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How to avoid Late VAT registration Penalties?

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The UAE Federal Tax Authority must be notified of your liability in undergoing VAT registration when your taxable turnover exceeds the mandatory registration threshold for the past twelve months. The threshold for registration in UAE is currently at AED 375,000.

When the notification regarding your VAT registration in UAE is late and there is no prior notification you’ll be charged regardless of the reason for the delay. A penalty of AED  10,000 will be imposed.

In order to avoid the harsh penalties that are currently in place for late VAT filing or non-filing of VAT, businesses must be wary of all taxation rules and deadlines imposed by the Federal Tax Authority and appoint a responsible person who can accurately record all tax input and output and make filing submissions in a timely manner.

Let MAS handle all your VAT aspects and save your business from unnecessary fines and penalties.

How to avoid Tax Evasion Penalties?

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The following penalties will be levied on businesses by the FTA:

  • Penalty of AED 10,000 will implement for not maintaining financial records and then AED 20,000 in case of repetition.
  • Submission of Incorrect Tax return by the Registrant will be AED 1,000 for the first time and then AED 2,000 in case of repetition.
  • Failure of the person conducting business to facilitate the work of the Tax Auditor will be AED 20,000.
  • Failure of the taxable person to submit a VAT registration application within the time frame specified in the tax law will be AED 10,000.
  • Tax Violations in UAE will also lead to shutting down of the business entirely and the cancellation of the Trade license.

–  MAS Tax Agency will entirely represent your business in front of the Federal Tax Authority (FTA). Our tax agents experts will ensure that everything is in line with the FTA’s law and regulation.

Let MAS handle all your VAT aspects and save your business from unnecessary fines and penalties.

Are you ready for FTA VAT Audit?

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By conducting a VAT audit, the government will verify that whether the business is following all the VAT laws and implementing VAT as per the regulation of FTA. Through the VAT audit in UAE, FTA will check the VAT returns and VAT refunds submitted by the taxpayer. The purpose of the VAT audit is to make sure that the business is collecting and submitting the VAT to the FTA within the assigned time frame.

VAT audit will include reviewing and accessing all the financial records of the company along with the bank statements. FTA will ask for the documents in hard copy and soft copy. FTA will check the sales and purchase invoices and review the books of accounts along with the VAT returns submitted to FTA.

Businesses who are subject to VAT audit must cooperate and facilitate FTA auditors in every possible way. A taxpayer or the legal representatives of the taxpayer must provide complete assistance to the tax auditor to conduct the audit in a smooth way. If your business receives a notification of VAT audit, you should prepare the following:

  • Office is accessible.
  • Original documents.
  • Tax invoices.
  • Financial records such as books of accounts.
  • The staff of Accounts department and VAT agents.
  • If the audit is conducted outside the business office then the presence of the relevant person from the business is mandatory at the time of the VAT audit.

If FTA finds out a non-compliance in the tax operations or discovers any violation of the FTA law then heavy VAT fines and penalties will be imposed on a business. The severity of violation or non-compliance might lead to the cancellation of the trade licenses or closing of a company.

How to apply for Reconsideration Request?

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If you have been assessed a penalty for non-compliance with tax regulations, we are here to help. Follow the steps below to request a reconsideration of the penalty:

            Penalty assessment:

A penalty may be assessed if you fail to comply with tax regulations or make errors in your tax filings. Penalties may vary depending on the type of violation and the amount of tax owed. Penalties may be assessed for:

  • Failure to register for tax.
  • Late filing of excise tax returns.
  • Late payment of tax.
  • Failure to maintain proper records.
  • Failure to comply with tax regulations.
  • Providing false or misleading information to tax authorities.

    Penalty reconsideration process:

  • To request a reconsideration of a penalty, you must submit a written request to MAS Tax Agency within 40 business days of receiving the penalty notice. Your request should include a detailed explanation of why you believe the penalty was assessed in error, as well as any supporting documentation that proves your compliance with tax regulations or shows that the penalty was miscalculated.

What are the Types of Corporate Tax Planning?

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Corporate tax planning is essential for businesses in the UAE that want to minimize their tax liabilities. We have a qualified team of expert tax agents who can help you find ways to lower your payable tax income while adhering to tax laws and compliance obligations.

With proper planning, corporate tax can have a huge impact on the financial structure of medium to large-scale organizations in the UAE. 

♦ At MAS, we aspire to help businesses come up with an effective tax plan that stays sustainable amidst the ever-changing tax laws in the UAE. Types of Corporate Tax Planning:

1) Purposive Tax Planning

Purposive tax planning is the process of developing a tax strategy based on specific business objectives.

2) Permissive Tax Planning

Permissive tax planning is about utilizing permissible tax activities such as exemptions and concessions to lower the payable tax income.

3) Short-Range Tax Planning

This type of tax planning is about utilizing short-term tactics at the end of the year to achieve your desired tax objectives.

4) Long-Range Tax Planning

Long-range tax planning is about coming up with long-term tax formwork that results in positive long-term returns.

Why is Corporate Tax Planning Important?

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Corporate tax planning is essential for businesses in the UAE that want to minimize their tax liabilities. We have a qualified team of expert tax agents who can help you find ways to lower your payable tax income while adhering to tax laws and compliance obligations.

With proper planning, corporate tax can have a huge impact on the financial structure of medium to large-scale organizations in the UAE. 

♦ At MAS, we aspire to help businesses come up with an effective tax plan that stays sustainable amidst the ever-changing tax laws in the UAE. Primary Objective of Corporate Tax Planning:
  • Offering payable tax optimization strategies within the established legal boundaries.
  • International tax planning to ensure a lower payable tax on income.
  • Corporate tax liability and risk assessment.
  • Staying updated with the changing tax regulations.
  • Accurate tax calculation and filing, as per the FTA guidelines.
  • Utilizing legal exemptions to reduce tax liabilities.

What are the documents required for Corporate Tax -CT Registration?

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The UAE has introduced a new tax known as Corporate Tax, which will take effect on June 1st, 2023. Companies that are eligible for this tax must complete the registration process before the start of the financial year. The main objective of the corporate tax is to achieve the UAE’s strategic economic goals and promote accountability in the business sector. It also aims to establish the UAE as a desirable business hub.

To register for corporate tax in the UAE, you will need to provide the following documents:
– Latest Trade License Copy.
– Passport copy of the. corporate owner.
– Emirates ID of the corporate owner.
– Memorandum of Association (MOA) or Power of Attorney (POA) document.
– Contact Information (Email and Phone Number)
– Physical address and P.O box of the company.
– Annual financial audit report.

What are the documents required for VAT Registration?

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There are two types of VAT registration services, companies will choose one category before applying for VAT registration and it will be based on their annual turnover. Following are the VAT registration categories:

Mandatory VAT Registration: Last 12 months turnover is more than AED 375,000.

Voluntary VAT Registration: last 12 months turnover is more than AED 187,500 but less than AED 375,000.

There are many factors which businesses should consider before applying for VAT registration processes like whether to apply for mandatory VAT registration or voluntary VAT registration, The other aspect is to apply for single VAT registration or a Tax group.

Documents Required are:

1- Copy of Trade License. (should not be expired);
2- Passport copy of the owner/manager who owns the trade license. (should not be expired);
3- Emirates ID copy of the owner/manager who owns the trade license. (should not be expired);
4- Contact Details of the company. (P.O Box and complete address such as building & area);
5- Memorandum of Association (MOA) – (not mandatory for sole establishments);
6- Concerned person’s contact details. (Mobile Number, Designation, Email Address);
7- Bank Details of the company. (Must be company’s bank account – Individual’s bank account will not be accepted) – (Account Name, Account Number, IBAN, Bank Name, Branch Name);
8- Turnover declaration for the last 12 months. (should be signed and stamped by the owner of the company and must be printed on the company’s letterhead);

What are businesses responsibilities related VAT?

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All businesses in the UAE need to record their financial transactions and ensure that their financial records are accurate and up to date. Businesses that meet the minimum annual turnover requirement (as evidenced by their financial records) are required to register for VAT. Businesses that do not think they should be VAT-registered should maintain their financial records in any event, in case we need to establish whether they should be registered.

Businesses generally:

  • Must charge VAT on taxable goods or services they supply;
  • May reclaim any VAT they’ve paid on business-related goods or services;
  • Keep a range of business records which will allow the government to check that they have got things right.

If you are a VAT-registered business you must report the amount of VAT you’ve charged and the amount of VAT you’ve paid to the government on a regular basis. It will be a formal submission and it is likely that the reporting will be made online. If you’ve charged more VAT than you’ve paid, you have to pay the difference to the government. If you’ve paid more VAT than you’ve charged, you can reclaim the difference.

 

Which supplies are subject to VAT at zero-rate?

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The following supplies are subject to VAT at the zero rate as an exception, provided that certain conditions for each (as mentioned in the legislation) are met:

  • Export of goods and services.
  • International transport of goods and passengers, and transport-related services.
  • Certain means of transport, such as trains, sea vessels and aircraft, and goods and services related to such means of transport.
  • First supply of residential buildings (lease or sale) within 3 years of finalizing their construction.
  • Airplanes and marine vessels designed for the purpose of rescue or aid through air or sea.
  • Certain precious investment metals.
  • First supply of buildings specifically designed for charitable institutions (lease or sale).
  • First supply of buildings that were converted from non-residential to residential units (lease or sale).
  • Crude oil and natural gas.
  • Certain educational services and related goods and services.
  • Necessary and preventive healthcare services and related goods and services.

What Tax records should you keep and for how long?

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As a prerequisite, every person who conducts any business, whether registered for tax or not, should hold the following documentations and records, as mentioned in the legislation. These documents should include accounting records with entries on payments, receipts, purchases, sales, profits and expenses, including:

  • Balance sheets and income statements (profit and loss accounts).
  • Records of wages and salaries.
  • Fixed asset records.
  • Inventory records and statements (including quantities and values) held at the end of any relevant Tax Period and all records of stock-counts related – to inventory statements.
  • Any records as specified in tax law and other legislation.


    *Note: The aforementioned records must be kept for a minimum of 5 years after the end of the tax period. Where the taxable person owns real estate, the records relating to the real estate must be kept for a period of 15 years, in accordance with the requirements of tax legislation.

What is Excise Tax Stockpiler?

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Stockpiler is a person or business that holds a stock of excise goods for business purposes and cannot prove that Excise Tax has been previously paid on these goods.

If a person or business is not considered to be a stockpiler, it will not need to account for Excise Tax on goods owned after the introduction of the tax that were purchased before the introduction of Excise Tax.

The Excise Tax Executive Regulations contain further details of the circumstances in which you would be considered to be a stockpiler.

Who should apply for Excise Tax Registration?

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There is no registration threshold for Excise Tax, therefore any person who is involved in any of the activities listed below must register and account for Excise Tax.

Activities requiring Excise Tax registration:

Any business which releases excise goods from a designated zone, imports, produces, or stockpiles excise goods in the UAE, should register for Excise Tax.

 

 

What is an Excise Tax?

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On 1 October 2017, the United Arab Emirates introduced an excise tax on tobacco and tobacco products, carbonated drinks, and energy drinks.

On 1 December 2019, the United Arab Emirates expanded the scope of excise tax to include sweetened drinks, electronic smoking devices and tools, as well as liquids used in electronic smoking devices and tools.

The applicable tax rates are as follows:

  • 100% on tobacco and tobacco products, electronic smoking devices and tools, liquids used in electronic smoking devices and tools, and energy drinks.
  • 50% on carbonated drinks and sweetened drinks.

Who should apply for VAT Registration?

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A business must register for VAT if their taxable supplies and imports exceed the mandatory registration threshold of AED 375,000.

Furthermore, a business may choose to register for VAT voluntarily if their supplies and imports are less than the mandatory registration threshold, but exceed the voluntary registration threshold of AED 187,500.

Similarly, a business may register voluntarily if their expenses exceed the voluntary registration threshold. This latter opportunity to register voluntarily is designed to enable start-up businesses with no turnover to register for VAT.

What is Value Added Tax (VAT)?

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VAT was introduced in the United Arab Emirates on 1 January 2018. The general VAT rate is 5% and applies to most goods and services, with some goods and services subject to a 0% rate or an exemption from VAT (subject to specific conditions being met).

The 0% VAT rate applies to goods and services exported outside the VAT-implementing Gulf Cooperation Council (GCC) member states, international transportation, the supply of crude oil/natural gas, the first supply of residential real estate, and some specific areas, such as health care and education.

Further, according to Cabinet Decision (No. 46 of 2020) on 4 June 2020, a person shall be considered as being ‘outside the state’, and thus fall under zero-rating export of services, if they only have a short-term presence in the state of less than a month and the presence is not effectively connected with the supply.

A VAT exemption applies to certain financial services, as well as to the subsequent supply of residential real estate. Further, transactions in bare land and domestic passenger transport are also exempt from VAT.

Certain transactions in goods between companies established in UAE Designated (Free) Zones (DZs) may not be subject to VAT. The supply of services within DZs is, however, subject to VAT in accordance with the general application of the UAE VAT legislation.

What are the Benefits of Hiring a Tax Agent in UAE?

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MAS is a certified Tax Agent in UAE. Our Tax Experts have handled and controlled a lot of situations and provided the best suitable solutions to the companies to corroborate that businesses will constantly operate in a smooth and efficient way.

MAS tax agents can also help you understand the new Corporate Tax Law, learn about the UAE Corporate Tax, and identify the best way to implement the corporate tax in your business.

MAS is FTA Approved Tax Agency in Dubai. Being a registered Tax Agent in UAE, We ensure VAT compliance to serve all businesses.

What are the Benefits of Hiring a Tax Agent in UAE?

A tax agent can handle all the tax affairs of a company, whilst the business owner and key management employees can focus on other important duties. The following are the core benefits of hiring a tax agent in the UAE:

    • Assists in Tax Preparations, Assessments & Representations.
    • Helps You Save Money and Time.
    • Assists in Tax Registration, Implementation, and Compliance.
    • Assists You in Filing Your Returns Timely & Accurately.
    • Acts as a Long-Term Advisor.
    • Sharing the responsibility for tax compliance.
    • Legal represent your company in FTA.
    • Support your company in FTA tax audit.
    • Records review by Tax Agent expert.

Who is a Tax Agent?

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A Tax Agent is an FTA-registered person appointed by the tax registrants and represented before the tax authority, helping them in evaluating the tax liabilities and the activities concerned with the tax rights. The tax agent acts as a legal delegate for a company in tax-related issues. The certified tax agents ensure the compliance of the business with tax liabilities.

The role of a tax agent is to help the businesses to be tax compliant, however, it is not mandatory for a taxable person to hire a tax agent. Hiring a tax agent does not ease the taxable person from their obligations, rather the person is ultimately responsible for the FTA dealings on their behalf.

What is the difference between Tax agents and Tax consultants in UAE?

A tax agent in the UAE is a person or organization that is authorized by the Federal Tax Authority (FTA) to represent taxpayers in their dealings with the FTA, including registering for taxes, filing tax returns, and communicating with the FTA on behalf of the taxpayer.

A tax consultant, on the other hand, is a professional who provides advice and guidance on tax-related matters, but may not necessarily be authorized by the FTA to represent taxpayers in their dealings with the authority.

Tax Agent in UAE

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MAS is one of the best registered Tax Agents in UAE. Being a certified tax agency in UAE, We are offering the best and top-notch tax agent services in UAE. We help businesses in the implementation & compliance of VAT as per the instructions of FTA UAE.

MAS is authorized by the Federal Tax Authority (FTA) and has been appointed as Tax Agent by the companies and businesses to represent them before the Federal Tax Authority (FTA).

Tax Agent in Dubai

A tax agent in Dubai is usually appointed on behalf of another person to represent him before the Federal tax authority. A tax agent in Dubai takes care of the business’s tax obligations and ensures that all the functions of a business are in line with the rules and regulations of the FTA. BMS Auditing UAE is FTA Approved and Certified Tax Agent in UAE. 

MAS, a registered tax agent in UAE, acts as a mediator between Federal Tax Authority and taxable persons. MAS represents your company as a taxable body in front of the FTA.

Will natural persons be subject to UAE Corporate Tax?

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A natural person shall be subject to UAE Corporate Tax in case they derive an annual Turnover exceeding AED 1 million from a ‘Business’ or ‘Business Activity’ in the UAE, as defined by the Corporate Tax Law and in Cabinet Decision No. 49 of 2023.

A natural person will be subject to UAE Corporate Tax when performing any Business or Business Activity generating an annual Turnover in excess of AED 1 million. This excludes income generated by a natural person from the following sources, that are not considered as Businesses or Business Activities:

  • Employment income,
  • Personal Investment income,
  • Real Estate Investment income.

UAE Corporate Tax does not apply on the salary and wages derived by employees in consideration for their services under an employment contract, including all allowances and bonuses.

Interest and other Personal Investment and savings income earned by a natural person in their personal capacity will not be subject to UAE Corporate Tax.

Personal Investment income is income earned by a natural person from investment activities conducted in their personal capacity including interest or dividends. It excludes income from a commercial business, or from activity conducted, or required to be conducted through a Licence from a Licensing Authority in the UAE.

How to prepare for Corporate Tax?

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1. Read the Corporate Tax Law and the supporting information available on the websites of the Ministry of Finance and      the Federal Tax Authority.
2. Use the available information to determine whether your business will be subject to Corporate Tax and if so, from what date.
3. Understand the requirements for your business under the Corporate Tax Law, including, for example: 

a. Whether and by when your business needs to register for Corporate Tax;
b. What is the accounting / Tax Period for your business; 
c. By when your business would need to file a Corporate Tax return;
d. What elections or applications your business may or should make for Corporate Tax purposes;
e. What financial information and records your business will need to keep for Corporate Tax purposes; 

4. Regularly check the websites of the Ministry of Finance and the Federal Tax Authority for further information and guidance on the Corporate Tax regime.

What is the Corporate Tax Period?

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All Taxable Persons (including Free Zone Persons) will be required to register for Corporate Tax and obtain a Corporate Tax Registration Number. The Federal Tax Authority may also request certain Exempt Persons to register for Corporate Tax.

Taxable Persons are required to file a Corporate Tax return for each Tax Period within 9 months from the end of the relevant period. The same deadline would generally apply for the payment of any Corporate Tax due in respect of the Tax Period for which a return is filed.

Illustrated below are examples of the registration, filing and payment deadlines associated for Taxable Persons with a Tax Period (Financial Year) ending on 31 May or 31 December (respectively). 

When is the UAE Corporate Tax regime effective?

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The UAE Corporate Tax regime is effective for Financial Years starting on or after 1 June 2023.

Examples:

  • A Business that has a Financial Year starting on 1 July 2023 and ending on 30 June 2024 is subject to UAE Corporate Tax from 1 July 2023 (which is the beginning of the first Financial Year that starts on or after 1 June 2023).
  • A Business that has a Financial Year starting on 1 January 2023 and ending on 31 December 2023 will become subject to UAE Corporate Tax from 1 January 2024 (which is the beginning of the first Financial Year that starts on or after 1 June 2023).

Who is exempt from Corporate Tax?

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Certain types of businesses or organizations are exempt from Corporate Tax given their importance and contribution to the social fabric and economy of the UAE. These are known as Exempt Persons and include:

In addition to not being subject to Corporate Tax, Government Entities, Government Controlled Entities that are specified in a Cabinet Decision, Extractive Businesses and Non-Extractive Natural Resource Businesses may also be exempted from any registration, filing and other compliance obligations imposed by the Corporate Tax Law, unless they engage in an activity which is within the charge of Corporate Tax.


Who is subject to Corporate Tax?

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Broadly, Corporate Tax applies to the following “Taxable Persons”:
● UAE companies and other juridical persons that are incorporated or effectively managed and controlled in the UAE;
● Natural persons (individuals) who conduct a Business or Business Activity in the UAE as specified in a Cabinet Decision to be issued in due course; and
● Non-resident juridical persons (foreign legal entities) that have a Permanent Establishment in the UAE (which is explained under Section 8).
Juridical persons established in a UAE Free Zone are also within the scope of Corporate Tax as “Taxable Persons” and will need to comply with the requirements set out in the Corporate Tax Law.

However, a Free Zone Person that meets the conditions to be considered a Qualifying Free Zone Person can benefit from a Corporate Tax rate of 0% on their Qualifying Income (the conditions are included in Section 14).

Non-resident persons that do not have a Permanent Establishment in the UAE or that earn UAE sourced income that is not related to their Permanent Establishment may be subject to Withholding Tax (at the rate of 0%). Withholding tax is a form of Corporate Tax collected at source by the payer on behalf of the recipient of the income. Withholding taxes exist in many tax systems and typically apply to the cross-border payment of dividends, interest, royalties and other types of income.

Demystifying Corporate Tax for Business in the UAE!

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Welcome to our comprehensive guide on Corporate Tax, tailored for individuals seeking answers to the question “What is Corporate Tax?” If you’re exploring accounting services and tax registration in the UAE, you’re in the right place.

Corporate Tax Unveiled

Corporate Tax stands as a pivotal component of financial landscapes, constituting a direct tax on the net income or profits of corporations and businesses. Often known as “Corporate Income Tax” or “Business Profits Tax” in various jurisdictions, its implications resonate deeply in the financial strategies of organizations worldwide.

In the context of the UAE, understanding Corporate Tax is crucial for businesses navigating the dynamic tax landscape. As a leading hub for international business, the UAE boasts a unique tax environment, and our expert insights can guide you through the intricacies of local regulations.

Navigating the UAE Tax Landscape

If you find yourself in need of accounting services and tax registration in the UAE, our specialized expertise can be your compass. The Emirates present a distinctive set of challenges and opportunities when it comes to tax compliance, and our seasoned professionals are here to ensure your business aligns seamlessly with local fiscal requirements.

Our services encompass a range of solutions, including meticulous accounting practices, strategic tax planning, and efficient tax registration processes. Whether you’re establishing a new business or seeking to optimize your existing tax structure, our team is dedicated to providing tailored solutions that resonate with the unique demands of the UAE market.

Why Choose Our Expertise:
  1. In-Depth Knowledge: Our team possesses an in-depth understanding of Corporate Tax nuances in the UAE, ensuring your business remains compliant and optimized for success.
  2. Tailored Solutions: We recognize that every business is unique. Our services are crafted to address your specific needs, offering personalized solutions that resonate with your organizational goals.
  3. Efficient Processes: Navigating tax landscapes can be intricate. Our streamlined processes ensure a seamless experience, from initial consultation to ongoing support, guaranteeing efficiency at every step.

Connect with Us

Embark on a journey toward tax efficiency and financial success in the UAE. Whether you’re delving into the world of Corporate Tax or in need of expert accounting and tax registration services, we’re here to guide you.
Contact us today to explore how our specialized solutions can elevate your business in the vibrant business environment of the United Arab Emirates.

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