Introduction
Under Article 58 of the UAE Corporate Tax Law, a Taxable Person can make an application to the FTA for the alteration in the Tax Period by choosing a different start and end date or using a different Tax Period. UAE FTA has brought forth certain conditions for the same as per UAE Corporate Tax Law.
Conditions for Change in Tax Period
A Taxable Person can make an application to the Federal Tax Authority (FTA). But this is subject to meeting of the following conditions:
I. Reason for the alternation in Tax Period: The reason for a change in Tax Period is for one of the following reasons:
a. Liquidation of the Taxable Person
b. To Align the Financial Year: The reason is to align the Resident Taxable Person’s Financial Year with:
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- Financial Year of other Taxable Person to form a Tax Group
- Financial Year of the other Taxable Person to join an existing Tax Group
- Financial Year of its domestic or foreign Head Office, subsidiary, parent, or ultimate parent company for financial reporting purposes
- Financial Year of the other Taxable Person to get the benefit of Tax Relief or under a foreign jurisdiction’s law
c. Valid commercial, economic, or legal reason to change the Tax Period.
2. Not yet filed Tax Return: The second condition is that the Taxable Person hasn’t filled the Tax Return as of yet for the Tax Period that he is applying to change.
3. Application for alteration in Tax Period: The application for changes in the Tax Period is for any of the following:
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- For extending the current Tax Period to a maximum of 18 months, or
- For shortening the next Tax Period to be between 6 and 12 months
4. Timeline for making the Application: The application is to be made before 6 months from the end of the original Tax Period
5. Shortening the Tax Period: If the Taxable Person has filed an application to shorten a Tax Period, then it should not be for a prior or current Tax Period
Implementation of the Decision for Change in the Tax Period
This decision will be published in the Official Gazette and will be implemented from June 1, 2023.
Conclusion
UAE Federal Tax Authority has brought forth certain conditions required for change in the Tax Period. This can be done through an application to FTA for choosing a different start and end date of the Tax Period or for using a different Tax Period as per UAE Corporate Tax Law.
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