The UAE has recently enacted a federal corporate tax regime starting from June of the year 2023, which marked a shift in the taxation system of the country. Even though the basic UAE corporate tax rate stands at 9% the actual law has anticipated some advantages that might be given to the taxable business in UAE. One of the main advantages is the provision for UAE corporate tax refunds. This article provides the overview regarding the conditions for applying for UAE corporate tax refunds under the corporate tax law and the procedure followed for the same along with the benefits that can be gained from this provision.
Eligibility for Corporate Tax Refund UAE
According to Article 49 of Federal Decree-Law No. 7 of 2022 on Corporate Tax, a taxable person may apply for a corporate tax refund from the Federal Tax Authority (FTA) in the following circumstances:
- Withholding tax credit exceeds tax payable: If the withholding tax credit available to a taxable person is more than their actual corporate tax liability for the tax period.
- Excess tax paid: If the FTA is satisfied that the taxable person has paid corporate tax in excess of their actual tax payable amount.
In both cases, the taxable person needs to apply to the FTA for a refund of the excess tax paid/withholding tax credit available.
Process for Claiming Tax Refunds UAE
According to the Tax Procedures Law, the steps to apply for and obtain corporate tax refunds can be found under Article 26. Here are steps that are considered important for:
- Submit refund application: Taxable entities that meet the threshold of filing must use the prescribed format and submit the refund application form to the FTA.
- FTA decision within 20 days: Following the guidelines on the refund application, the FTA is supposed to review and approve the application where necessary, and inform the applicant within 20 business days.
- Refund disbursal within 5 days: If approved the FTA must commence refund disbursement within 5 business days from the time the Applicant is notified.
- Deferral option: The FTA can postpone the refund until the applicant submits other outstanding tax returns relevant to the application.
Documents Required for Tax Refund Application
To apply for a corporate tax refund in the UAE, a taxable person needs to provide the following documents to the FTA:
Table 1: Documents Required for Refund Application
| Document | Purpose |
|---|---|
| Corporate tax return | To demonstrate tax overpayment or excess withholding tax credit |
| Tax assessment notices | To prove tax dues and payments made |
| Payment receipts | Proof of tax installments/withholding taxes paid |
| TIN/incorporation certificates | To verify claimant's identity and tax profile |
Benefits of Claiming Tax Refunds
The following are some of the benefits that taxable businesses can get from claiming their corporate tax refunds in UAE:
- Enhance cash flows by accelerating the collection of excess tax amounts
- Clear tax credits or tax losses from future tax periods
- Obtain funds to invest in the business for expansion and other growth strategies
- Promote compliance by guaranteeing non-excessive tax revenues.
- Simplify tax compliance by automating refund distribution
Timeline for Receiving Tax Refunds
According to tax procedures law, the FTA has to process refund applications and refund the amounts approved, subject to a maximum working period of 25 business days from the date of application.
On average it has been observed that generally the request of tax refunds takes about 15-20 working days to get processed and the amount is credited to the account of the employee provided all the papers are filled and submitted in a proper manner. However, in some other occasions, the time taken may be a little longer considering the extra queries or the review by the FTA.
FAQs
Q1. Who is eligible for a corporate tax refund under UAE corporate tax law?
A1. According to the law, any taxable person, who has paid excess corporate tax either by claiming withholding tax credits or by payment of tax in excess, would be entitled to apply for refund.
Q2. What is the process for claiming a corporate tax refund in the UAE?
A2. FTA has its own approval of the refund application form and required documents; eligible taxpayers should file and submit the application with supporting documents to the FTA. In the following 20 days, FTA will decide on the refund and disburse the amount in the subsequent 5 days if it is approved.
Q3. What documents are required to apply for a corporate tax refund in the UAE?
A3. Such documents consist of corporate tax returns, receipts of excess tax paid, withholding certificates, valid trade license, CR documents and such others documents as deemed necessary by FTA on an instance-by-instance basis.
Q4. How long does it take to receive a corporate tax refund in the UAE?
A4. According to its legal requirements, FTA is obliged to make and pay refunds within 25 business days. While in practice, many refunds are completed in between 15-20 days depending on the fact that all required documents are availed. Sometimes though, more time may be necessary in certain circumstances.
Q5. What are the benefits of claiming a corporate tax refund for businesses in the UAE?
A5. These include enhancing cash inflows, utilizing it as a deduction against future tax credits and the liabilities, financing business operations and growth including putting measures to prevent the accumulation of excess tax amounts as well as the use of automated refunds for compliance.
Conclusion
Companies interested in claiming a corporate tax rebate in the UAE should consult and engage with the right corporate tax advisor in the region. Financial and Tax Consultant Dubai can scrutinize businesses’ tax returns and balances to know whether they qualify for a refund. They can also help to fill out refund applications correctly and compile all relevant evidence to support the refunds. The expertise of consultants familiar with UAE tax regulation changes, as well as the authority’s work, allows businesses to maximize the likelihood of a positive result in the form of a prompt refund decision.