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UAE E-invoicing Update – Administrative Violations and Penalties under e-invoice framework
The UAE Ministry of Finance has issued Cabinet Decision No. 106 of 2025, which sets out violations and administrative penalties related to the national e-invoicing system. The decision takes effect the day after its publication in the Official Gazette, making compliance an immediate priority for businesses operating in the UAE.
In simple words, this decision moves e-invoicing from a regulatory requirement to an enforceable obligation, with defined penalties for non-compliance.
This article explains what the decision covers, who it applies to, and most importantly, what businesses need to do now.
What Is Cabinet Decision No. 106 of 2025 About?
Cabinet Decision No. 106 of 2025 defines violations and penalties linked to the UAE e-invoicing system introduced under Federal Decree-Law No. 28 of 2022.
Its purpose is to ensure that businesses:
- Implement the e-invoicing system on time
- Use approved technical channels
- Issue and receive invoices correctly
- Report system issues without delay
The decision provides legal clarity and sets financial consequences for failures on both the issuing and receiving sides.
Who Does the Decision Apply To?
The decision applies to all entities involved in:
- Issuing electronic invoices
- Transmitting electronic invoices
- Receiving electronic invoices
- Issuing or receiving electronic credit notes
If a business is subject to Federal Decree-Law No. 28 of 2022, this decision applies to it, regardless of size or industry.
What this really means is that even businesses with limited transaction volumes are not exempt from compliance obligations.
Key Definitions You Should Understand
To avoid confusion, the decision clearly defines important terms used in the e-invoicing framework.
Key definitions include:
● Electronic Invoice
A structured digital invoice is issued, transmitted, and received through the UAE e-invoicing system.
● Electronic Credit Note
A structured electronic document used to adjust or correct an issued electronic invoice.
● Issuer
The entity responsible for issuing the electronic invoice or credit note.
● Recipient
The entity that receives the electronic invoice or credit note.
● Accredited Service Provider (ASP)
A service provider approved by the Authority to facilitate e-invoicing.
Understanding these roles is essential because penalties are assigned based on whether a business acts as an Issuer or a Recipient.
What Are the Penalties for Issuers?
Issuers carry primary responsibility for issuing and transmitting invoices correctly and on time. The decision lists specific violations with defined penalties.
Penalties applicable to Issuers include:
- Failure to implement the e-invoicing system or appoint an Accredited Service Provider within the prescribed timeline
Penalty: AED 5,000 for each month or part of a month of delay
- Failure to issue and transmit an electronic invoice within the prescribed timeline
Penalty: AED 100 per invoice, capped at AED 5,000 per calendar month
- Failure to issue and transmit an electronic credit note within the prescribed timeline
Penalty: AED 100 per credit note, capped at AED 5,000 per calendar month
- Failure to notify the Authority of a system failure within the prescribed timeline
Penalty: AED 1,000 for each day of delay or part thereof
- Failure to notify the appointed ASP of changes to registered data within the prescribed timeline
Penalty: AED 1,000 for each day of delay or part thereof
The structure of these penalties shows a clear focus on ongoing compliance rather than one-time enforcement.
What Are the Penalties for Recipients?
Recipients also have defined responsibilities under the e-invoicing framework. The decision makes it clear that compliance is not limited to invoice issuers.
Penalties applicable to Recipients include:
- Failure to notify the Authority of a system failure within the prescribed timeline
Penalty: AED 1,000 for each day of delay or part thereof
- Failure to notify the appointed ASP of changes to registered data within the prescribed timeline
Penalty: AED 1,000 for each day of delay or part thereof
This confirms that recipients must actively monitor their systems and maintain accurate registration details.
What Should Businesses Do to Avoid Penalties?
To stay compliant under Cabinet Decision No. 106 of 2025, businesses should focus on operational readiness rather than last-minute fixes.
Key steps include:
- Confirming the timely appointment of an Accredited Service Provider
- Ensuring invoicing systems can issue and transmit invoices within the required timelines
- Setting internal alerts for system failures
- Defining clear reporting responsibilities
- Regularly reviewing and updating registered business data
- Training finance and IT teams on compliance procedures
The thing is, most penalties arise not from intent but from weak processes and unclear ownership.
Why This Decision Matters for Long-Term Compliance
This decision signals a shift toward structured enforcement of digital tax and reporting systems in the UAE. E-invoicing is part of a broader framework that includes VAT compliance, data standardisation, and transaction transparency.
Businesses that align early will face fewer disruptions, lower compliance risk, and better audit readiness.
Those who delay may face recurring penalties that accumulate quietly over time.
To sum up, Cabinet Decision No. 106 of 2025 brings clarity, accountability, and enforceable standards to the UAE e-invoicing system. The expectations are now clearly defined, and the penalties are practical and measurable.
For businesses, the priority is simple. Understand your role, fix your processes, and monitor compliance continuously.
Staying ahead of regulatory change requires more than just technical readiness. It requires the right guidance and clear interpretation along with practical implementation. Working with experienced advisors such as Kreston Menon helps businesses deal with evolving compliance requirements with confidence and stay prepared for what comes next.
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Digital Transformation in Audit: Blockchain, Data Analytics, Real-Time Reporting
Audit has always been about trust, accuracy, and compliance. But the methods and tools used are no longer the same as they were even a decade ago. With digital transformation reshaping industries, auditing is moving towards technology-driven practices. Blockchain Auditing, advanced analytics, and real-time reporting are becoming the foundation of how audits are conducted worldwide, including in the UAE. This shift is not optional anymore; it is shaping the skills auditors need, the way firms operate, as well as the expectations of businesses.
Continue reading the blog ‘Digital Transformation in Audit: Blockchain, Data Analytics, Real-Time Reporting’ to grab further insights on this.
How Audit Processes Are Changing Globally and in the UAE
Traditionally, audits relied heavily on sampling and periodic checks. That approach made sense when data was limited and systems were paper-based. Today, businesses generate massive volumes of data, and stakeholders expect faster insights. Globally, audits are moving from static annual reviews to continuous evaluation. In the UAE, where regulations are tightening and businesses are scaling across borders, the expectation is for more transparent and timely reporting. Regulators are also encouraging the use of digital tools to improve reliability and reduce risks.
The UAE has taken a leading role in adapting to these global changes. Government-led digital transformation programs, such as smart government initiatives and blockchain adoption strategies, are influencing the way audits are carried out. For companies operating in free zones and mainland structures alike, the audit function is no longer just about financial compliance but, it is more about showing operational resilience and alignment with regulatory expectations.
Blockchain Audit: Building Trust in Data
Blockchain technology is bringing new possibilities to assurance. Since it records transactions in an immutable ledger, it offers a transparent way to verify financial data. Here, auditors can check transactions directly at the source without relying only on reconciliations provided by clients. The benefit is clear: greater accuracy, fewer manual interventions, and stronger trust in reported numbers.
For global companies with operations in the UAE, blockchain audit is also significant because it helps bridge compliance with international reporting standards. Cross-border operations involve multiple financial systems, and blockchain ensures data integrity across all of them. The potential for error or manipulation is reduced, allowing auditors to focus more on analysis than on verification.
Blockchain Auditing and Smart Contracts
One area gaining attention is blockchain smart contracts audit. Smart contracts execute transactions automatically when certain conditions are met. While this adds efficiency, it also introduces risks if the code is flawed or if security gaps exist. Auditing smart contracts requires both financial knowledge and technical skill to review coding logic, security vulnerabilities, and compliance with legal frameworks. This is where blockchain auditing extends beyond numbers, it joins technology with assurance.
In the UAE, smart contracts are particularly relevant for industries such as real estate, supply chain, and trade finance, where transactions are frequent and high-value. Auditors who understand how to assess these contracts provide clients with an added layer of security and confidence in their operations.
Data Analytics in Audit: Making Insights Practical
The volume of financial and operational data available to businesses is overwhelming. Nowadays, auditors are not just checking balances; they are analyzing patterns, anomalies, and risks hidden in datasets. Data analytics in audit allows firms to test entire populations rather than small samples. What this really means is better detection of irregularities, faster decision-making, and deeper insights for clients.
Internal audit and data analytics best practices now focus on integrating data tools early in the process, setting clear objectives for what to test, and ensuring data quality before drawing conclusions. In the UAE, where businesses often manage multinational operations, this approach is even more valuable. Auditors can evaluate consolidated financials in detail without being slowed down by manual processes.
Real-Time Audit Reporting
The old model of waiting months for an audit report does not fit modern business needs. Real-time audit reporting enables auditors to provide ongoing updates as data flows in. This approach reduces surprises at year-end and gives management timely insights to act upon.
The difference between continuous auditing vs real-time reporting lies in scope: continuous auditing focuses on ongoing controls and compliance checks, while real-time reporting emphasizes delivering insights quickly to support business decisions. Both are becoming essential parts of the modern audit process. In the UAE, where companies are often subject to both local regulations and international compliance standards, the ability to report in real time is increasingly valuable.
Recent Trends in Auditing
Several trends are shaping the profession:
- Greater use of automation to handle repetitive tasks.
- Demand for cybersecurity audits as digital threats increase.
- Increased reliance on cloud platforms to manage audit workflows.
- Integration of artificial intelligence in testing large datasets.
- Expectation for auditors to provide assurance and insights into performance.
- Adoption of sustainability reporting as ESG requirements grow.
These trends are not isolated to global markets; they are visible in the UAE as well, where regulators and businesses are seeking digitization at a rapid pace. The demand for transparent financial data is rising, and firms that can provide these insights through technology are gaining a competitive edge.
Audit Digital Transformation Trends 2025 (UAE)
Looking ahead to 2025, audit firms in the UAE will face three key shifts:
Regulation-Driven Technology Adoption
Compliance requirements will push firms to adopt blockchain and advanced analytics to improve transparency.
Talent Transformation
Firms will seek auditors with hybrid skills, finance plus data science.
Real-Time Compliance Monitoring
Businesses in the UAE, especially in financial services and free zones, will expect audit results delivered on demand.
The UAE is positioning itself as a regional hub for innovation in auditing, supported by government policies that encourage technology adoption. This transformation is not just about tools but it is also about mindset. Firms that adapt quickly will remain competitive, while others risk being left behind.
Also Read: Documents Required for VAT Registration UAE
Skills Audit Firms Are Looking For
The skills required for auditors are changing. Firms now value professionals who can:
- Work with data visualization tools.
- Understand blockchain applications in financial auditing.
- Apply AI as well as machine learning techniques to identify risks.
- Collaborate across teams, blending accounting knowledge with IT expertise.
- Communicate findings clearly to both technical and non-technical stakeholders.
In the UAE, where multilingual and multicultural workforces are common, communication and adaptability are also highly valued. Technical ability is becoming just as important as financial knowledge, reflecting the new nature of auditing where technology is embedded at every stage.
Also Read: The Three Golden Rules of Accounting
Benefits of Data Analytics for Auditors
The practical benefits of analytics are hard to ignore:
More Accurate Risk Assessments
Data analytics allows auditors to analyze entire data sets instead of relying only on samples. This broader view improves accuracy in identifying areas of potential concern, helping auditors focus on the risks that matter most.
Ability to Identify Fraud Faster
With analytics, unusual patterns, duplicate transactions, or outliers can be spotted in real time. This makes it possible to detect fraud earlier, reducing financial and reputational damage for organizations.
Reduced Time Spent on Manual Sampling
Traditional audits required auditors to manually select and review small samples of transactions. Analytics tools can scan all transactions automatically, saving time and allowing auditors to concentrate on interpretation and decision-making.
Clearer Communication of Findings Through Dashboards and Visuals
Analytics platforms present results through charts, dashboards, and interactive visuals. This makes it easier for management and stakeholders to understand findings quickly and take corrective action.
Stronger Alignment with Regulatory Requirements
Regulators expect timely and accurate reporting, and analytics help meet this demand by providing a full view of financial activity. Auditors can generate evidence-backed reports that align with compliance standards while reducing the risk of oversight.
Actually, data-driven audits do not just improve efficiency; they improve the value auditors bring to their clients. Firms can now move from being compliance checkers to strategic advisors. In the UAE, businesses are increasingly expecting this level of insight because it helps them stay competitive in international markets.
Challenges of Implementing Blockchain in Audit
While blockchain offers strong advantages, there are challenges to address:
- Standardization is still lacking across industries
Different industries and jurisdictions use blockchain in different ways, which makes it difficult to create a consistent audit approach.
- Auditors need new technical skills
Using blockchain for auditing requires knowledge of cryptography, distributed ledgers, and smart contracts, which many professionals are still learning.
- Integration with existing financial systems can be complex
Most companies still rely on traditional accounting systems, so connecting these with blockchain platforms often requires major adjustments.
- Legal frameworks are still catching up with the pace of technology
Regulations in many regions, including the UAE, are still evolving, which means auditors face uncertainty about compliance requirements.
- High costs of adoption for smaller firms
Implementing blockchain solutions often requires heavy investment in infrastructure and training, which can, in turn, be a barrier for smaller audit practices.
These challenges explain why blockchain adoption in audits is progressing step by step rather than overnight. Still, the momentum is clear, and audit firms are preparing for broader use. In the UAE, where the government actively promotes blockchain adoption, overcoming these challenges is a priority for both regulators and firms.
Future of Auditing: AI, Blockchain & Analytics
The future is about combining multiple technologies rather than relying on one. AI will support anomaly detection and predictive analytics. Blockchain will secure transaction data and smart contracts. Analytics will turn raw data into useful insights. Together, they will reconceive the audit profession into a more forward-looking function. Instead of simply validating the past, audits will increasingly guide future decision-making.
For Audit firms in the UAE, this shift will also align with the country’s vision of being a digital economy leader. Businesses will expect auditors to understand both accounting standards as well as technology ecosystems.
Internal Audit and Data Analytics Best Practices
For internal auditors, adopting data analytics requires discipline. Best practices include:
- Starting with clear objectives on what risks to assess.
- Using high-quality, verified data sources.
- Building dashboards that are simple enough for non-technical stakeholders to understand.
- Regularly updating models to reflect new risks.
- Training internal audit teams to interpret analytical results confidently.
By performing these practices, internal audits can become more reliable and relevant for decision-makers. For companies in the UAE, where businesses often operate in highly regulated industries like banking and healthcare, best practices in data analytics help reduce compliance risks and improve governance.
To recapitulate, auditing is changing fast, moving away from traditional checks to more tech-driven practices. With blockchain, data analytics, and real-time reporting, firms in the UAE can offer greater trust and timely insights. The future belongs to auditors who make use of these tools and bring real value beyond compliance.
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What Is the Global Minimum Tax UAE & Its Impact on UAE Multinationals?
Taxation has always shaped how multinational businesses operate. For decades, companies chose low-tax jurisdictions to optimize costs and stay competitive. The landscape is now shifting with the introduction of the global minimum tax UAE, part of the wider initiative led by the Organisation for Economic Co-operation and Development (OECD) under its Base Erosion and Profit Shifting (BEPS) project. The UAE, known for its business-friendly tax regime, has aligned with this framework to stay consistent with international standards.
This move has important consequences for UAE-based multinationals, particularly those with significant cross-border revenues. The big question is how the global minimum tax UAE changes the playing field for companies that have long relied on favorable tax conditions. Well, let’s discuss them in the blog ‘Global Minimum Tax UAE & its Impact on UAE Multinationals’.
Table of Contents
- What Is the New Minimum Top-Up Tax in the UAE
- Background: OECD BEPS Pillar Two Explained
- Who Is Affected? Global Revenue Thresholds for UAE Tax
- How the Minimum Tax Works
- Global Revenue Thresholds for UAE Tax
- Impact of Minimum Tax on UAE Multinationals
- Industry-Specific Impact on UAE Multinationals
- Key Rules and Exceptions
- Strategic Planning for UAE Multinationals
- Broader Implications
- Compliance and Reporting Challenges for UAE Multinationals
- Stay Ahead with Kreston Menon
What Is the New Minimum Top-Up Tax in the UAE
In late 2024, the UAE implemented Cabinet Decision No. 142 of 2024, introducing a Domestic Minimum Top-Up Tax (DMTT). This measure is the UAE’s response to the OECD Pillar Two UAE rules under the Base Erosion and Profit Shifting (BEPS) project.
In simple words, the new law ensures that multinational enterprises (MNEs) operating in the UAE pay at least 15% effective tax on profits within the country. If the local corporate tax or free zone incentives result in a lower rate, companies must pay a top-up tax to reach the 15% threshold. The rules apply from fiscal years starting 1 January 2025.
The DMTT aligns the UAE with international standards and ensures that large multinationals cannot avoid minimum taxation by structuring profits in low-tax jurisdictions.
Background: OECD BEPS Pillar Two Explained
The global minimum tax UAE originates from the OECD’s BEPS (Base Erosion and Profit Shifting) initiative. Pillar Two is specifically aimed at introducing a coordinated system where large multinationals with annual consolidated revenues exceeding EUR 750 million have to pay a 15 percent effective tax rate. The idea is simple: no matter where profits are booked, they should not escape taxation below this threshold.
For years, countries competed on tax incentives to attract foreign investment. This created an uneven playing field, as large groups could exploit low-tax jurisdictions. Pillar Two curbs this by allowing jurisdictions to impose a domestic minimum tax, which ensures that the revenue stays within the country rather than being taxed elsewhere through top-up mechanisms.
Who Is Affected? Global Revenue Thresholds for UAE Tax
Not every company in the UAE will be affected by the new minimum tax. The law applies only to multinational groups that meet certain size criteria.
- To qualify, a group must have consolidated annual revenues of at least €750 million in at least two of the last four fiscal years.
- The revenue test considers the Ultimate Parent Entity (UPE) of the multinational group. This means the financials of the entire group, not just the UAE entity, determine whether the rules apply.
What this really means is that small or mid-sized businesses are largely unaffected. The focus is on large corporations with cross-border operations, which could see additional tax obligations in the UAE.
How the Minimum Tax Works
The DMTT functions as a top-up. Let’s understand it with a simplified example:
If a UAE subsidiary pays UAE corporate tax at a rate of 9% due to free zone incentives, and the 15% minimum tax applies, the company will need to pay an additional 6% as top-up tax.
If the effective rate is already 15% or higher, no additional payment is required.
The computation considers all taxable profits of the UAE entity within the multinational group. The law includes guidance on excluding certain items, such as investment entities or sovereign wealth funds, under specific conditions.
Global Revenue Thresholds for UAE Tax
The legislation clearly defines which companies fall within scope. The threshold of EUR 750 million (or its equivalent in dirhams) applies based on consolidated group revenues reported in the ultimate parent entity’s financial statements. Only those groups that cross this threshold for at least two of the four preceding fiscal years will be subject to the domestic minimum tax in the UAE.
This design ensures that compliance is targeted at the largest players while keeping smaller and medium-sized enterprises outside the framework. For UAE-based holding structures, this means careful monitoring of global revenues and consolidated accounts is now essential.
Impact of Minimum Tax on UAE Multinationals
The introduction of the DMTT has several implications for UAE-based multinationals.
1. Higher Tax Burden
Companies that previously relied on free zone exemptions or low corporate tax rates may now face additional liability. Even if profits remain in the UAE, the top-up ensures that the effective rate does not fall below 15%.
2. Compliance and Reporting Requirements
Multinationals must maintain accurate records and report their tax position under the new rules. This includes:
- Collecting data across all jurisdictions in which the group operates.
- Calculating effective tax rates.
- Filing reports to UAE authorities.
The compliance process can be resource-intensive, especially for companies with complex global structures.
3. Strategic Considerations
The minimum tax may influence corporate decisions such as:
- Structuring investments across jurisdictions.
- Determining the location of intellectual property or financing entities.
- Evaluating free zone participation versus mainland operations.
What this really means is that tax planning in the UAE must now consider global revenue and tax structures, not just local incentives.
4. Implications for Free Zone Entities
Free zone companies with preferential tax rates will need to assess whether these benefits trigger a top-up obligation. Even zero-percent corporate tax in a free zone may not shield a company if the overall group’s effective rate is below 15%.
Industry-Specific Impact on UAE Multinationals
The 15 percent minimum tax will affect industries differently. Some examples include:
- Energy and Natural Resources
Operate through joint ventures and cross-border projects.
Tracking effective tax rates across multiple jurisdictions can be complex.
- Technology and Digital Services
Previously relied on intellectual property structures and royalties to reduce tax.
These models may now trigger top-up obligations.
- Logistics and Aviation
The UAE’s role as a hub means global operators may be in scope.
Effective tax rate monitoring becomes crucial due to varying margins.
- Financial Services
Already subject to strict regulations.
Will still need to align reporting systems with Pillar Two requirements.
The key takeaway is that each sector faces unique challenges, so UAE multinationals must approach the global minimum tax with well-planned, industry-specific strategies.
Key Rules and Exceptions
The law provides certain exemptions and clarifications:
- Investment entities may be excluded under specific conditions.
- Sovereign wealth funds are generally outside the scope if they qualify as governmental entities.
- Certain joint ventures or special-purpose entities may be treated as separate groups for reporting purposes.
These rules aim to prevent loopholes while avoiding excessive compliance for smaller or public-sector entities.
Also Read: Documents Required for VAT Registration UAE
Strategic Planning for UAE Multinationals
For large groups, preparing for the DMTT is critical. Recommended steps include:
1. Assess Eligibility
Determine if the group meets the €750 million revenue threshold.
2. Calculate Effective Tax Rate
Evaluate current UAE tax obligations, including free zone benefits.
3. Review Entity Structure
Examine how subsidiaries and branches are organized, and consider adjustments if the current structure leads to unnecessary top-up liabilities.
4. Strengthen Financial Reporting
Ensure accounts and tax records support the DMTT calculation. Accurate data across multiple jurisdictions is key.
5. Plan Cash Flow
Allocate funds for potential top-up tax. Unexpected liabilities can impact budgeting and profit margins.
6. Monitor Updates
UAE authorities may issue additional guidance or clarifications. Staying updated helps avoid surprises and ensures compliance.
Also Read: The Three Golden Rules of Accounting
Broader Implications
The global minimum tax UAE reflects an international shift towards standardized taxation for multinational enterprises. For businesses in the UAE, this means:
- Fewer opportunities to rely solely on low-tax incentives.
- Increased transparency and reporting expectations.
- Strategic tax planning becoming a core element of corporate decision-making.
In practical terms, the change is not just about paying more tax; it also signals that the UAE is aligning with OECD UAE standards. This alignment could improve investor confidence and strengthen the UAE’s position as a hub for international business.
Compliance and Reporting Challenges for UAE Multinationals
The implementation of the global minimum tax UAE reshapes how multinationals manage compliance and reporting. While the initiative strengthens global tax fairness, it also creates practical challenges for companies that now need to rethink their tax governance models. Here are some of the key hurdles:
- Complexity of the rules
The OECD Pillar Two UAE framework is highly detailed, covering aspects such as income inclusion, undertaxed payments, and a lot more. For UAE multinationals, understanding how these rules interact with the domestic minimum top-up tax and the corporate tax regime requires significant effort.
- Heavy data requirements
Multinationals are now required to collect and reconcile data from different jurisdictions, subsidiaries, and business units. Inconsistent accounting practices or decentralized systems can make this process slow and prone to mistakes.
- Technology and system upgrades
Many companies will find their existing reporting tools inadequate for the level of detail now required. Investing in upgraded ERP systems, tax reporting software, and digital compliance platforms has become essential.
- Risk of penalties and reputation issues
Inaccurate or late reporting can attract financial penalties and trigger audits. Beyond that, reputational damage is a real concern. With global attention on how jurisdictions like the UAE are adapting to international tax reforms, transparency and compliance have become closely tied to corporate credibility.
- Shortage of skilled professional
The global minimum tax is still a new concept in the region, and tax teams in the UAE may lack prior experience in managing such complex reporting requirements. This shortage of expertise often forces businesses to either invest heavily in training or rely on external advisors.
- Challenges of cross-border alignment
UAE multinationals typically operate across several countries, each with its own reporting expectations. Aligning compliance frameworks across jurisdictions while maintaining consistency with the UAE’s domestic top-up tax rules creates another layer of difficulty.
To conclude, the global minimum tax UAE marks a significant development for multinationals operating in the Emirates. Companies with large global revenues must now consider both their local and global tax positions to comply with the 15% minimum effective rate.
What this really means is that tax planning and compliance are more important than ever. Large UAE multinationals should review their structures, prepare for additional reporting, and forecast potential tax liabilities. Staying informed and proactive will ensure compliance and reduce unexpected financial risks.
Stay Ahead with Kreston Menon
With the experts of Kreston Menon, you can easily stay updated in the business scenario of Dubai. Our team helps UAE multinationals navigate complex tax rules and maintain compliance while planning for growth.
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How to Register for Corporate Tax in UAE Using Emaratax
With the introduction of corporate tax in UAE, the face of tax and the entire economy have changed deliberately. Emaratax, the UAE’s official online portal offering streamlined services, makes registration and payment easy. Through this, companies can easily submit their registration applications online and manage all tax-related matters efficiently. This eliminates the need for complex paperwork and physical visits to the Authority.
This Emaratax portal simplifies corporate tax-related tasks, allowing existing and new business owners to register and pay taxes easily.
Therefore, it’s important to know processes like tax registration, deregistration, payments, and deadlines to avoid hefty penalties and other future issues.
Table of Contents
- What is Corporate Tax?
- Who Needs to Register for UAE Corporate Tax?
- How to Register for Corporate Tax in UAE?
- Documents Required for Corporate Tax Filing in the UAE
- Corporate Tax Registration Guide
- UAE Corporate Tax Deadline for filing
- UAE Corporate Tax Deregistration
- Deregistration of Corporate Tax in UAE
- FAQs
What is Corporate Tax?
Corporate tax is a tax imposed on businesses that generate taxable income over a threshold amount and operate within a specific jurisdiction. The UAE corporate tax is a new regulation introduced by the UAE government to reduce the country’s reliance on oil-related income and match the country’s tax standards to global tax standards.
Companies registered in the UAE, generating impressive net profits above AED 375,000 are required to pay 9% of the amount in corporate tax to the FTA. Fortunately, budding businesses are exempt from this category and are not asked to contribute any sum in the form of tax to the government because they have relatively less role in uplifting the economy.
Who Needs to Register for UAE Corporate Tax?
All companies in the country generating taxable incomes above the threshold should register for corporate tax with the FTA (Federal Tax Authority). This includes any business regardless of origin. As far as a business operates in the UAE, tax must be paid to its government. However, businesses with profits below the threshold are not asked to pay corporate tax. However, they can voluntarily do so if they want to make their company look more appealing and trustworthy to the public.
There are also a few other exemptions for companies operating in designated free zones. These companies are either free from tax obligations or they can enjoy reduced rates. However, these benefits can only be availed once the government is convinced of their specific limitations. Except for these, it is mandatory for all other companies, including LLCs, partnership companies, joint stock companies, sole proprietorships, holding companies, real estate investors, and foreign business owners to file for corporate tax in UAE.
How to Register for Corporate Tax in UAE?
UAE companies must register with the FTA to comply with the latest tax regime. But before that, it is important to have at least a vague picture of the UAE corporate tax registration guide. To complete the registration, An Emaratax login is suggested. The process involves sharing key details about the company. The FTA has announced a pre-registration corporate tax for certain companies to encourage them to register for the same through the Emaratax portal. The Emaratax login can be done easily using an FTA account or UAE pass. Individuals with no FTA account need to create one by clicking on “Sign Up” or “Register” on the Emaratax website.
The website ensures a seamless user experience with links to powerful government entities like the Central Bank and national programs such as UAE Pass. Users will get access to all the necessary information needed for the tax registration. Moreover, it has a few self-help options in case users get stuck in the middle. The platform is easy to navigate and is a one-place stop for entities looking to manage their corporate tax, VAT payments, registrations, and so on.
Documents Required for Corporate Tax Filing in the UAE
When preparing to register for Corporate Tax in UAE, the following information and documents should be kept handy/ submitted:
- Taxable income: This includes the details of operating expenses, revenues, cost of goods, and any tax deductions.
- Financial statements for the relevant period
- Profit details
- Taxable losses: Any losses carried forward from the previous year
- Transfer pricing documentation
- Tax adjustments
Also Read: Documents Required for VAT Registration UAE
Corporate Tax Registration Guide
To register, determine the structure of the business, trading name, necessary approvals, and license, and then apply for the registration number. Following that, entities can pay their taxes per the tax regulations put forth by the UAE government. The step-by-step process is as follows:
Step 1: Login to the portal: Login can be done using the UAE pass. Once logged in, users will be automatically taken to the Emaratax user dashboard, an interface where the Taxable Person details pop up. If there is no data available associated with the user profile, a new Taxable Person should be added.
Step 2: To complete the registration, the user must tap on the “Register” tab under the Corporate Tax tab. Following that, another interface will appear with guidelines and instructions. It is important to go through them before clicking on the confirm button.
Step 3: Click “Start” to begin the registration process.
The application is divided into many sections and there’s a progress bar to denote how many sections need to be finished. All the necessary fields have to be filled in to avoid the application being rejected later.
Step 4: Select the entity type among the following:
UAE Public Joint Stock Company
UAE Private Company
Currently, the application is available for more entities including legal person entities and natural person entities.
Step 5: After filling in the details, tap on the ‘Next Step.’ This will automatically save the updates and direct the user to the ‘Identification Details’ section.
Step 6: To add the trade license-related activity details, tap on ‘Add Business Activities.’
Step 7: Once all the key details are added, click on the activation code.
Step 8: Following that, click on the ‘Add Owners’ button and provide the details of the owner who holds at least 25% or more.
Step 9: If the entity has multiple branches, select ‘Yes,’ and add the branch details, including the owners’ list, business activities, and trade license details.
Step 10: Once this section is done, click ‘Next Step’ to proceed to the ‘Contact Details’ segment.
Step 11: Enter the detailed address of the entity.
Step 12: (The application is likely to be rejected if the original address is not provided. In case the company has more than one address, the address of the company where most activities are held should be provided)
Step 13: After completing this part, click on the ‘Next Step, to save the details entered so far and proceed to the ‘Authorized Signatory’ section.
Step 14: Click on the tab named ‘Add Authorized Signatory’ to provide the details.
Step 15: After adding the details, click ‘Add’.
Step 16: On completion, tap on the ‘Next Step’ option and head to the ‘Review and Declaration’ part. This is a review section; hence, all the crucial information entered so far will be displayed for review. Any edits have to be made quickly before clicking on the ‘Submit’ bar.
Step 17: After clicking on the ‘Submit’ bar, the application will be submitted to the registration authority.
Step 18: Finally, a reference number is provided. It has to be noted for future correspondence with the tax authority/ FTA.
Also Read: The Three Golden Rules of Accounting
UAE Corporate Tax Deadline for filing
One of the major flexes of UAE corporate tax is its focus on self-assessment. This means, the businesses are responsible for themselves and must ensure all the submitted documents are true and comply with the law. The due date for filing a corporate tax return is 9 months from the closing of the financial year. The law allows business entities up to 21 months to prepare for filing and making their payments. For example, businesses with a tax period beginning from January 1, 2024, and extending to December 31, 2024, have time until January 1 and September 30, 2025.
UAE Corporate Tax Deregistration
Deregistration for Corporate Tax refers to removing a business entity from the UAE’s corporate tax system. Businesses have to be removed when they no longer meet the criteria for tax registration. Generally, a business becomes eligible for deregistration in the following situations:
Profit falls below the threshold: If a business’s net profit falls below AED 375,000 annually for any reason, it can proceed with deregistration.
Business Ceases Operations: If a company is dissolved or suddenly stops engaging in business activities, it may apply for deregistration
Deregistration of Corporate Tax in UAE
Before deregistering, make sure there are no outstanding tax liabilities, including interest or penalties.
- Login to the FTA portal using username/password
- Initiate deregistration by filling out the form
- Provide the appropriate deregistration reason
- Submit request documents which may include proof of business closure, final financial statements, and other required documents
- Wait for the FTA review
- Once all the documents are received and all requirements are met, the FTA will approve the deregistration, cancelling the corporate tax of the company
- An official confirmation will be received from the FTA once the application is approved
- Upon the approval of deregistration, it is crucial to cancel the trade license of the company with the regulatory authority
Note: Corporate Tax deregistration has to be initiated within 20 days from the event that pushes a deregistration. And if the entity is registered for VAT, it has to be taken care of separately.
FAQs
- How efficient is online tax payment in the UAE?
In UAE, online tax payment is highly useful for companies registered for corporate tax as it eliminates the risk of paperwork and physical visits. Via this platform, services like submitting tax returns, paying bills, registering, and claiming refunds can be carried out effectively. - How to pay tax in Emaratax?
Paying tax via Emaratax is trouble-free and understandable. Simply log in to the Emaratax portal and select the ‘My Payments’ option. Tap on the ‘Select and Pay’ bar and choose the payment methods. Once the payment is completed, a confirmation message will be received. - How often will companies in the UAE have to file a CT return?
Companies are only required to file one CT return per financial year. Which means, only once a year. No advanced or provisional Corporate Tax filings are required. - Are salaries subject to UAE Corporate Tax?
Regardless of whether the employment falls under the category of public or private sector, UAE corporate tax will not apply to any employment income, and salaries are no exception. - How crucial is FTA in UAE CT?
The processes like administration, collection, and implementation of UAE corporate tax is carried out by the FTA, making it a crucial authority. In essence, the FTA ensures that companies in the UAE meet their tax obligations.
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How to Find a TRN Number and Perform TRN Verification in the UAE?
In the wake of recent amendments in UAE’s tax regulation, understanding and verifying the company’s Tax Registration Number, aka, TRN is crucial. Any business entity looking to dodge the possible legal issue should ensure their empire is registered for VAT in the UAE. Whether you are a consumer or a business owner, grasping how to verify the TRN is important to ensure the authenticity of transactions carried out, with respect to the VAT laws. It can prevent the company from finding itself in a situation where its reputation and goodwill are at stake. This blog will address why TRN verification is important in the UAE and how to do it. We will also provide a comprehensive guide on verifying TRN in the UAE.
Table of Contents
- What is TRN in UAE?
- Who Needs a TRN?
- Importance of TRN in Dubai
- Why is TRN Verification Important?
- How to Find TRN Number?
- How to Do TRN Verification
- Conclusion
- FAQs
What is TRN in UAE?
The TRN is a unique 15-digit number provided by the FTA (Federal Tax Authority) to help differentiate companies. This distinctive code can only be attained after completing a business’s VAT registration.
Value Added Tax or VAT is a fixed amount of tax charged by registered businesses from their customers intending to pay back to the government. Businesses registered under UAE VAT are issued a TRN respectively and only those entities are supposed to charge the VAT from their customers. A VAT of 5% was introduced 6 years ago, and ever since companies have been imposing it on the customers, as per the provisions of the law.
Who Needs a TRN?
A TRN is necessary for entities engaging in commercial activities and registered under the VAT system to comply with tax regulations. It also helps report back to the FTA efficiently. The category includes local and foreign businesses that engage in taxable transactions in the country.
The requirement for a TRN is not limited to physical businesses but also to freelancers and self-employed individuals who conduct similar activities. Collecting a TRN can also help importers and exporters with customs clearance. In short, anyone providing taxable goods or services or generating taxable income should obtain a TRN to ensure their operations are legal.
Importance of TRN in Dubai
A TRN number is crucial in the UAE VAT system for numerous reasons:
Tax Identification
A TRN is necessary in the tax system as it serves as a unique identifier for each business in the community. Firstly, it simplifies the entire tax filing process and secondly, TRN reduces the workload of FTA in efficiently managing tax obligations.
Legal Compliance
A TRN plays a major role in building trust with clients and it is mandatory for UAE-based entities to get TRNs for ensuring compliance with the country’s tax laws. Companies without a TRN, even when the law mandates it, are likely to face legal repercussions, whereas, once received, this TRN helps maintain good standing with the authorities. Additionally, it also fosters accountability and transparency.
A TRN signals the professionalism of a business, boosting the trust and credibility of the company. Often, it indicates the transparency of the entity by making it compliant with tax regulations. It often symbolises the company’s commitment to ethical business practices, mostly helping them secure contracts and partnerships easily. Essentially, a TRN can also be a selling point that can be put forth to enhance the confidence of clients while also cancelling out any scepticism.
Facilitating Business Operations
A TRN is necessary for maintaining proper financial records. Besides reflecting on the financial transactions, it also sheds light on many other business operations, including contract negotiations and invoicing. Additionally, TRN can simplify interactions with government agencies that often ask for tax identification for validation. This ease in actions leads to ultimate growth and efficiency.
Eligibility for Tax Refunds
Having a TRN is beneficial in different ways. Businesses with credible TRN can make full use of tax benefits and companies can recoup taxes paid on goods and services purchased for commercial purposes. This can reflect hugely on the company’s profitability, especially a relief for small businesses.
Why is TRN Verification Important?
Considering the benefits mentioned above, there is always a risk of fraudulent practices such as using fake TRNs to conduct transactions. Initially, it wasn’t allowed for companies to deal with it themselves, but recently, the UAE government allowed citizens to carry on the verification processes through third parties. Unfortunately, some parties exploit the lack of knowledge of the business owners. So, having a good understanding is necessary.
When an entity is registered in the UAE, paying taxes to its government becomes compulsory on them. To keep track of the registered businesses, FTA often relies on TRN, and since that’s unique, it becomes easy for FTA to analyse what each company is doing. Usually, these businesses are required to pay a fixed sum to the government and to keep things easy and balanced, the registrants adjust the 5% VAT into their pricing. The money that’s collected in this manner is then directly transferred to the UAE government.
But, there is a huge room for foul play in this scenario. Unregistered companies do not have TRN and they are not allowed to collect VAT. But, since the government fails to keep an eye on these businesses, they fake their registration and TRN solely to collect cash in the form of VAT from customers. As such, this collected amount is unlawful to them. This makes a TRN check necessary.
Also Read: The Three Golden Rules of Accounting
How to Find TRN Number?
1. For individuals and businesses
- Check Personal Documents: TRN can be found on any tax-related papers like invoices, VAT registration certificates, or other documents from FTA. This number is supposed to be listed on at least any of these documents if not all.
- FTA Portal: TRN can be obtained from the registered account of the business. You have to click on the FTA’s official website and log in using your registered account. Once the profile window opens, your TRN should pop up somewhere on your profile or specifically under your registration details.
- FTA Mobile App: For this, the first step is downloading the FTA app. After logging in, you can find the TRN number in your registered account.
If you’re unable to locate your TRN by these methods, you can directly contact the FTA customer service or simply email them. They can guide you through the process to retrieve the TRN number.
2. For additional resources
- Tax Consultants and Advisory Firms
For anyone unfamiliar with the entire TRN concept, professional tax consultants in the UAE can come in to help. They can efficiently assist with TRN registration, verification, and other TRN-related issues.
- Business Registration Portals
After identifying the associated economic zone of your business, you can seek help from respective portals as they primarily focus on registration services and support.
Also Read: Documents Required for VAT Registration UAE
How to Do TRN Verification
Online Verification
Performing online verification is a straightforward method to ensure a company’s compliance with the country’s tax regulations. You are supposed to open the FTA’s official website and click on the ‘TRN’ on the right-side panel. Following that, you will be asked to provide the TRN number. When entering the 15 digits, it’s important to pay close attention to avoid unnecessary errors. After cross-checking the provided number, click the “Verify” tab, and then it will show the entity name that is linked to the TRN. The entity name displayed can be cross-verified with the available documents such as invoices to ensure authenticity.
If the TRN is not found, the system will immediately indicate the error and if you want further assistance with the verification, you may simply contact the FTA, and they will assist you with the requirements.
Performing the TRN verification online is not only less time-consuming but also more reliable.
TRN Verification Via Mobile
The second easy method to verify your TRN is via the FTA mobile app. To begin with, you have to download the app which is available on Google Play Store and App Store. Once installed, users are expected to log in using their registration credentials. If not registered, start with registering. You may be required to enter details like your email address, phone number, and TRN.
After completing the login process, scroll down to the TRN Verification section and enter your TRN number in the appropriate field. Again, users have to be careful while entering this unique number. Once entered, click on the “Verify” button. Within minutes, the app will process the results.
Manual TRN Verification
To manually verify your TRN, you have to keep all the details, including VAT registration certificates and other FTA correspondence in hand. Then, visit the official FTA website and go to their customer service. Depending on your preference, you can call them or email them requesting TRN verification. They might also ask for other information like the company name, address, and contact details.
If that doesn’t work, you can also visit the nearby FTA service centre in person. You have to bring a folder containing all the necessary tax documents and identity proofs. After sharing all the required details, they will assist you in verifying your TRN and resolving issues if any.
Conclusion
Understanding and verifying TRN is essential for both individuals and businesses engaging in taxable transactions in the UAE. It’s not just important for ensuring compliance with the tax regulations but it also plays a crucial role in enhancing the credibility of your business and ultimately leaving a good impression on the clients. As far as your income is taxable, having a valid TRN is paramount regardless of whether you are running a business or a freelancer. Regularly checking on the TRN verification status can help you avoid complicated situations in the future and safeguard your business against potential penalties.
Choose Kreston Menon: Your Tax Consultant for Comprehensive Tax Solutions
If you need assistance with tax consultation or TRN verification, you can easily contact a tax consultant in UAE, who can provide the best services.
Kreston Menon is a leading tax consultant in Dubai with years of experience in the field. Our trained team is dedicated to helping individuals and entities come face to face with the complexities of the UAE tax system. Whether you are seeking guidance on tax compliance or you want to find your TRN verification status, look no further than Kreston Menon, because we provide personalised support for you and we prioritise your satisfaction and peace of mind over anything.
Reach out to us immediately to schedule a consultation. We ensure this is your final step towards hassle-free tax management.
FAQs
- What actions are to be taken when a company fakes its TRN?
When a company is suspected or proven of using a fake TRN, it’s important to contact the FTA for further investigation and verification. An internal audit is also advised. - Is the retrieval of a TRN number possible online?
Yes, retrieval of a TRN is possible and the feature is available on both the FTA mobile app and FTA’s official website. - What are the documents required for TRN verification?
While verifying the TRN of a company or individual, the most important information required is its TRN number itself. Along with that, the name of the registered business may also be needed. - How long after registration can TRN be obtained?
Following the application for VAT registration, the FTA takes a couple of days to process the TRN number. Typically, the TRN number is issued in 2-4 days. - What should be done if a VAT registration certificate is lost?
In the case of a lost VAT registration certificate, one has to request a copy immediately through the FTA online account.
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What Are The Different Types Of Audit Reports?
Audit reports are more than just any formalities in a company; they are critical and reveal a company’s financial health and compliance with standards.
Regardless of size, large or small, every business relies on these reports to provide data on its financial health and internal controls. A well-written audit report provides valuable insight that aids banks, investors, and other stakeholders in making informed decisions. In this blog, we’ll explore the various types of audit reports and features and how you can obtain a favorable audit opinion.
Table of Contents
- What Is An Audit Report?
- What Are The Different Types Of Audit Opinions?
- Common Features Of An Audit Report
- How You Can Obtain A Favorable Audit Report?
- Address Issues from Past Audits
- Conclusion
What Is An Audit Report?
Audit reports are formal documents that express the auditor’s opinion on the accuracy and consistency of a company’s financial statements. An auditor is a professional who observes a company to determine the assets and liabilities present in their finances. The results of this audit report will show a detailed overview of a company’s financial statements that are free from any misstatement.
The 5 C’s of audit report writing are Clarity, Conciseness, Completeness, Correctness, and Consistency, essential elements to ensure the report is clear, accurate, and comprehensive for stakeholders. Banks, financial institutions, investors, and creditors are all required to file an audit report. After the auditing, they will issue you with a clean report if you’re clean, and you will get an unqualified report if you have any financial statement errors. These audit reports are essential for all companies’ financial health.
Generally, audit reports can be divided into four categories: unqualified reports (clean), qualified reports, adverse opinions, and disclaimers of opinions. All these opinions provide a unique insight into the financial health of the company.
What Are The Different Types Of Audit Opinions?
In an audit report, you will find the auditor’s final assessment of your company’s financial statements. Based on the auditor’s findings, audit reports are divided into four types.
1. Unqualified Audit Opinion (Clean Report / Clean Bill of Health)
An unqualified opinion of a company also known as ‘Clean Report’ is the first type of an audit report. This means that the auditor has reviewed the company’s financial statements and determined that they are free of any type of misstatements and that the documents are prepared to comply with generally accepted accounting principles. In this way, the financial health of your company is now presented accurately without any exceptions. The company can now show the report to the public, which also comes as a positive sign for the company’s growth, overall confidence, and healthy financial reporting.
2. Qualified Audit Opinion
Qualified audit reports indicate that if there is a specific process within the company that an auditor isn’t confident about, that may prevent them from issuing an unqualified report. It’s like the financial report looks good, but there are a few points that need to be clarified. When companies receive a qualified audit report, they must address the identified issues to enhance their financial standing.
3. Adverse Audit Opinion
An adverse opinion is the type of audit report that the financial statements are misstated and do not accurately reflect the company’s financial health. This means there are significant errors, fraud, or non-compliance with the accounting of the company.
This type of report is rare and has significant implications that lead to a loss of confidence among investors, creditors, and regulators. It indicates that the company has failed to meet the accounting requirements, raising red flags about the integrity of the management team and the company’s financial controls.
4. Disclaimer of Opinion
A disclaimer audit report issued by an auditor for your company means that the auditor has no opinion as to the financial standing of the particular company. When the auditor arrives at a company, the company needs to give them proper access and effective auditing documents. This will happen if the auditor doesn’t get any access to documents or satisfactory answers during their audit; they issue a disclaimer of opinion to the company. If the company gets this type of audit report, that can harm the company’s reputation and hinder its growth.
Common Features Of An Audit Report
Title
The audit report starts with a title called “Independent Auditor’s Report,” showing it from an unbiased third party.
Address
An audit report is usually addressed to the company’s shareholders or board of directors.
Responsibilities of the Auditor and Management
This section displays the roles of the company’s management and the auditor. The management of the company is responsible for setting up the financial statements of the business and the auditor’s duty will be to provide an independent opinion.
Scope of the Audit
The report specifying the standards followed and describing the procedures conducted during the audit. It also confirms any error assessments and procedures as well as the limitations of the audit scope.
Opinion of the Audit
This is where the auditor’s overall conclusion comes regarding the financial statements, whether it’s an unqualified (clean), qualified, adverse, or disclaimer opinion.
Basis of Opinion
This section provides the rationale behind the auditor’s opinion, explaining the audit process, any limitations, and the reasoning behind the judgment made.
Signature of the Auditor
The auditor’s signature is used to complete and authenticate the report, indicating responsibility.
Place of Signature
In place of signature, the auditor needs to add where the audit report was conducted and signed.
- Date of the Audit Report
Here, they will add the date when the auditor completed the audit work and finalized the report.
- Date of Signature
The exact date on which the auditor signed the report, confirming its issuance.
How You Can Obtain A Favorable Audit Report?
Here are some points that you can look at in your next financial audit of your company.
Accurate financial reporting
You have to maintain a well-organized and transparent financial reports of your company. Make sure all your statements comply with the accounting standards. You can review these records once in a while to maintain its accuracy and consistency and you can know if there are any errors in it.
Also Read: The Three Golden Rules of Accounting
Implement strong internal controls
Doing good internal controls protects your financial data from fraud or mismanagement in your business. This includes monitoring cash flows and expenditures and reporting other revenue. Regular Internal audits or regular financial reviews can help identify issues early, reducing the likelihood of material misstatements during an external audit.
Also Read : Documents Required for VAT Registration UAE
Build a Collaborative Relationship with Your Auditor
You can clearly communicate with your auditor to set up a smooth audit process in your company. When they are auditing you can actively give them what they want and make a collaborative relationship with them. These will help in clarifying any discrepancies and reduce the risk of any limitation that could lead to a disclaimer of opinion.
Address Issues from Past Audits
If your company has received qualified or adverse opinions in the past, it’s vital to address the underlying issues that led to those reports. Whether it involves fixing accounting errors, improving documentation, or resolving compliance issues, demonstrating that your company has taken corrective action can improve the chances of receiving a clean opinion in the future.
Conclusion
A favourable audit report goes a long way in building trust with investors, banks, and other stakeholders. You can contact a professional audit service firm like Kreston Menon if you require auditing services for your business. As a professional auditing firm in the UAE, Kreston Menon is dedicated to safeguarding the interests of all stakeholders. By committing to professionalism, we provide the best auditing services available.
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