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Guide to Securing a Tax Clearance Certificate in the UAE

May 12, 2024 | Accounting

Getting a Tax Clearance Certificate in the United Arab Emirates (UAE) shows that a company or an individual is up to date with their tax obligations. This document is crucial for those involved in various business dealings. It acts as a mark of compliance with the country’s tax laws. As the UAE continues to develop its economic landscape, businesses and individuals need to know how to get this certificate.

We give a detailed look at the eligibility criteria, application process, and the strategic importance of a Tax Clearance Certificate in the UAE. Whether you’re an entrepreneur, a tax professional, or just aiming to keep your financial record clean, we will give you the steps and expert advice to manage the tax compliance environment effectively.

The Tax Clearance Certificate in the UAE

What Is a Tax Clearance Certificate

In the UAE, a Tax Clearance Certificate is a vital document that proves a tax-registered entity has either settled all its tax dues or isn’t liable for any tax payments. It’s a testament to the taxpayer’s commitment to their fiscal responsibilities. The UAE Federal Tax Authority (FTA) has added a feature to the taxpayer’s online portal, making it easy for you to request a “CLEARANCE CERTIFICATE.”

This certificate isn’t just a piece of paper but a mandatory document for various business-related activities. These activities include mergers and acquisitions, business cessation, ownership transfers, securing banking facilities, and the issuance of visas.

Importance and Uses of the Certificate

The Tax Clearance Certificate in the UAE is a symbol of compliance, helping entities avoid penalties associated with non-compliance and maintaining their reputation as law-abiding entities. You’ll find this certificate particularly indispensable when a business is being acquired, during a company’s winding up, or when a business needs to deregister from VAT due to a decrease in sales below certain thresholds.

It’s a document of integrity, often requested by authorities or other parties during mergers and acquisitions, company liquidations, and ownership changes, for the approval of banking facilities or as a prerequisite for visa issuance. A tax clearance certificate is a sign that the entity has been diligent in its tax affairs.

Legal Basis for Tax Clearance in the UAE

The FTA’s introduction of the tax clearance certificate is a strategic move to boost compliance with UAE tax laws and regulations. Your ability to obtain this certificate depends on your clean slate with the FTA, with no outstanding liabilities. Not securing a tax clearance certificate can hinder the progression of business requirements.

Furthermore, applying for a tax clearance certificate might prompt a tax audit, which could reveal tax liabilities if the entity is found to be non-compliant. An audit is a standard procedure for those registered for tax, while non-registrants must show the FTA that they aren’t required to be registered for tax. This legal framework ensures that all entities meet their tax obligations and that the business environment remains transparent and regulated.

Screenshot Of Federal Tax Authority Website

Eligibility Criteria for Applicants

Individual Applicant Requirements

For individuals aiming to obtain a TRC, residing in the UAE for a minimum of 183 days within the financial year of application is essential. This residency requirement is pivotal for determining eligibility. However, foreign and offshore company branches are not considered residents and thus are ineligible for a TRC.

Corporate Entity Requirements

Legal entities must have been established in the UAE for over one year before applying for a TRC, ensuring a significant presence there. Additionally, entities seeking a CAC must be VAT-registered in the UAE, as the CAC serves to verify their commercial activities within the nation.

Special Considerations for Non-Residents

Non-residents must provide substantial proof of their stay and economic ties to the UAE to qualify for tax certificates. This includes documentation of physical presence and financial interests. Non-residents must carefully document their stays and financial activities to satisfy the FTA’s stringent criteria.

Documentation Needed for Initial Assessment

For a TRC, individuals must submit their passport, residence permit, Emirates ID, residential lease agreement, income proof, bank statements, entry and exit report, and evidence of permanent residence in the UAE.

Legal entities are required to provide their trade licence, memorandum of association, authorisation proof, audited financial statements, and bank statements. Government entities should submit a copy of the decree or government decision, trade licence, and a request letter from the entity.

Applicants need to submit a trade license and a request letter for a CAC. The required documents for a TRC may differ based on the applicant’s duration of stay in the UAE and other considerations.

Applications can be made through the EMARATAX portal, which operates around the clock for TRCs and CACs issuance. The submission process is streamlined, with an average submission duration of 45 minutes and a processing time of 5 business days upon receiving a complete application. The TRC is valid for one year from the chosen financial year’s commencement, and the CAC is valid for one year from the selected date.

A submission fee of $13.60 (AED 50) is applicable for treaty purposes, with additional fees contingent on the applicant’s status. The CAC incurs a fee of $136 (AED 500), and an extra $68 (AED 250) per copy is charged for a physical copy of the certificate. Certificates are sent digitally to the applicant’s email after payment. If a printed certificate is requested, it is only available for delivery within the UAE. Special forms for the TRC can be submitted electronically or via mail or courier for FTA attestation. The necessary Exit & Entry report can be obtained through the UAEICP application.

Screenshot Of Federal Tax Authority Website

Application Process for Tax Clearance Certificate

Application Guide

To initiate the process for obtaining a certificate, access the EmaraTax platform and log in with your credentials or UAE Pass. Navigate to the ‘Other Services’ section and click on the ‘Clearance Certificate’ option. There, you can begin a ‘New Request’ and fill out the application form with your business details, including trade licence information in English and Arabic, and specify the reason for the certificate request, such as changes in ownership or business closure.

Upload the necessary documents, which may include financial statements and a declaration letter. Additional documents like a sale contract or proof of business cessation may be required depending on your specific situation. Ensure all financial figures are presented in AED. After completing and reviewing the application, submit your request and a filled-in declaration form.

Online vs Offline Submission Options

The EmaraTax platform offers a user-friendly online system for submitting applications, eliminating the need for paper-based submissions. To facilitate a smooth application process, ensure you have digital copies of all required documents.

Payment of Fees and Dues

The fees for obtaining a certificate vary depending on the type and your tax status. For example, a TRC incurs a submission fee, with additional charges based on whether you are a tax registrant or not and whether you are an individual or a legal entity. If requested, an extra fee applies for each printed certificate. Confirm the current rates before applying, as they are subject to change.

Expected Timeframe for Processing

The FTA typically reviews applications within five business days. If you require a printed certificate, expect a similar time frame following payment completion. For applications that include a tax form for FTA attestation, the processing period is five working days from the receipt of the completed form and payment.

Track your application’s status through the EmaraTax dashboard. You will receive a reference number upon a successful application, and the certificate will be issued. If the FTA needs more information or rejects the application, you will be notified by email and may need to submit additional details or a new request. Ensure your tax records are in order before applying to avoid potential audits or liabilities.

Screenshot Of EmaraTax Website

Expert Tips

Should You Hire a Professional?

Understanding the intricacies of the UAE’s tax system can be daunting. Engaging a tax consultant can be crucial for effective tax management and adherence to all pertinent regulations. For those with diversified revenue sources or international business dealings, the strategic planning and safeguarding of assets that a consultant provides can be particularly advantageous.

Tax consultants are adept at identifying strategies to reduce tax burdens, thereby freeing up capital for reinvestment or other financial priorities. When considering the engagement of a tax consultant, it’s essential to weigh the potential long-term financial advantages against the cost. A proficient consultant will facilitate compliance through meticulous filings and provide strategic advice to enhance your tax strategy.

It is advisable to select a consultant with a proven track record who prioritises client interests and communicates transparently. Equally important is ensuring that the consultant maintains confidentiality and adheres to professional ethical standards.

Maintaining Compliance Post-Issuance

After obtaining a tax clearance certificate, it is imperative to promptly and accurately fulfil tax obligations. Tax consultants can be instrumental in this regard, as they monitor regulatory updates, scrutinise previous tax submissions, and confirm ongoing adherence to tax requirements.

Their expertise can help circumvent any sanctions due to delayed registration or submission errors, thereby ensuring seamless business operations.

Impact of a Tax Clearance Certificate on Future Tax Filings

Possession of a tax clearance certificate can positively influence subsequent tax submissions by evidencing a history of adherence to tax regulations. This can prove beneficial during audits or in the context of business dealings that require demonstration of tax compliance.

Key Contacts and Helpful Resources

A variety of tax professionals and firms are available in the UAE, ranging from individual certified accountants to specialised tax consultancies that address corporate, personal, VAT, and international tax issues. Legal and accounting firms also offer tax planning and compliance services. Organisations such as us here at Virtuzone provide specialised expertise for corporate tax compliance and securing tax clearance certificates.

While applying for a tax clearance certificate via the EmaraTax platform, the expertise of tax professionals can be invaluable in ensuring the accuracy of the application and the organisation of supporting documents. Tax consultants are pivotal in guiding businesses through VAT and corporate tax registration and de-registration, return submissions, refund processing, and maintaining tax compliance. Their role is essential in fostering foreign direct investment and aiding international businesses in structuring their operations tax-efficiently, particularly regarding understanding transnational tax laws.

Final Takeaway

Securing a Tax Clearance Certificate in the UAE underscores your entity’s commitment to robust financial health and legal compliance. As the nation’s fiscal landscape evolves, particularly with the onset of corporate tax, the certificate becomes a stronger asset, affirming your business’s integrity and paving the way for smoother financial undertakings.

While the application process via the EmaraTax portal is straightforward, the support of seasoned tax professionals can enhance the precision and efficacy of your submission. Vigilance and proactive management of your tax affairs post-certification ensure ongoing compliance, fostering a stable and reputable business environment.

Therefore, it’s not merely about acquiring the certificate—it’s a continual journey of fiscal diligence that will position your business favourably in the dynamic economic arena of the UAE.

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