The Federal Tax Authority (FTA) has recently issued an important decree—Decision No. (07) of 2024—regarding the extension of deadlines for tax return submissions and payments under the new corporate tax regime in the UAE. This decision, which aligns with the broader context of the tax reforms introduced by the government, has implications for businesses operating in the UAE, especially those newly established in recent years. It is crucial for companies to understand these changes to ensure they remain compliant and avoid potential penalties.

Key Features of the Decision

The primary objective of this decision is to establish new, extended deadlines for businesses to submit their tax returns and settle any outstanding corporate tax liabilities. Specifically, the FTA has set the final deadline for tax return submission and corporate tax payment to 31 December 2024. However, this extension is only applicable under certain conditions, which businesses must meet to benefit from the postponement.

The decision specifies that the extension applies to businesses that meet the following criteria:

Established or Recognized After June 1, 2023: This means that any business that has been founded or legally recognized under UAE laws after June 1, 2023, is eligible for the extended deadlines, provided that they adhere to the rest of the requirements outlined in the decision.

Tax Period Ends by February 29, 2024: The business’s tax period must end on or before February 29, 2024, to qualify for the extended deadlines. This condition ensures that only companies with a specific tax timeline benefit from the adjustment.

These provisions are in line with the newly implemented Federal Decree-Law No. (47) of 2022, which governs corporate taxation in the UAE. The law introduced sweeping changes, including the introduction of a corporate tax on profits for the first time in the UAE’s history. While many businesses have already been gearing up for compliance with the new tax regime, this decision offers additional time for those who are still aligning their operations with the legal framework.

Impact on Businesses

This extension is particularly significant for businesses that were either newly incorporated or expanded after June 2023. Many companies, especially those operating in dynamic sectors like technology, services, and trading, may not have yet fully adjusted their financial and tax systems to accommodate the new requirements under the Federal Decree-Law No. (47) of 2022.

For businesses that qualify for this extension, the new deadline provides much-needed breathing room to ensure their tax submissions are accurate and complete. This will allow companies to avoid the risk of incurring penalties for late submissions or incorrect filings, a common concern for businesses unfamiliar with the complexities of corporate tax compliance in the UAE.

It is also worth noting that the FTA has emphasized that businesses must meet all the conditions stipulated in the decision for the extension to apply. Any company that fails to comply with the eligibility requirements, or misses the new deadline of December 31, 2024, will face penalties as per the tax laws in place.

The Legal Framework: Aligning with UAE’s Growing Corporate Tax Structure

The introduction of a corporate tax regime in the UAE marked a significant shift in the country’s fiscal policy, transitioning from a tax-free environment for businesses to a more structured and regulated corporate tax framework. This shift is in line with the UAE’s vision to diversify its economy and enhance its financial sector by complying with international tax standards.

Federal Decree-Law No. (47) of 2022 and its amendments were introduced to address the taxation of profits for businesses operating in the UAE. The law applies to both domestic and foreign-owned entities, and companies must meet specific thresholds to qualify for tax exemptions or reduced rates.

By extending deadlines through Decision No. (07) of 2024, the FTA is helping businesses transition smoothly into this new tax regime, ensuring that businesses have sufficient time to align their financial reporting and tax obligations with the new standards. This proactive approach aims to reduce the compliance burden on companies, particularly those that are still adjusting to the corporate tax landscape.

In conclusion

Decision No. (07) of 2024 provides essential clarity and flexibility for businesses that were established or recognized after June 2023, allowing them additional time to submit their tax returns and settle outstanding payments. This extension reflects the UAE government’s commitment to ensuring a smooth transition to its corporate tax regime, which is essential for the country’s ongoing economic growth and competitiveness. Businesses that meet the specified criteria should take full advantage of this extension, while ensuring they comply with all other legal requirements to avoid penalties and stay in good standing with the tax authorities.