UAE Corporate Tax- Exceptions from Tax Registration
10 April 2023
The Ministry of Finance (‘MoF’) has issued Ministerial Decision No. 43 of 2023 on Exception from Corporate Tax registration for the Purpose of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (‘Corporate Tax Law’). Article 51 of the Corporate Tax Law deals with the requirement to register for Corporate Tax (‘CT’) and provides authority to Minister to prescribe the persons exempted from registration.
The Cabinet Decision prescribes that the following persons shall not reregister for CT with the Federal Tax Authority (FTA):
- A Government Entity.
- A Government Controlled Entity.
- A Person engaged in an Extractive Business that meets the conditions of Article 7 of the Corporate Tax Law.
- A Person engaged in a Non-Extractive Natural Resource Business, that meets the conditions of Article 8 of the Corporate Tax Law.
- A Non-Resident Person that derives only State Sourced Income from UAE and does not have a Permanent Establishment in UAE according to the provisions of the Corporate Tax Law.
This exception does not apply to the entities covered under point a. to d. which undertake a business activity which is not exempt on account of not meeting the prescribed conditions. Such entities shall be obliged to obtain CT registration.
The MoF has started CT registration for certain businesses. The MoF has highlighted in one of their awareness sessions that there will be no penalties for late CT registration if the registration is obtained before the first filing under Corporate Tax Law.
Key takeaways
- This decision provides clarity to Non-Resident Persons that they do not require to register for CT unless they create a Permanent Establishment in the UAE. It is pertinent to note that, currently, a 0% withholding tax rate has been prescribed on payment of State Sourced Income from UAE to Non-Resident Persons. The exception from CT registration a welcome relief for Non-Resident Persons.
- The Non-Resident Persons may attract taxability on income having ‘Nexus in the UAE’. However, the Cabinet Decisions defining ‘Nexus in the UAE’ is still awaited. Hence this aspect remains open for Non-Resident Persons.
- Free Zones entities are not included in list of exception entities, which inversely confirms that they do have to obtain CT registration and carry out compliance.
- Businesses in Extractive and Non-Extractive Natural Resource Business covered under Article 7 and 8 of the Corporate Tax Law are exempted from Federal Corporate Tax as they are currently subject to Emirate level Corporate Tax. Exception from CT registration provides further clarity to such businesses.
How can we help?
With the announcement of the above exception, businesses can evaluate their CT registration requirement and may apply for registration. Our CT experts can help business analyse their CT registration requirements, including the eligibility to claim available exemptions and evaluate whether Non-Resident Persons create a Permanent Establishment in the UAE. Please feel free to reach out to any of our Tax Team members.