Since the beginning of 2023, the Federal Tax Authority (FTA) of the United Arab Emirates has taken a dynamic stride by initiating an ‘early registration’ mechanism tailored for select business categories, beckoning them to partake in the realm of Corporate Tax compliance within the nation’s purview. This pioneering initiative has witnessed a gradual, all-encompassing expansion, with an ultimate objective: to encompass every qualifying juridical person that harmonizes with the expanse of the UAE’s resolute Corporate Tax.
On August 31, 2023, the FTA introduced a comprehensive guide known as the “Registration of Juridical Persons – Corporate Tax Guide – CTGRJP1,” often referred to as the “RJP Guide” for simplicity. This guide is divided into nine sections and provides detailed insights into the Corporate Tax registration requirements for legal entities as outlined in the new Corporate Tax Law.
The core sections of the RJP Guide are:
- Corporate Tax Registration
- Overview of the Corporate Tax Registration Process
- Taxable Persons and Exempt Persons
- Resident Juridical Persons
- FTA’s Power to Register a Person for Corporate Tax
- Corporate Tax Deregistration
This article provides an overview of the RJP Guide issued by the FTA.
The RJP Guide
The newly issued RJP Guide is based on the registration obligations under the UAE’s new Corporate Tax Law, mostly stemming from Chapter Three and Chapter Four of the Corporate Tax Law, read together with other relevant articles of the Corporate Tax Law and implementing decisions issued by the Cabinet of Ministers and the Minister of Finance.
The RJP Guide starts in Section 3 by providing an overview of the persons required to register for Corporate Tax and general registration requirements, highlighting general differences between taxable persons and exempt persons for Corporate Tax purposes.
In Section 4 of the RJP Guide, the FTA clarifies the details of the Corporate Tax registration process, addressing key concepts such as quick a know-how, timelines, requirements, required documentation, post-registration obligations, and other factors. The FTA further stated that the Tax Registration Number (TRN) issued to registrants for Corporate Tax purposes will be the same as that used by the taxable person for VAT and/or Excise Tax, albeit with a different last digit.
Section 5 of the RJP Guide provides a detailed explanation of the two main categories of persons for Corporate Tax purposes, being a taxable person and an exempt person, with (12) twelve scenario-based examples to help businesses understand their status from a Corporate Tax perspective. The section concludes by addressing ‘Exempt Income’, importantly noting that a person exclusively deriving exempt income does not result in exempting that person from their Corporate Tax obligations such as the obligation to register for Corporate Tax in the UAE.
Under Section 6 of the RJP Guide, the FTA sheds light on the nature of a ‘juridical person’, defining it as “an entity established or otherwise recognised under the laws and regulations of the UAE, or under the laws of a foreign jurisdiction, that has a legal personality separate from its founders, owners and directors”. The section provides further examples and discusses possible forms that a juridical person may take. Most interestingly, the FTA noted that an entity and its branches are considered one and the same person for Corporate Tax purposes.
Section 7 of the RJP Guide is a very short one-pager confirming the FTA’s discretionary power to forcibly register a taxable person that should have registered for Corporate Tax but failed to do so. It is understood that this procedure will be followed by a tax assessment issued by the FTA, which is an administrative decision subject to the standard objection and appeal process.
Consistent with Section 7 of the RJP Guide, Section 8 of the RJP Guide is another relatively short section spanning across only two pages. In Section 8 of the RJP Guide, the FTA explains that juridical persons are required to deregister if they are no longer subject to Corporate Tax in the UAE due to – for example – cessation of business and liquidation. This Section further provides two scenario-based examples, similar to those provided in other sections of the RJP Guide.
To this end, given the array of regulations governing the registration of juridical entities for UAE Corporate Tax, maneuvering through the intricate terrain of registration responsibilities and prerequisites can be a formidable expedition. As the legislation and guidelines continue to unfold, it remains crucial for juridical entities to wholeheartedly embrace their Corporate Tax registration duties to maintain an unbroken presence in the market.
In this vein, it is worth highlighting that seeking expert legal counsel not only guarantees a thorough grasp of the available registration stipulations, but also provides tailored direction, leading to optimal tax conformity and long-term success.
This Article is prepared by Mohamed El Baghdady, Head of Tax and Financial Crimes, and Marwan Alnooryani, Senior Tax Associate, at Habib Al Mulla & Partners Law Firm.
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Our track record of successfully resolving tax disputes and helping clients minimize their tax liabilities has likely earned us a reputation as a trusted and reliable tax advisor. Our tax and financial crimes team, led by our Head of Tax and Financial Crimes, Mohamed El Baghdady, has successfully advised and represented clients across various industries, including, but not limited to, consumer goods and retail, services, real estate, oil & gas and banking and finance, before the government authorities, tax tribunals and courts. Our clients have been successful in multiple tax disputes before the committees and courts.
For further information, please contact, Mohamed El Baghdady, Head of Tax and Financial Crimes, on mohamed.elbaghdady@habibalmulla.com or any of the members of our team.
