Avoid Penalties: Your Essential Guide to UAE Free Zone Corporate Tax Deadlines and Compliance

Learn the key deadlines, compliance steps, and penalties for corporate tax registration and filing in UAE Free Zones. Partner with BMS Auditing for expert tax assistance and avoid penalties.

The UAE Free Zone is a leading business hub. It offers 100% foreign ownership, duty-free benefits, and numerous tax incentives. In line with Federal Decree Law No 47 of 2022 on Corporate tax, that came into effect from June 1, 2023, the UAE government highlighted a range of new tax responsibilities in relation to any entities registered on the mainland or in the UAE Free Zones.

To avoid hefty penalties, it is essential to understand the impact of non-compliance and any violation of the prescribed rules and timelines. Whether the business is a mainland or free zone entity, timely registration and filings are necessary to steer clear of easily avoidable penalties.

Let us walk you through corporate tax registration deadlines and brief you on the applicable rules in the Free Zones, the set penalties for non-compliance, and how to employ a sound approach that aligns with UAE tax laws.

Corporate tax in UAE Free Zone

The corporate tax rate for a Qualifying Free Zone Person (QFZP) is 0% on qualifying income, while on non-qualifying income, corporate taxes are subject to a standard rate of 9%.

All businesses, unless specifically categorized as exempt, must register and submit tax returns to the Federal Tax Authority within the set timelines.

Corporate tax deadlines in UAE

In June 2024, the Federal Tax Authority confirmed corporate tax registration deadlines depending on the license's date. Businesses must register according to the set timelines concerning the incorporation date, not on the financial year. For instance, if a license was issued in March, the company must register for corporate tax by March 31, 2025. Failure to meet the deadlines will result in an AED 10,000 penalty. 

Corporate tax Registration in Free Zone entities in UAE

The UAE’s Federal Tax Authority has implemented deadlines for corporate tax registration and filing depending on the type of establishment and duration when it is licensed.

1. Business with Legal Entities Incorporated after 1st March 2025: Legal entities licensed or after March 1st, 2025  must register for corporate tax within 90 days from the date of incorporation.

1. Natural person: A natural person with an annual turnover exceeding AED 1 million should submit corporate tax registration by 31st March of the year following the tax year. For example, if a sole proprietorship firm is making a gross revenue of AED 1 million in the Jan - Dec 2024 tax year, registration must be completed before 31st March 2025.

1. Foreign Legal Entities: Foreign legal entities managed and functioned in the UAE must register for corporate tax within 3 months of the following tax period. For example, a company with a tax period of 1st April 2024 to 31st March 2025 must register for corporate tax by 31st March 2025.

• Permanent Establishment: New establishments must register within 3 months after the date of incorporation

Corporate tax Filing Deadlines

Every UAE company must submit a corporate tax return filing for each tax period in accordance with FTA directives. Non-compliance will result in severe penalties and fines. 

Important compliance requirements: 

• All businesses including Free Zone entities must submit corporate tax return filing and obtain a corporate tax registration number.
• Exempt businesses must mandatorily file corporate taxes as per the Federal Tax Authority. 

Timeline for Corporate tax filing

Each taxpayer shall pay the amount needed to the FTA within nine months from the conclusion of the financial year. Reporting guidelines should be followed by businesses submitting required documents to comply with the filing of corporate tax returns that must be completed before the deadline.

Elements of Corporate Tax Compliance in Free Zones

To adhere to the conditions mentioned in the Federal Tax Authority, Free Zone businesses must follow the following steps:-

• Evaluate Business activities: Free zone companies must evaluate the source of income to identify the eligibility criteria for tax exemption.
• Keep Proper Accounts: For companies with eligible income, appropriate financial records must be maintained to substantiate exemption claims.
• FTAs portal registration: Free zone companies must register on the FTA's portal to request a Tax Registration Number (TRN).
• Timely filing return: Post corporate tax registration, the corporate tax return has to be filed within 9 months after the end of the financial year.
• Compliance to Economic Substance: Adhere to the economic substance requirements for Qualifying Free Zone Person (QFZP).
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Penalties for Non-compliance Corporate Tax Registration in UAE

Every business whether it is a mainland or free zone enterprise must register for corporate tax within the stipulated time frame.  Failure to complete the corporate tax registration can lead to hefty penalties as outlined below:

• Administrative fines: One will incur a penalty of AED 10,000 for late penalties. For late corporate tax deregistration, the penalty begins at AED 1000 and goes up to a maximum AED 10,000.
• Delay in processing: If you miss the registration deadline, it may lead to a delay in processing tax refunds and impact business operations.
• Hindrance to government obstacles: Delay registration can put obstacles to government permission and clearance. 
• Reputational Risk: Non-compliance with FTA regulation can harm the company’s regulation and credibility.

A delay in corporate tax return submission may cause penalties depending on the duration of the delay and the outstanding amount. 

Why partner with BMS Auditing?

BMS Auditing is a leading tax agent with a team that has some of the best tax experts in the GCC region. Our experts have immense hands-on experience and expertise, ensuring hassle-free compliance processes. 

Let BMS Auditing handle all your Corporate Tax compliances and focus all your resources on ensuring optimum operational performance. 

Call us today for a free session with our tax experts!