UAE Corporate Tax Registration for Offshore Companies: Complete Guide

The Emirates’ corporate tax implementation significantly changed the country’s status as a tax-free business destination. To strengthen the nation’s position as a leading global investment hub and confirm compliance with worldwide tax standards, UAE corporate tax registration for offshore companies became mandatory in June 2023.

Unlike other nations, the UAE corporate tax rate, which is a direct tax applied to businesses with eligible taxable income operating in the Emirates, is lower, which has still maintained the nation’s reputation as a premier global business hub. Whether you own an offshore company in the Emirates or are planning to establish one, it is a must to learn about the compliance and tax regulations associated with UAE corporate tax registration for offshore companies.

Continue reading and explore the essentials of UAE corporate tax registration for offshore companies, from the registration process to deadlines.

What are Offshore Companies in UAE?

Before discussing the essentials of UAE corporate tax registration for offshore companies, let’s get an overview of offshore companies. Offshore businesses are not registered in their primary operating locations and are registered in designated jurisdictions, like RAK ICC, JAFZA, and Ajman Free Zone. Primarily, offshore company formation is done for international trade, asset protection, and tax minimization purposes. They can conduct business operations in the local market, as they are not registered in the UAE. Offshore company formation in UAE guarantees excellent confidentiality, as making the ownership rights of the company public is not mandatory.

Understanding UAE Corporate Tax Registration for Offshore Companies

A major shift in the Emirates’ tax structure was introduced with the implementation of corporate tax. On December 9, 2022, a federal corporate tax with a 9% rate is applied to businesses operating in the UAE with annual taxable income above AED 375,000. This applies to financial years on and after June 2023. Businesses with taxable income below the eligibility requirement can continue to enjoy a tax-free environment. Additionally, to align the national tax framework with the OECD standard, a 15% DMTT is applied to MNEs. 

Scope of UAE Corporate Tax: Businesses established in the Emirates or operating under a UAE business are subject to this tax. Apart from business entities, individual owners and non-resident business entities are also subject to this tax if they conduct business activities in the UAE or have a permanent establishment and earn income from operations within the country.

UAE Corporate Tax Exemptions: Government entities, qualifying freezone businesses, businesses operating in the natural resource industry, and qualifying investment funds are not subject to the UAE corporate tax.

Onshore vs Offshore Tax Registration in UAE

Onshore companies registered in the UAE’s mainland and operating the business within the nation’s borders are responsible for onshore tax registration. All onshore businesses are subject to the standard 9% corporate tax; however, they benefit from wider local market access and higher chances to secure partnerships and contracts from local businesses and government. Higher transparency, annual report submission, and maintaining a physical office are some compliance requirements that onshore businesses must adhere to.  

Unlike onshore businesses, offshore companies in UAE are registered in designated zones within the country and operate outside its borders. They are subjected to lower tax rates and can benefit from tax exemptions, a smooth registration process, asset protection, and easier international market access. For offshore tax registration in UAE, establishing a physical office is not mandatory.

Offshore Jurisdictions in Tax Planning: Benefits

• Tax Efficiency: Businesses registered in offshore jurisdictions are subject to 0 or low corporate tax rates, which results in lower tax liability.
• Asset Protection: The legal structure of offshore jurisdictions protects their assets from legal disputes and debt holders.
• Business Expansion: Offshore companies can expand their operations internationally without any strict restrictions.
• Privacy & Cost Savings: Businesses operating in offshore jurisdictions can keep their financial transactions and ownership rights records private. Also, lower compliance costs help with more cost savings.

Offshore Corporate Tax Registration: Challenges

• Limited Scope: Apart from being restricted to operating in the local markets, offshore companies in UAE cannot engage in the retail and manufacturing sectors. As they mainly depend on international markets, they are more impacted by worldwide financial instability. 
• Regulatory Updates: Even though the compliance requirements are fewer, regular updates in the legal system lead to increased compliance costs. 
• Financial Challenges: They cannot open a bank account in local banks due to strict due diligence, which makes loans and other financial facilities less accessible for them.

UAE Corporate Tax Registration for Offshore Companies: Deadlines

• Registration Deadline: If an offshore business, with permanent establishment, secures taxable income above the eligibility threshold in 2025, they have to register for tax registration before March 31 of the following year.
• Date of Filing: Once they secure registration, it is mandatory to file tax returns within nine months after the end of a specific financial year.
• Record Keeping: They have to maintain accurate financial and business transaction records of the past 7 years to confirm compliance with FTA.

Offshore Tax Registration: Process

Step 1: Firstly, you have to visit the EmaraTax portal and create an account or log in with the credentials provided during VAT registration. Offshore business owners have to provide an email address and phone number while logging in. 

Step 2: Now, you have to go to the taxable persons section and select the new taxable person option. After that, you have to provide the business’s legal name, commercial registration number, etc. 

Step 3: Then, click on the corporate tax option, and the offshore tax registration UAE interface will open. 

Step 4: Once you click on the start option, the interface will guide you through a series of registration processes.

Step 5: Then, you have to enter your business details, like structure, registered address, etc., in the entity section.

Step 6: Now you have to enter the identification details, like the unique TRN number.

Step 7: Proceed with filling in contact details, phone number, and email address of the primary person of the business. 

Step 8: Now, you need to fill in the authorized signatory details accurately, as this will present your business with tax-related matters.

Step 9: Before checking the declaration checkbox for accurately filled details, it is advisable to review them once again. 

Step 10: Once you are done reviewing, click on submit, after which an offshore tax registration completion message will be delivered to you. 

Step 11: Keep monitoring your registration request approval on the portal. Once it is approved, a notification regarding the further process will be submitted to you.

Conclusion 

Under the corporate tax regulations introduced in 2023, UAE corporate tax registration for offshore businesses has become mandatory to stay compliant with the FTA. However, navigating the offshore tax registration and compliance process can be difficult for businesses, as any mistake can lead to severe legal issues. If you are seeking assistance for this complex process from a professional and reliable partner, you can contact Hisab Taskmaster CAdvsiors. We have years of expertise in delivering top-quality financial solutions and tax advisory services to our valuable clients. Contact us and secure a seamless offshore corporate tax registration in UAE. 

Also Read – How the UAE’s Corporate Tax Reforms Will Affect Your Business