Understand Your Qualifying, liability, and filing responsibilities under the U.A.E Federal Tax Authority

 As the schedule of new tax or revenue streams in the UAE expands in both terms of category and scale, it is crucial those impacted understand their qualifying, liability, and filing responsibilities. As the FTA (Federal Tax Authority) continues to expand its monitoring and enforcement, the opportunities for negotiating penalty waivers will decrease/cease and non-compliance could result in your business being wound up. 

The UAE accountancy profession has gleefully accepted this income 'gift'. The prices many charge for intermediating on behalf of tax-liable clients are embarrassing. And wrong. The client after all is the one with the heavy lifting. Providing the information needed for a) assessing the liability b) populating the data required in the standard tax return templates and c) paying the bill/liability. The accountancy practice or advisor simply inputs all this information. Once you have the 'understanding' of what's involved and depending on the number of tax categories, with practice, a few minutes of work. Every quarter. So it would be worth investing in in-house expertise. 

Yes I know the initial registration can be difficult, but again not warrant the fees being charged.

There are also many areas where clients may not realize there is a liability or potential liability - eg commercial property sales. It is here that some 'knowledge' may be needed. 

Whether you are subject to FTA taxes depends on your business activities and structure. Here's a general overview of qualifying factors:

 Corporate Income Tax (CIT): CIT applies to all resident companies in the UAE, regardless of their nationality. Resident companies are those that have their headquarters, management, or control in the UAE or derive at least 50% of their income from UAE sources.

 Excise Tax: Excise tax is levied on specific goods, such as tobacco products, sugary drinks, and carbonated beverages. It is typically borne by the final consumer, but businesses involved in the production, importation, or distribution of these goods are responsible for collecting and remitting the excise tax.

 Value-Added Tax (VAT): VAT is a general consumption tax applied to most goods and services supplied in the UAE. Businesses that exceed a specific taxable turnover threshold, currently AED 375,000, are required to register for VAT.

 Liability for FTA Taxes

 Once you determine whether you qualify for FTA taxes, you need to assess your liability for each specific tax. This involves understanding the rates, exemptions, and deductions applicable to your business activities.

 Corporate Income Tax (CIT): The standard CIT rate in the UAE is 9%. However, certain industries, such as oil and gas, may have different rates.

 Excise Tax: Excise tax rates vary depending on the specific goods being taxed. For example, the excise tax on tobacco products is 50%, while the tax on sugary drinks is 50%.

 Value-Added Tax (VAT): The standard VAT rate in the UAE is 5%. Certain goods and services are exempt from VAT, such as basic food items, medicines, and educational services.

 Filing Responsibilities under the FTA 

Businesses that are liable for FTA taxes must comply with specific filing requirements. These include: 

Tax Registration: Businesses exceeding the taxable turnover threshold for VAT or engaging in activities subject to excise tax must register for the respective tax with the FTA. 

Tax Returns: Businesses are required to file periodic tax returns with the FTA, typically quarterly for VAT and annually for CIT and excise tax. 

Tax Payments: Businesses must make timely payments of their tax liabilities to the FTA.

 FTA Penalties for Non-Compliance