The UAE Corporate Tax Law shall establish comprehensive rules for the deregistration of natural persons ceasing business activities. These rules aim to ensure that individuals properly manage their tax status when they cease business activities or in the event of death.
Termination of Business Activity: Deregistration
The requirement that natural persons deregister from the tax system if they stop conducting all their business or business-related activities is a fundamental component of the Corporate Tax Law.
Are Natural Persons Necessary to Deregister?
When a natural person ceases all business operations they must deregister for corporate tax. But before requesting deregistration the individual must be cautious to make sure that no business activity is still going on under their name or ownership. This deregistration procedure applies to all business operations regardless of the overall turnover or revenue produced. An individual cannot deregister if they continue to operate even one business or activity.
For example, a person cannot deregister from corporate tax if they own several businesses and one of them closes while the others continue. This is a result of their continued involvement in business operations through their other operating company. As a result, the tax registration status is still in effect until the person has stopped conducting any business.
Time and Process of Deregistration
If a natural person stops conducting business, they must apply to the FTA for tax deregistration. Within three months of the date on which their business or business activity ceased this application must be submitted. The deregistration takes effect on the day the business closes unless the FTA decides otherwise. The application must be submitted as soon as possible to prevent legal non-compliance. It is crucial to remember that the FTA will only approve the deregistration application if all unfiled tax returns, unpaid corporate taxes, and unpaid administrative fines have been completed. The deregistration request will not be granted if the person has not complied with these duties. This means that before starting the deregistration process the person must make sure they have fulfilled all tax filing and payment obligations for the time they ran their business.
The Case of Ongoing Business Activities
It is crucial to realize that a natural person who is still engaged in business operations is not required to deregister even if their total turnover for a given tax period is less than the AED 1 million threshold. This holds even if the company’s annual revenue is less than what is needed to register for corporate taxes. For instance, a person must still file a nil tax return which indicates that there is no tax obligation even if their business turnover for the year is less than AED 1 million. However, unless all operations stop the FTA will not permit deregistration if they carry on with their business. The nil tax return does not mean that you are deregistered from the tax system it is only necessary to maintain compliance.
Also covered by the Corporate Tax Law is the case of a natural person’s death. When a person passes away their tax liabilities are passed to their estate and heirs, and they are no longer considered a taxable entity under the law. For corporate tax purposes, a natural person is no longer regarded as a taxable person upon their death. This essentially ends their tax registration. Nevertheless, any unpaid corporate tax debts from before the individual’s passing still need to be paid. Also, the Corporate Tax Law stipulates that any taxes due by the deceased before their passing must be settled with the estate’s assets. Before distribution to the heirs, the estate consists of all the deceased person’s assets and earnings. Depending on their respective shares in the estate the heirs or legatees are responsible for paying any unpaid taxes that remain after the estate has been divided. The heirs may be held liable for any unpaid taxes that are found after the estate has been distributed. However, they would be released from any additional tax obligations if the heirs or estate representatives had received a clearance certificate from the FTA.
