Whether you are about to embark on a business journey in the UAE, or even if you may have already set up a business of your own in the region, you may have already heard about a Tax Clearance Certificate. On paper, this might seem like another daunting piece of paperwork that you need to secure. Throughout the course of this blog, you will soon learn that it is nothing to worry about! We’ll walk you through everything you need to understand about Tax Clearance Certificates in the UAE so you wouldn’t have to scratch your head anymore.
What Exactly Is a Tax Clearance Certificate?
The UAE’s Federal Tax Authority (FTA) is responsible for issuing a Tax Clearance Certificate. Having said that, it is an official document. By having a Tax Clearance Certificate for your businesses, it stands as a form of certification, indicating that your business has met the tax obligations and has no outstanding tax liabilities. By holding a Tax Clearance Certificate, it shows the UAE Government that you are a responsible business that takes paying your taxes seriously.
If you were to ever close your business, renew a trade licence or sell a property attached to your business, these actions may call for you to produce your Tax Clearance Certificate. This certificate indicated to the authorities that you are not leaving any unpaid taxes behind you as you move forward along your business journey.
Why Do You Need a Tax Clearance Certificate?
At some point, your business activities will require you to carry out certain tasks that require this certificate as mentioned above. Therefore, it is essential that you have a Tax Clearance Certificate, especially if a significant financial transaction is in the pipeline for you.
Here are some situations where you may need a Tax Clearance Certificate:
Closing down your business: If you are shutting down your operations in the UAE, it is your duty to settle all your pending tax payments before company closure. By having a Tax Clearance Certificate, it will clearly indicate that you have fulfilled these obligations.
Ownership Transfer: Let’s assume that you are ready to move on to another venture and you want to transfer ownership of the business to a partner. You will need to produce a Tax Clearance Certificate to prove that you are all clear from the taxation side before making the transaction happen.
Selling Property: If you would like to sell a property attached to your business, a Tax Clearance Certificate will show the buyer that the property does not have any outstanding taxes.
Renewing a Trade License: Depending on the type of trade licence that you need to renew, the renewal may call for a Tax Clearance Certificate.
Key Benefits of Having a Tax Clearance Certificate
While a Tax Clearance Certificate is a regulatory requirement, it does bring more benefits to your business as it shows that you are carrying out your operations in a transparent and responsible manner. This is a plus point when building relationships with banks, investors and partners.
Credibility: A Tax Clearance Certificate indicates that you are in compliance with tax regulations. This helps in boosting your credibility in the market.
Financial Flexibility: If you were to apply for a loan, the bank will ask you for a Tax Clearance Certificate. Having one ready to go is a great way to showcase your good financial standing.
Smooth Transitions: Whether you’re selling your company or transferring ownership, a TCC helps make the process smoother and faster.
The Process of Securing a Tax Clearance Certificate
By now, you must be having a good understanding of what a Tax Clearance Certificate is and why you need one. So, how do you get one? Just like most processes in the UAE, the process to obtain a Tax Clearance Certificate is also fairly simple.
Step 1: Make Sure All Your Tax Affairs Are in Order
There is no point in applying for a Tax Clearance Certificate if you have not submitted your tax returns and paid all the due taxes. These will include:
- VAT returns: If your business is registered for VAT, make sure that all your VAT returns are up to date.
- VAT payments: Settle all outstanding VAT payments.
- Fines or penalties: If you’ve been hit with any penalties, make sure those are cleared.
Step 2: Submit Your Application to the FTA
A Tax Clearance Certificate can be applied for online, via the Federal Tax Authority’s portal:
- Log in to your FTA account
- Go to the section where you can request certificates
- Fill out the application by entering your Tax Registration Number (TRN), business information etc.
- Submit the application and pay the fees (The fees can vary, so check the FTA website for up-to-date information)
Step 3: Wait for Approval
Once your application is submitted, it will be reviewed by the FTA. If everything is in order (Taxes paid and no outstanding issues) your Tax Clearance Certificate will be issued in a few days. Given that processing times may vary, you should expect that it will take around five working days to receive your Tax Clearance Certificate. Once the certificate is ready, you can download it directly from the FTA portal.
Common Mistakes to Avoid
In order to ensure that your Tax Clearance Certificates are issued without a hassle, there a few proactive measures that you take:
- Keep your records up to date. All tax returns, payments, and communications with the UAE’s Federal Tax Authority must be easily accessible to you.
- Don’t forget to settle your fines if you have been late with any VAT payments or submissions. A Tax Clearance Certificate will not be issued unless these are cleared.
- Don’t wait until the last minute. If you know a Tax Clearance Certificate will be required soon, apply as soon as you can to avoid potential delays.
- Fill the application with accurate information. If there are discrepancies, the process will become slower.
Stay Ahead of the Game
Securing a Tax Clearance Certificate in the UAE doesn’t have to be a hassle. As long as you keep your tax affairs in order and follow the steps outlined above, you’ll be able to get your TCC without any major issues. Whether you’re closing your business, selling property, or just trying to stay on top of your tax obligations, having a TCC can save you a lot of headaches and ensure you’re in good standing with the tax authorities.
How Can SetHub Help?
SetHub is well versed in helping businesses of all sizes with their administrative and tax related needs and concerns. Securing Tax Clearance Certificates for our clients is something that we are all too familiar with! If you are still unsure about how to initiate this process, reach out to us so that we can make all of your regulatory obligations happen in the background while you focus on building your business. Schedule a call with us now to hear back from one of our experts within one business hour.
