If you are planning to start a new business in UAE? Spare no moment in fronting your business, recruiting employees, and having your own office to remember that alongside going corporate, it is legally required to register for corporate tax.
New organizations that are formed in the UAE are required to register for corporate tax within one month from the time that the organization was set up or they will be charged some fines which any young organization will not afford.
The Federal Tax Authority has sent out several notices to the new businesses to register themselves but most of them either fail to register on time or do it improperly and therefore get rejected.
As tax consultants point out, it is unadvisable to register in haste or at the last minute as this might lead to some rigmarole.
To ensure a smooth start, new businesses should take the following steps:
- Register for Corporate Tax Promptly: It is necessary that it completes the registration process immediately after incorporation, but not later than 3 months.
- Evaluate Eligibility for Tax Relief Programs: Determine whether the business falls for ‘qualifying free zone person’ for tax exemption, review 3-year SME Relief program and analyze the applicability of transfer pricing.
- Maintain Accurate Financial Records: Make sure that there is a proper set of books so that there are no interference between business and business expenses and the owners or investors, personal and business expenses.
- Stay Compliant with VAT and Other Laws: One must remember the applicability of VAT and other regulations, which concern the business.
“Regardless of the ventures’ size and industry, any company incorporated after June 1, 2023, in the UAE is immediately subject to corporate tax,” added Jeet Gianchandani, Founder Partner at the Dubai-based JCA Consulting. Every month, the Federal Tax Authority sends out notifications on registration dates on taxes depending on the incorporation dates of the company.
It revealed that young people who started new businesses are keeping off some formalities of filing legal documents for registration with tax consultants reporting them to be ailing to dodge penalties.
Ali Nawaz, Senior Manager – Client Accounting at Sovereign PRO Partner Group, emphasized the importance of early registration: ‘This also helps to make sure that the new company is ready with the tax aspect when it is formed by minimizing unnecessary mistakes which may lead to penalties from the Government.
The other important factor that an entrepreneur needs to consider when establishing their new business in the UAE is the financial year. Companies have to choose between the calendar year, the fiscal year or any other year that is convenient for the functioning of the company.
“The financial year and tax period will depend on what has been provided in Memorandum of Association and /or Articles of Association,” agreed Girish Chand, Senior Partner MCA Management Consultants. Companies that start their incorporation after June 1, 2023, will have their first tax period starting from the date of incorporation and must not be more than 18 months or less than six months.
For instance, if a Company of choose to have its financial year ended on 31st of December then the first tax period would be only for seven-month from 1st June 2023 to 31st December 2023. If the financial year is from April to March, then the first tax period would only be from June 1, 2023, to March 31, 2024, which will amount to ten months.
