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Corporate Tax Payments and Refunds in the UAE

Corporate Tax Payments and refund

Tax compliance is something that frightens many businesses. However, it shouldn’t be. The idea is to collect all the essential information and act proactively, or consult a tax consultant. Hiring a tax consultant might seem expensive; however, it will save you time, money, penalties, and all the legal hassle. In this blog, we are discussing key information concerning corporate tax payments and refunds in the UAE. The basic legal guide in this case is Federal Decree-Law No. 47 of 2022 and other relevant regulations.

Corporate Tax in the UAE: The Background

From June 1, 2023, the UAE levied corporate tax in the region. The standard rate of corporate tax is 9%, which applies to businesses earning over AED 375,000 in a tax year. Businesses earning AED 375,000 or less in a tax year will pay 0% corporate tax. The UAE has always been a tax haven for businesses, even though it still has one of the lowest tax rates in the world. Furthermore, several reliefs and exemptions keep the UAE as one of the most attractive business destinations. For instance, there is small business relief (SBR) that exempts certain small businesses from corporate tax. However, there are certain conditions to meet to claim the exemption.

Corporate Tax Payments and Refunds

A taxable person or a business must settle the corporate tax payable within nine months from the end of the relevant tax year. However, there can be circumstances when there is a different date determined by the Federal Tax Authority (FTA).

Furthermore, there can be circumstances when a taxable person has a corporate tax refund. As per Article 49 of the tax law, a business may apply to the authority for a corporate tax refund under the tax procedures law in the following situations:

a) The withholding tax credit available to the taxable person is more than the corporate tax liability.

b) When the authority is satisfied that the taxable person has paid more than the actual corporate tax payable.

In any case, the authority will issue a notice to the taxable person about the decision of the application for a tax refund. This should be under the tax procedures law.

Penalty for Failure to Settle the Payable Tax

If corporate tax payment is not made for the tax liability, there is a penalty as per Cabinet Decision No. 75 of 2023. If there is an unsettled tax even after the due date, there is a monthly penalty. A monthly penalty of 14% per annum applies to the unpaid tax liability from the day following the due date to the same day every month. This penalty also applies in cases of payment delay in a voluntary disclosure or a tax assessment. However, the due date is different in this case. The due date in this case is:

a) 20 business days from the date of submission in the case of a voluntary disclosure.

b) 20 business days from the date of receipt of the tax assessment.

Tax Compliance:

If a business keeps all the records and pays corporate tax as per the law, it is generally compliant. However, there are small details whereby businesses might need expert advice and consultation to remain compliant. As the primary function of a business is to earn money and add value for its shareholders, it is always beneficial to consult a tax expert. This in turn will benefit your business, as it will not deviate from the primary reason of its existence. Creative Zone Tax & Accounting is one of the reputed firms in the UAE that specializes in taxation.

Conclusion:

The word “corporate tax” is new in the UAE; however, the mechanism is similar to what we see in the rest of the world. The standard rate of corporate tax is 9% for taxable income of over AED 375,000. If the taxable income is below this threshold, the rate is 0%. Apart from these basic rates, there are various tax exemptions and reliefs available for certain businesses. However, these exemptions and reliefs come with conditions; therefore, one should have a proper knowledge of the tax laws and regulations.

Corporate tax payments or liabilities are due within nine months from the end of the tax year. If there is a delay in payment, the tax law applies penalties for the late payment. There are circumstances under which a business can claim a corporate tax refund. This is the case when there is a higher withholding tax credit available to the business than the tax liability. Moreover, a taxable person can also apply for a refund when it can satisfy the tax authority that excess tax is paid over the actual tax liability.

Creative Zone Tax & Accounting:

With our assistance and consultation, we aim to see businesses grow and remain competitive. With a team of highly skilled tax experts and accountants, we provide cutting-edge services to our clients. From basic consultation to advanced strategies, contact us for a tailor-made solution for your business. We will also assist you with corporate tax payments and refunds in the UAE. We are just a call away; contact us today.

Disclaimer:

The information provided might be outdated with time as there is continuous updating of the tax laws and regulations. Therefore, this blog cannot be a reference for tax planning or tax advice. We strongly advise you to consult a tax consultant or lawyer for all your tax matters.