application for Corporate Tax.

If the juridical person has a nexus in the UAE before 1 March 2024, it shall submit a Tax Registration application within three months from the effective date of FTA Decision No. 3 of 2024, i.e. by 31 May 2024.

#Example 9

Company J was incorporated in Oman on 3 January 2024.

On 10 January 2024, Company J purchased residential property in Ras Al-Khaimah for investment purposes.

The property was rented out on 15 February 2024. Company J does not have a Permanent Establishment in the UAE.

Company J is a Non-Resident Person because it is not a Resident Person and has a nexus in the UAE.

Even though the Immovable Property was purchased on 10 January 2024, it did not earn income from the Immovable Property until 15 February 2024.

Company J, therefore, had a nexus in the UAE on 15 February 2024.

Company J is a Non-Resident Person with a nexus in the UAE on 15 February 2024, prior to 1 March 2024, so it must submit a Tax Registration application for Corporate Tax within three months from the effective date of FTA Decision No. 3 of 2024, i.e. by 31 May 2024.

2.Being a Non-Resident Person on or after 1 March 2024 Where a juridical person is a Non-Resident Person on or after 1 March 2024, it shall submit a Tax Registration application for Corporate Tax to the FTA based on whether it has a Permanent Establishment or a nexus in the UAE.

If the juridical person has a Permanent Establishment in the UAE, it shall submit a Tax Registration application within six months from the date of existence of the Permanent Establishment.

The date of existence of the Permanent Establishment is when the Permanent Establishment is recognised for UAE Corporate Tax purposes.

If an international agreement for the avoidance of double taxation provides for a longer duration to recognise a Permanent Establishment in the UAE than the Corporate Tax Law, the provision in the international agreement shall prevail.

#Example 10

Company K was incorporated in Luxembourg on 22 October 2019.

On 1 July 2024, Company K expands into the UAE and opens a branch in Abu Dhabi.

Company K intends to continue to operate the branch for the foreseeable future.

The operations that are conducted in this branch fulfil the requirements for a Permanent Establishment in the UAE.

Company K will be a Non-Resident Person because it will not be a Resident Person and will have a Permanent Establishment in the UAE.

The existence of the Permanent Establishment will, therefore, be on 1 January 2025, when its place of Business had established a degree of permanence of six months in the UAE, assuming all the other requirements to have a Permanent Establishment have been met.

Company K is a Non-Resident Person with a Permanent Establishment after 1 March 2024, so it must submit a Tax Registration application for Corporate Tax within six months from the existence of the Permanent Establishment, i.e. by 1 July 2025.

If the juridical person has a nexus in the UAE, it shall submit a Tax Registration application within three months from the date of establishing a nexus in the UAE.

#Example 11

Company L was incorporated in the Kingdom of Saudi Arabia on 12 December 2023.

Company L purchases a commercial property in the UAE on 7 April 2024 and enters into a lease contract with a tenant on the same day.

Company L is a Non-Resident Person because it is not a Resident Person and has a nexus in the UAE.

As Company L earns income from Immovable Property from 7 April 2024, it establishes a nexus in the UAE on the same date.

Company L is a Non-Resident Person with a nexus in the UAE on 7 April 2024, which is after 1 March 2024, so it must submit a Tax Registration application for Corporate Tax within three months from the date of establishing a nexus in the UAE, i.e. by 7 July 2024.

If a Non-Resident Person has both a Permanent Establishment and a nexus in the UAE, the deadline for submitting a Tax Registration application for Corporate Tax to the FTA shall be the earlier of the two deadlines.

#Registration timeline for natural persons that are Resident Persons

A natural person that is a Resident Person shall submit a Tax Registration application for Corporate Tax to the FTA if their Turnover from Business or Business Activity in the UAE exceeds AED 1 million during a Gregorian calendar year, starting from 1 January 2024.

Where a natural person that is a Resident Person exceeds the AED 1 million Turnover threshold in a Gregorian calendar year, starting from 1 January 2024, they shall submit a Tax Registration application for Corporate Tax to the FTA by 31 March of the subsequent Gregorian calendar year.

Since a natural person’s first Tax Period is the 2024 Gregorian calendar year, any income generated prior to 1 January 2024 will not be subject to Corporate Tax.

#Example 12

Mr A opened a jewellery shop on 24 July 2023.

In the 2023 Gregorian calendar year, he generated an income of AED 1.5 million.

In the 2024 Gregorian calendar year, Mr A generates an income of AED 4.1 million, which is equal to the Turnover.

Even though Mr A exceeded the AED 1 million threshold in 2023 Gregorian calendar year, this is before a natural person’s first Tax Peri od, so he is not subject to Corporate Tax for this year and is not required to submit a Tax Registration application in relation to the 2023 Gregorian calendar year.

However, in the 2024 Gregorian calendar year, Mr A is a Resident Person because he conducts a Business or Business Activity in the UAE and he has a Turnover of AED 4.1 million, which exceeds the AED 1 million threshold, so he must submit a Tax Registration application for Corporate Tax by 31 March of the subsequent Gregorian calendar year, i.e. by 31 March 2025.

#Registration timeline for natural persons that are Non-Resident Persons

A natural person that is a Non-Resident Person shall submit a Tax Registration application for Corporate Tax to the FTA if their Turnover from a Business or Business Activity in the UAE derived from a Permanent Establishment exceeds AED 1 million during a Gregorian calendar year, starting from 1 January 2024.

Where a Non-Resident Person exceeds the AED 1 million Turnover threshold in a Gregorian calendar year, starting from 1 January 2024, they shall submit a Tax Registration application for Corporate Tax to the FTA within three months of meeting the requirements of being subject to Corporate Tax. A natural person who is a Non-Resident Person will meet the requirements to be subject to Corporate Tax when they have a Permanent Establishment in the UAE and, in the Gregorian calendar year, they exceed the AED 1 million Turnover threshold derived from the Permanent Establishment.

Since a natural person’s first Tax Period is the 2024 Gregorian calendar year, any Turnover generated prior to 1 January 2024 will not be subject to Corporate Tax.

#Example 13

Mr B is treated as being tax resident in Spain under an applicable international agreement for the avoidance of double taxation between the UAE and Spain.

However, from 27 January 2024, Mr B started travelling to the UAE every month to conduct Business as an independent IT consultant.

By conducting Business in the UAE, Mr B creates a Permanent Establishment in the UAE under the applicable international agreement for the avoidance of double taxation.

In the 2024 Gregorian calendar year, Mr B generates a turnover of AED 1.2 million.

However, the AED 1 million threshold is exceeded on 10 November 2024.

In the 2024 Gregorian calendar year, Mr B is a Non- Resident Person because he is not a Resident Person and conducted Business in the UAE via a Permanent Establishment.

Additionally, Mr B’s Turnover derived from a Permanent Establishment in the UAE (AED 1.2 million) exceeds the AED 1 million threshold, so he has met the requirements of being subject to Corporate Tax.

Since Mr B meets the requirements of being subject to Corporate Tax on 10 November 2024, he must submit a Tax Registration application for Corporate Tax within three months from the date of meeting the requirements of being subject to Corporate Tax, i.e. by 10 February 2025.

This Public Clarification issued by the FTA is meant to clarify certain aspects related to the implementation of Federal Decree Law No. 47 of 2022 on the Taxation of Corporations and Businesses and its amendments, and Federal Tax Authority Decision No. 3 of 2024 on the Timeline specified for Registration of Taxable Persons for Corporate Tax for the Purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses and its amendments. This Public Clarification states the position of the FTA and neither amends nor seeks to amend any provision of the aforementioned legislation. Therefore, it is effective as of the date of implementation of the relevant legislation, unless stated otherwise.

#Legislative References

In this clarification, Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Business and its amendments is referred to as “Corporate Tax Law” , Cabinet Decision No. 49 of 2023 on Specifying the Categories of Businesses or Business Activities Conducted by a Resident or Non-Resident Natural Person that are Subject to Corporate Tax is referred to as “Cabinet Decision No. 49 of 2023” , Cabinet Decision No. 56 of 2023 on Determination of a Non- Resident Person’s Nexus in the State for the Purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses is referred to as “Cabinet Decision No. 56 of 2023” , Cabinet Decision No. 75 of 2023 on the Administrative Penalties for Violations Related to the Application of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, and its amendments is referred to as “Cabinet Decision No. 75 of 2023” , Federal Tax Authority Decision No. 7 of 2023 on Provisions of Exemption from Corporate Tax for the Purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses is referred to as “FTA Decision No. 7 of 2023” , Federal Tax Authority Decision No. 3 of 2024 on the Timeline specified for Registration of Taxable Persons for Corporate Tax for the Purposes of Federal Decree- Law No. 47 of 2022 on the Taxation of Corporations and Businesses and its amendments is referred to as “FTA Decision No. 3 of 2024”.

Article 1 of the Corporate Tax Law defines the following terms as:

•“Business” – Any activity conducted regularly, on an ongoing and independent basis by any Person and in any location, such as industrial, commercial, agricultural, vocational, professional, service or excavation activities or any other activity related to the use of tangible or intangible properties.

•“Business Activity” – Any transaction or activity, or series of transactions or series of activities conducted by a Person in the course of its Business.

•“Corporate Tax” – The tax imposed by the Corporate Tax Law on juridical persons and Business income.

•“Financial Year” – The period specified in Article 57 of the Corporate Tax Law.

•“Free Zone” – A designated and defined geographic area within the UAE that is specified in a decision issued by the Cabinet at the suggestion of the Minister.

•“Free Zone Person” – A juridical person incorporated, established or otherwise registered in a Free Zone, including a branch of a Non-Resident Person registered in a Free Zone.

•“Licence” – A document issued by a Licensing Authority under which a Business or Business Activity is conducted in the UAE.

•“Licensing Authority” – The competent authority concerned with licensing or authorising a Business or Business Activity in the UAE.

•“Non - Resident Person” – The Taxable Person specified in Article 11(4) of the Corporate Tax Law.

•“Permanent Establishment” – A place of Business or other form of presence in the UAE of a Non-Resident Person in accordance with Article 14 of the Corporate Tax Law.

•“Resident Person” – The Taxable Person specified in Article 11(3) of the Corporate Tax Law.

•“Tax Period” – The period for which a Tax Return is required to be filed.

•“Tax Registration” – A procedure under which a Person registers for Corporate Tax purposes with the FTA.

•“Taxable Person” – A Person subject to Corporate Tax in the UAE under the Corporate Tax Law.

Article 1 of Cabinet Decision No. 49 of 2023 defines “Turnover” as the gross amount of income derived during a Gregorian calendar year.

Article 1 of Cabinet Decision No. 56 of 2023 defines “Immovable Property” as any of the following:

a.Any area of land over which rights or interests or services can be created.

b.Any building, structure or engineering work attached to the land permanently or attached to the seabed.

c.Any fixture or equipment which makes up a permanent part of the land or is permanently attached to the building, structure or engineering work or attached to the seabed.

1.

Article 51(1) of the Corporate Tax Law states that any Taxable Person shall register for Corporate Tax with the FTA in the form and manner and within the timeline prescribed by the FTA and obtain a Tax Registration Number, except in circumstances prescribed by the Minister.

2.

Violation No. 14 of the Table of Violations and Administrative Penalties annexed to Cabinet Decision No. 75 of 2023 states that a Taxable Person who fails to submit a Tax Registration application within the timeframe specified by the FTA in accordance with the Corporate Tax Law will incur an Administrative Penalty of AED 10,000.

3.

Article 3(1) of FTA Decision No. 3 of 2024 states that 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: