New Corporate Tax Regulation: A Significant Update for All Businesses

In a landmark move, a critical regulatory update that impacts all companies within the United Arab Emirates (UAE) has been introduced by the Federal Tax Authority (FTA). In accordance with Decision No. 3 of 2024 issued on February 22, 2024, a new mandate has been introduced that requires every company holding a license in the UAE to register for Corporate Tax (CT) effective from March 1, 2024, setting out the timeline for registration.

This directive marks a pivotal shift in the UAE's tax policy landscape, impacting all companies within its jurisdiction.

This new regulation applies to all companies across all sectors regardless of the nature or extent of their operations within the UAE. The CT is levied on the net profit of the company calculated at the end of each financial year after all operational expenses have been deducted. It is essential to highlight that only profit-generating companies are subject to CT, meaning that if the company is not operational or does not generate a profit, it is not required to pay the tax. However, a declaration must still be submitted to the FTA to comply with the regulatory requirements.

One of the most critical aspects of this regulatory update is the stipulation of a deadline for the submission of the Tax Registration application. Companies must heed this timeline to ensure timely compliance and avoid potential penalties. It is worth noting that the FTA's decision provides a safeguard against penalties for late CT number issuance as long as the application for CT registration has been duly submitted within the specified period. Therefore, as long as the CT registration application is submitted, no penalty should apply irrespective of when the CT number is issued.

Businesses operating within the UAE are now urged to take immediate action to comply with this new requirement as per the provided deadline. It is crucial to understand the intricacies of the CT, assess the company's financial standing, and ensure that all necessary documentation is available and ready to be submitted within the designated timeframe.

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