Developments in Corporate Tax Compliance

In the past week, guidance has been provided by both the Ministry of Finance and the Federal Tax Authority (FTA) regarding deadlines for Corporate Tax registration.

 

The new deadlines have the potential to significantly reduce the time left for meeting the deadlines for Corporate Tax registration. For example, certain applicable taxable persons will be required to submit the Corporate Tax registration applications by 31 May 2024 in order to avoid a violation and the applicable penalties.

 

Previous guidance from the FTA stated that taxable persons would have until the due date of their first tax return to register. For example, if a taxable person had a financial year ending on 31 May 2023, they would have a registration period of 26 months available until 28 February 2025. Similarly, for taxable persons with a financial year ending on 31 December 2022, a registration period of 33 months would be available until 30 September 2025.

 

Federal Tax Authority Decision No 3 of 2024 (FTA Decision) was issued on 22 February 2024 mandating specific application deadlines to register for Corporate Tax applicable to both juridical and natural persons, that are either resident or non-resident persons, to be effective from 1 March 2024.

 

We emphasis that the deadlines are applicable for the submission of Corporate Tax registration applications, as distinguished from completion of the registration process and possession of a registration certificate.

 

The deadlines specified by the FTA Decision are determined by a combination of the month of issuance of the taxable person’s Trade License, whether a juridical person was incorporated prior to 1 March 2024, and the residency of the taxable person.

 

Tax Registration Deadlines of Resident Juridical Persons

 

A juridical person that is a Resident Person, incorporated or otherwise established or recognised prior to 1 March 2024, shall submit the Tax Registration application, in accordance with the following:

Date of License Issuance Irrespective of Year of Issuance

Deadline for submitting a Tax Registration application

1 January – 31 January

31 May 2024

1 February – 28/29 February

31 May 2024

1 March – 31 March

30 June 2024

1 April – 30 April

30 June 2024

1 May – 31 May

31 July 2024

1 June – 30 June

31 August 2024

1 July – 31 July

30 September 2024

1 August – 31 August

31 October 2024

1 September – 30 September

31 October 2024

1 October – 31 October

30 November 2024

1 December – 31 December

31 December 2024

Where a person does not have a License at the effective date of the FTA Decision

(3) three months from the effective date of the FTA Decision

 

A juridical person, that is a Resident Person incorporated or otherwise established or recognised on or after 1 March 2024, shall submit the Tax Registration application, in accordance with the following:

Category of Juridical Persons

Deadline for submitting a Tax Registration application

A person that is incorporated or otherwise established or recognized under the applicable legislation in the UAE, including a Free Zone Person

(3) three months from the date of incorporation, establishment or recognition

A person that is incorporated or otherwise established or recognized under the applicable legislation of a foreign jurisdiction that is effectively managed and controlled in the UAE

(3) three months from the end of the Financial Year of the person

 

Tax Registration Deadlines of Non-Resident Juridical Persons

 

A juridical person, that is a Non-Resident Person prior to 1 March 2024, shall submit a Tax Registration application in accordance with the following:

Category of Juridical Persons

Deadline for submitting a Tax Registration application

A person that has a Permanent Establishment in the UAE

(9) nine months from the date of existence of the Permanent Establishment

A person that has a nexus in the UAE

(3) three months from the effective date of the FTA Decision

 

A juridical person, that is a Non-Resident Person on or after 1 March 2024, shall submit a Tax Registration application in accordance with the following:

Category of Juridical Persons

Deadline for submitting a Tax Registration application

A person that has a Permanent Establishment in the UAE

(6) six months from the date of existence of the Permanent Establishment

A person that has a nexus in the UAE

(3) three months from the effective date of the FTA Decision

 

Tax Registration Deadlines of Natural Persons

 

A natural person conducting a Business or Business Activity in the UAE shall submit a Tax Registration application in accordance with the following:

Category of Natural Persons

Deadline for submitting a Tax Registration application

A Resident Person who is conducting a Business or Business Activity during the 2024 Gregorian calendar year or subsequent years whose total turnover derived in a Gregorian calendar year exceeds the threshold specified in the relevant tax legislation

31 March of the subsequent Gregorian calendar year

A Non-Resident Person who is conducting a Business or Business Activity during the 2024 Gregorian calendar year or subsequent years whose total turnover derived in a Gregorian calendar year exceeds the threshold specified in the relevant tax legislation

(3) months from the date of meeting the requirements of being subject to tax

 

Penalties for Non-Compliance

 

On 27 February 2024, the Ministry of Finance issued Cabinet Decision No 10 of 2024 (amending the schedule of violations and administrative penalties of Cabinet Decision No 75 of 2023) that specifies that an administrative penalty of AED 10,000 will be imposed for failure to meet the deadlines provided for the submission of a tax registration application.

 

Points for Consideration

 

We suggest that you review and understand the registration timelines, and commence any necessary action to ensure compliance. Furthermore, Corporate Tax registration will now form part of any new corporate establishment process as, unlike VAT registration for which certain thresholds are required to be met, resident juridical entities will have only three months from the date of incorporation, establishment or recognition to submit an application for their Corporate Tax registration. ■

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Unification of Federal and Local Judicial Principles: key decisions relating to civil procedure and cheques

The Commission for the Unification of Federal and Local Judicial Principles (the “Commission”) recently issued a number of decisions aimed at harmonising certain “judicial principles”. Since the doctrine of stare decisis is not followed in the UAE, there have been instances of incongruities in the application of law by the UAE courts. The Commission was established under Federal Law 10 of 2019 (the “Federal Law”), recognising a need to avoid such inconsistencies.

 

In terms of Article 18 of the Federal Law, decisions of the Commission are binding on all on-shore courts of the UAE, including courts of emirates which are not part of the federal judicial system (Abu Dhabi, Dubai, and Ras Al Khaimah) – with the fail-safe that an inconsistency between a judgment and a “judicial principle” recognised by the Commission may constitute a ground for appeal of a judgment which otherwise would be final. Requests for unification of judicial principles can be submitted by the heads of supreme courts in the UAE, the federal public prosecutor, and local prosecutors.

 

The following are some of the key decisions issued by the Commission.

 

Scope of Article 667 of the Commercial Transactions Law (enabling direct execution proceedings for cheques dishonoured for insufficient funds) expanded to include cheques dishonoured due to account closure

 

  • In terms of Article 667 of Federal Decree Law 50 of 2022 (the “Commercial Transactions Law”), the bearer of a cheque which was dishonoured due to “unavailability” or “insufficiency” of funds is able to rely on the cheque as a writ of execution to file execution proceedings (as opposed to asserting a substantive claim) against the drawer of the cheque. This provision was introduced following the decriminalisation of the act of drawing a cheque without having a sufficient balance in the account to honour the cheque. Readers are reminded that not all acts concerning cheques were decriminalised.

 

  • The Commission has expanded the scope of Article 667 of the Commercial Transactions Law to include instances where a cheque is dishonoured due to an account being closed. Therefore, bearers of cheques which are dishonoured for this reason are now able to file execution proceedings directly against the drawer for the value of the cheque.

 

  • It should be noted that the act of closing an account prior to issuing a cheque or presenting it to the drawee for payment still constitutes an offence punishable by a term of imprisonment of up to two years. Therefore, until further clarification is provided, the prudent view is that this act has not been decriminalised.

 

Federal Supreme Court / Courts of Cassation power to reverse judgments extended to criminal matters

 

  • In terms of Article 190 of Federal Decree Law 42 of 2022 (the “Civil Procedure Law”), the Federal Supreme Court or Court of Cassation (as applicable), is empowered to ‘reverse’ final civil judgments issued by it, on its own volition or upon an application being made by the party against whom the judgment was issued, in any of the following circumstances:

 

– if the judgment contains a procedural error committed by the court or its auxiliary bodies and such error affected the outcome of its decision or judgment;

 

– if the decision or judgment is based on an abrogated law, and the application of the correct law would have materially altered the court’s judgment; or

 

– if the judgment is issued in violation of any judicial principles prescribed by the Commission, among others

 

  • The Commission has widened the ambit of Article 190 of the Civil Procedure Law to cover judgments issued by the Federal Supreme Court or Court of Cassation (as the case may be) in criminal cases.

 

Court of Appeal to decide on the substance of the claim if it declines to grant a payment order

 

  • Payment Orders are mechanisms that enable a creditor to obtain summary relief where, among others, there is a confirmed debt owed to it. Prior to the current decision of the Commission, a judgment on an application for a Payment Order could be appealed to the Court of First Instance (if the value of the claim is less than AED 50,000), or to the Court of Appeal (if the value of the claim exceeds AED 50,000). If the Court of Appeal found that a Payment Order should not be granted, and absent an appeal to the Court of Cassation (available only on issues of law and where the claim exceeds AED 500,000) the applicant was required to file ordinary proceedings anew to claim its debt.

 

  • Following the current decision of the Commission, if the Court of Appeal finds that a payment order should not have been granted, it must proceed to adjudicate the applicant’s claim against the counter-party as it would in ordinary proceedings.

 

  • While this is advantageous to a creditor in the sense it no longer has to incur the time and expense to file ordinary proceedings anew in the Court of First Instance, it also means that the parties lose one level of appeal, unless the value of the claim exceeds AED 500,000 (thus enabling an appeal to the Court of Cassation on an issue of law). ■

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