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“UAE Corporate Tax Rule: Small Businesses Must Register, Even in Losses!”

As full-year tax period kicks in, UAE SMEs must prioritize signing up for corporate tax

UAE Small Business Owners, whether making profits or just starting, must prioritize registering for corporate tax.

With the UAE’s first full-year corporate tax period underway, businesses need to boost their auditing efforts and, crucially, ensure Corporate Tax Registration with the Federal Tax Authority for compliance. Whether a business is new or facing losses, it’s essential to register, regardless of annual profits being above or below the Dh375,000 threshold. Some SME owners may think they can delay registration until profits reach Dh375,000, but that’s not the case, warns a tax consultant.

Businesses have been able to register for corporate tax since June of last year. According to UAE rules, if a business follows the calendar year as its financial year, it will be paying its 2024 corporate tax by September of 2025.

Here’s what to know about Small Business Relief

  1. To qualify for relief, a business must have revenue below or equal to Dh3 million for the most recent and all past tax periods.

  2. If the revenue goes beyond Dh3 million, the business can’t choose the relief package anymore, even if the revenue later drops below the threshold in future tax periods.

In essence, these businesses must still register for corporate tax. Recently, UAE tax authorities have been hosting workshops and offering guidance on corporate tax, set at 9% of the annual profit if the Dh375,000 threshold is met.

UAE Corporate Tax applies to all businesses “incorporated, effectively managed and controlled” in the UAE, making registration mandatory, irrespective of profit or revenue. It’s recommended that companies use accounting software for tax best practices, though some still use Excel-based accounting. If a business opts for independent auditors, costs are competitive in the UAE, varying based on the volume and complexity of operations.

What is the minimum sales limit for businesses to register for VAT?

UAE businesses have experience with VAT requirements. For VAT registration, companies could choose to register voluntarily if their taxable supplies reached Dh187,500 or were required to register if it touched Dh375,000.

However, there’s a significant difference – VAT is a tax applied to each transaction, and the rules are quite distinct from those for corporate tax compliance.

Experts suggest that even if someone is starting a new business in the UAE, it’s advisable to register for corporate tax right away – it’s a crucial step that should be taken promptly.

Source : Gulf News