Timeline :

Deadline for filing of First Corporate Tax return is 30th September 2024, if:

• The Entity is newly incorporated in June 2023 ; and
• It follows Financial Year / Accounting Period of January to December

Penalty

• Failure to file return within due date : AED 500 Per month (or part of month) for first 12 months and AED 1,000 each month from 13 month & onward;
• Failure to settle tax : Monthly penalty of 14% per annum;
• Incorrect Tax Return : AED 500 per month (unless the Person Corrects his Tax Return before the expiry of the deadline)

Applicability

It applies to new entities incorporated or established under Federal Decree-Law No. 32 of 2021 on Commercial Companies (the “Commercial Companies Law”) as well as any other legislation relevant to Free Zones in the UAE, including:

• Limited Partnership Company
• Private Joint Stock Company
• Limited Liability Company
• Joint Liability Company
• Public Joint Stock Company
• Foreign Incorporated companies who have established their head office  / branch / representative office in the UAE

Aforesaid categories of Entities are being re-issued their corporate tax registration certificates wherein the due date for filing Return is shown as 30 September 2024.

Rationale

•  The Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Business, and its amendments (Corporate Tax Law) applies to Tax Periods commencing on or after 1 June 2023. A Taxable Person’s Tax Period is the Financial Year or part thereof for which a Tax Return is required to be filed.
• Therefore, any entity established or incorporated in the month of June 2023 and following January to December has to prepare Financial Statements for the period June 2023 to December 2023 (being 7 months as Financial Year since FY cannot be less than 6 months and greater than 18 months);
• The Corporate Tax Law does not include a specific provision for the first financial year of a juridical person classified as a taxable person. The first financial year of a newly incorporated entity should be interpreted based on the guidance provided by the Federal Tax Authority through the Public Clarification (‘CTP003’). This clarification takes into account the provisions of the Commercial Companies Law to determine the first financial year of a newly established entity.
• The financial year adhered to by the taxable person under the Commercial Companies Law will also be considered the financial year for the purposes of the Corporate Tax Law, thus defining the tax period. According to Article 28 of the Commercial Companies Law, the financial year for a newly incorporated company, starting from its date of incorporation, must be no less than 6 months and no more than 18 months. Therefore, the first tax period for a newly incorporated company will be determined by the first financial year as defined by the Commercial Companies Law .
• Thus, any new entity incorporated/ established in the month of June 2023 will be required to prepare Financial Statements for the First Financial Year comprising of the period June 2023 to December 2023 (First Tax Period) and file its first CT Return on or before 30 September 2024;
• Article 53 (‘Tax Returns’) of the Corporate Tax Law provides that an entity must file a Tax Return within 9 months from end of relevant Tax Period (i.e. Financial Year);
• Each subsequent Tax Period will be the 12-month period following from the end of the First Tax Period.
• Illustration given in the Corporate Tax Public Clarification ‘CTP003’:

A company incorporated on 5 June 2023 will have its first financial year defined under Article 28 of the Commercial Companies Law as spanning from 5 June 2023 to 31 December 2023 (a duration of 6 months and 26 days). The initial financial statements for this company will be prepared for that same period. According to Article 53 regarding ‘Tax Returns’ of the UAE Corporate Tax Law, a taxable person is required to file their return within 9 months after the end of the relevant tax period (i.e., the financial period). Therefore, the company must submit its corporate tax return on or before 30 September 2024.

FOR MORE INFORMATION, CONTACT US :

Phone : +971 52 1952 532 / +971 4 240 1110

Mail-Id : info@yugaaccounting.com

Website : www.yugaaccounting.com