UAE Clarifies Corporate Tax Payment Rules

According to the FTA, the first Tax Period for companies subject to Corporate Tax is aligned with the company’s first Financial Year, as defined by the Commercial Companies Law. The Corporate Tax Law applies to Tax Periods starting on or after June 1, 2023. If a company’s first Financial Year begins before this date, the first Tax Period will be the following Financial Year that starts on or after June 1, 2023.

The FTA allows flexibility in determining the first Financial Year. Instead of the standard 12-month period, the first Financial Year may range between 6 to 18 months. This period is accepted as the first Tax Period for Corporate Tax purposes, without the need for any application to change the Tax Period.

Non-resident companies with a Permanent Establishment in the UAE have specific guidelines for determining their first Tax Period. If operations began before June 1, 2023, the first Tax Period will be the next Financial Year starting on or after this date. For operations starting on or after June 1, 2023, the Tax Period will run from the start date until the end of that Financial Year, provided this period is between 6 and 18 months.

Companies that cease operations during their first Tax Period are still required to register for Corporate Tax. In cases of business cessation, such as dissolution or liquidation, the company must submit a Tax Deregistration application within three months of the cessation event.

The FTA has clarified that even if the first Tax Period is longer or shorter than 12 months, there is no pro-rating of various thresholds, including the Revenue threshold for Small Business Relief. The only exception is the de minimis threshold related to the General Interest Deduction Limitation Rule, currently set at AED12 million.