1. Corporate Tax Registration
All Taxable Persons (including Free Zone Persons) are 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. Expect to pay about AED1500 for this service.
2. VAT – VAT is a 5% consumption tax in the UAE
Certain sectors e.g. healthcare have special rules though. Generally speaking, according to the UAE VAT Law, freezone companies must undergo VAT registration UAE on their taxable supplies. Both fenced and unfenced freezones are subject to standard UAE VAT rules as they are considered within the territorial scope of the UAE. The threshold for VAT registration remains the same – AED 375,000 for mandatory registration and AED 187,500 for voluntary VAT registration. However, there is special VAT treatment for the ‘Designated Zone’ specified by the Cabinet Decision. VAT registration is AED3,000. VAT filing is AED2,000.
3. Accounting Methods
It is noteworthy that in the UAE, most businesses must use accrual accounting for tax purposes to comply with IFRS standards, while smaller businesses with revenue under AED 3 million can opt for cash-basis accounting. Depreciation – Depreciation is an accounting method that reduces an asset’s book value over its useful life by allocating its cost over time, rather than expensing it all at once. It reflects the asset’s loss in value due to use, wear and tear, or obsolescence, and its main purpose is to match the asset’s cost with the revenue it helps to generate, leading to more accurate financial statements. Accounting fees for outsourced services would start at AED2,000 upwards.
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- In the UAE, depreciation usually applies to physical assets like vehicles, machinery, buildings, and equipment. These fixed assets lose value over time due to usage, technological advancements, and market conditions. It’s important to remember that depreciation only pertains to tangible assets. In contrast, intangible assets like patents or trademarks are subject to amortisation.
- Unlike in the US, where the IRS has detailed regulations on depreciation, the UAE’s Corporate Tax (CT) Law doesn’t explicitly address the tax treatment of depreciation or amortisation. However, it does mention that net interest expense (NIE) is deductible up to a certain percentage of the tax-adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA). This suggests that depreciation is a recognised factor in calculating taxable income.
4. Audits
Mandatory audits in the UAE are required for most companies registered in the mainland and free zones to ensure financial accuracy and compliance. All free zone companies must undergo an annual audit, and mainland companies are subject to audit requirements under the Commercial Companies Law, with specific obligations depending on the company’s type, revenue, and licensing authority. Fees vary with nature and complexity of the business but AED5,000 to AED20,000 depending on turnover and complexity.
5. Corporate Tax Returns
In the UAE, the filing of corporate tax returns is a mandatory annual requirement for most businesses, including those in free zones, unless specifically exempted. The process is conducted electronically through the Federal Tax Authority’s (FTA) EmaraTax portal. Again the fee depends but AED3,000 to AED15,000 is an approximate range.
6. Dissolution
As with many jurisdictions, dissolving a company in the UAE can be time consuming and expensive. Fees vary depending on the nature of the business and the free zone.
7. License Renewals
Trade licenses are normally renewable annually. Fees vary with the freezone and the nature of the business.
