Corporate Tax Registration Planning: Things to Do Before Deadline

The deadline for submitting the application for corporate tax registration in the UAE is fast approaching. The deadline to register for corporate tax in the UAE is May 31st 2024. Failing to apply for corporate tax registration within the deadline will lead to a hefty penalty of AED 10,000.

This situation calls for the need to conduct comprehensive tax planning before registering for corporate tax in the UAE. It is advisable to conduct corporate tax planning through the best corporate tax consultants in Dubai. In this blog, you can learn about the key things you must perform before the corporate tax registration deadline:

Consider Free Zone Corporate Tax Rate

Businesses operating in the UAE free zones (Free Zone Persons) can benefit from the 0% tax rate. However, you need to meet the conditions to become eligible for a Qualifying Free Zone in the UAE to benefit from the 0% tax rate. The conditions can be complex and free zone businesses need to review their status and profile before May 31st 2024 to ensure they meet the conditions.

Corporate tax advisers in Dubai can advise you on how to meet the conditions to be a Qualifying Free Zone Person. Specifically, you need to take the following actions:

  • Analyze the pros and cons of a Qualifying Free Zone as opposed to electing the standard corporate tax rate in the UAE, which is 9%.
  • Plan whether you need to update transactions, pricing, intercompany agreements (ICAs), documentation, etc.
  • Review and plan your company’s economic substance

Review the Structure

The structure of a business will also affect the group’s ability to make critical elections such as corporate tax grouping, or income like dividends and gains. Some of the actions you can take include:

  • Review the legal structure and determine if it gives rise to any corporate tax inefficiencies or limits opportunities (such as tax grouping)
  • Assess the company’s funding structure and review whether it leads to opportunities or risks such as limits on interest deductions, or non-deductible capital

Check the Group’s Financial Profile

Failing to review the accounting policies and entries may lead to unplanned tax consequences. Businesses must review their main expense categories (entertainment, interest, exempt income etc.) along with the accounting policies that may have an impact on critical tax areas. Consult with the top corporate tax consultants in Dubai to receive advice on this matter.

Plan the Transfer Pricing Profile

Ensuring transfer pricing (TP) compliance is one of the key corporate tax requirements in the UAE. You must also design TP policies that are in line with the arm’s length principle to ensure compliance with the TP regulations. Preparing robust TP documentation is also a critical requirement that businesses must meet.  Companies must also incorporate their TP adjustments before closing the financial statements. Consider the following necessary actions:

  • Form a Tax Group to avoid TP Rules
  • Maintain Intercompany agreements (ICAs)
  • Prepare TP Policy and documents and do not wait until the last minute
  • Beware of General Anti Avoidance Regulations (GAAR)

Review your Claims & Elections

The UAE corporate tax law contains various provisions to provide businesses relief from tax burdens such as Small Business Relief, Qualifying Group Relief, Business Restructuring Relief etc. Review whether your company is eligible for any of the relief and analyze the pros and cons of claiming them. The leading corporate tax advisers in Dubai can help you review the pros and cons of relief provisions.

Check Operational Readiness

Businesses must review their operational readiness before the deadline for corporate tax registration in the UAE. It is essential to perform the following actions:

  • Maintain books of accounts
  • No undisclosed income or expenses and only actual assets and liabilities in last year’s balance sheet
  • Create separate trial balances for each entity
  • Maintain Accounts with inventory and IFRS
  • Do not mix free zone and mainland transactions
  • Sales as per VAT and Corporate Tax must match
  • Create CAPITAL in their books to support investments and spending with proof
  • Transactions in Bank Accounts must reconcile with the Turnover

Hire the Best Corporate Tax Advisers in Dubai, UAE

Businesses need not rush to register for corporate tax in the UAE. Some companies may apply for corporate tax registration in the UAE, petrified by the hefty penalty. Even though meeting the deadline for UAE corporate tax registration is mandatory, approaching it without any proper planning is suicidal.

Therefore, it is advisable to seek an expert’s assistance in conducting comprehensive corporate tax planning in the UAE. The top corporate tax consultants in Dubai such as Tax Gian can help you with corporate tax planning. We are a brand of Jitendra Tax Consultants (JTC) that has more than two decades of experience in the industry. Tax Gian’s tax experts can help you plan better and save you from any unintended tax outcome.