Newly Formed Companies in UAE: Don’t Miss the 3-Month Corporate Tax Registration Window

If you’ve just set up a company in the UAE, registering for corporate tax should be at the top of your checklist, alongside building your business, hiring staff, and setting up your office. Newly incorporated companies in the UAE are required to register for corporate tax within three months of their formation. Missing this deadline could result in penalties that no budding business would want to face.

Despite repeated reminders from tax authorities, many new business owners either miss this crucial deadline or rush through the registration process, leading to rejected applications, say tax consultants. Here’s a streamlined approach for new businesses to stay compliant and avoid costly errors:

• Register for Corporate Tax Promptly: Newly established companies must register for corporate tax within the first three months of their incorporation.
• Evaluate Your Eligibility: Assess whether your business qualifies for the ‘qualifying free zone person’ status, the 3-year SME Relief program, and other considerations like transfer pricing rules.
• Maintain Accurate Financial Records: Ensure that your bookkeeping practices are in order, and avoid mixing business expenses with personal ones.
• Keep Other Tax Obligations in Mind: Be aware of VAT and other applicable laws that may affect your business.

Jeet Gianchandani, founder and partner at Dubai-based JCA Consulting, emphasizes, “Any company formed on or after June 1, 2023, in the UAE is under the corporate tax regime from day one.”
The Federal Tax Authority continues to issue alerts regarding tax registration deadlines based on each company’s incorporation date. If the Memorandum and Articles of Association do not specify the financial year, it will default to January through December under corporate tax rules.

Tax consultants note that many founders delay the necessary paperwork for tax registration, including obtaining the Tax Registration Number (TRN). Ali Nawaz, Senior Manager – Client Accounting at Sovereign PRO Partner Group, advises, “Early registration ensures that the newly formed company is prepared to meet its tax obligations from the start. This helps avoid last-minute rushes and potential errors if registration is left too late. Delaying the registration could result in penalties and complications later on.”

Choosing Your Financial Year: A Key Decision for New Businesses

When forming a company and registering for corporate tax, selecting the appropriate financial year is another critical decision. Most UAE businesses operate on a January to December fiscal year, but alternatives such as April to March or another 12-month cycle are possible.

“The financial year and the corresponding tax period will depend on what’s outlined in the Memorandum or Articles of Association,” says Girish Chand, Senior Partner at MCA Management Consultants. For companies incorporated on or after June 1, 2023, the financial year will start from the date of incorporation, coinciding with the onset of the UAE’s corporate tax regime.

The first tax period will begin from the date of incorporation or registration, spanning a minimum of six months and a maximum of 18 months. For instance, if the company chooses a January to December financial year, the first tax period would run from June 1, 2023, to December 31, 2023, covering seven months. If the financial year is set from April to March, the first tax period would be from June 1, 2023, to March 31, 2024, encompassing ten months.

Ultimately, to reach this stage, meeting tax registration deadlines should be a top priority for every new business. If your business is being licensed today, make sure to register for corporate tax within the next 90 days.