UAE Corporate Tax Landscape in 2024: Why Branch Licenses Matter?

The new year 2024 marks a significant transition for businesses adhering to the January to December financial year in the United Arab Emirates (UAE). With the advent of corporate tax, even though the corporate tax returns are slated for submission in September 2025, it is prudent to conduct a preliminary review of key considerations. Successful businesses work closely with reputed corporate tax consultants in Dubai to ensure adherence.

Corporate Tax Registration Process

At the outset, businesses in the UAE need to get their entities registered to establish their legal existence. Thanks to the streamlined process of online registration, it takes little time to get your business registered with the regulatory authorities. Once recognized, businesses in the UAE are recognized as registered taxpayers. The fast process also allows ample time for authorities to review applications and provide feedback.

The Emaratax technology helps corporate tax registration align with the information submitted earlier for VAT. An early application helps in detecting potential loopholes in VAT registration. Fixing these information loopholes is crucial before businesses smoothly complete the corporate tax registration process.

Knowing License Categories

For businesses operating in the UAE, the different categories of licenses present surprises since they are habituated to working under established category for years. Notably, branches of a UAE company, especially those spanning multiple emirates, are viewed as extensions of the main head office license and do not require separate registration. Obtaining additional licenses merely by appending ‘branch’ to the name may risk categorizing these licenses as separate entities, subjecting them to distinct regulatory requirements.

Businesses operating under multiple sole establishments or civil company licenses across emirates face similar challenges in the emirates. This challenge becomes particularly pressing for companies when they are coupled with separate VAT registrations. This explains why it’s imperative to identify the license category accurately. Businesses aiming to qualify for small business relief (SBR), particularly regarding financial resources, unified management, and shared bank accounts should focus on this crucial process.

Planning to Close the Company in 2024? Clarifications Await

Often, business owners seem to be reluctant to register for corporate tax, particularly when they consider liquidating their company in 2024. It is crucial to dispel the misconception that liquidating a company absolves it from tax obligations. Businesses need to register their commercial entity, submit a corporate tax return for the truncated financial year, and then commence the de-registration process. Any delays in compliance may attract penalties, including those on legal representatives.

Different tax authorities in the UAE need to coordinate on the matter. Therefore, obtaining corporate tax clearance might be a prerequisite for approving company liquidation, prioritizing the importance of timely compliance.

Tax Benefits for Free Zone Companies

Recent developments have granted commodity traders operating from non-designated zones a preferential tax rate of 0% on income generated on qualifying commodity trading. However, companies established in ‘designated zones’ continue to face complexities when it comes to their eligibility for preferential tax rates on direct/third-port shipments and ‘high-sea sales.’

Considering the ongoing debate, it’s important to determine the eligibility of your business based on its location and goods. Relying solely on public consultation documents may not be the logical approach. Free zone companies engaged in various qualifying activities must understand the scopes of inclusions and exclusions regarding their qualifying activities.

Adequate Substance: Ensuring Tax Benefits

For companies eligible for free zone tax benefits, maintaining adequate substance in the respective free zone is imperative. The restructuring required to meet substance requirements could be substantial. With the new era of tax regulations posing considerable challenges, businesses must be meticulous while planning. Inadequate planning or inexperience can lead to missed opportunities or penalties.

The IMC Group continues to be one of the trusted corporate tax consultants in Dubai . Businesses can reach out to these professionals for sound advice and remain on the right track amidst the evolving tax regulatory regime.