With the UAE all set to implement the corporate tax in UAE from 2023, next year, the aspect of compliance is of significant importance. Failure to comply with the new corporate tax regime in the UAE, can not only bring with it financial risks but also penalties and an increase in tax charges.
Furthermore, a significant business risk, as it can harm the reputation of the taxpayer with government authorities and the public.
That being said, our blog outlines the proposed requirements that must be kept in mind by businesses in order to comply with corporate tax.
Requirements for Corporate Tax Compliance in UAE
Regulations for Registration and Deregistration of Corporate Tax
Registration with the Federal Tax Authority as well as acquiring of Tax Registration Number (TRN) within the prescribed duration needs to be taken care of by the business that is accountable to pay corporate tax. The FTA also has the right to list a business automatically for corporation tax, if the business does not voluntarily do it. In case a business is eliminated from being subject to corporation tax either due to termination or liquidation of the company), it needs to fill an application to the FTA for deregistration in less than three months proceeding from the date of termination or liquidation of the company.
The Deregistration of a company by the FTA will only be approved when the FTA is sure that the business has undertaken the corporate tax filing and resolved all its responsibilities and fines (if any), that are pending for all periods from and on the date of termination or liquidation of the company. If the business does not fill the application for deregistration within the stipulated time frame or complete the payment and filing obligations, the FTA may or may not undertake the deregistration of an individual based on the available information
Filing, Payment and Refund Regulations for Corporate Tax in UAE
Conducive to the FTA keeping a minimum corporate tax burden on business, a business will exclusively have to prepare and file a corporate tax return with other supporting processes with the FTA for each tax period. A business does not have to file an interim CT return or make any up-front payments of any kind. The Submission of each corporate tax return and other supporting documents has to be done to the FTA in less than nine months of the end of each applicable tax period. The FTA may also ask for additional documents if required.
A taxpayer’s CT obligation needs to be paid in less than nine months at the end of each applicable tax period. The taxpayer can also request a refund from the FTA, where a corporate tax refund is due. 2
The table below further showcases the deadlines for corporate tax filing and payment.
Deadlines for Corporate Tax Filing and Payments
|End of the financial year||30 June||31 December||31 March|
|Initial (first) Tax Period||1 Jul 2023- 30 Jun 2024||1 Jan 2024-31 Dec 2024||1 Apr 2024- 31 Mar 2025|
|Filing of Corporate tax and Payments as seen in the above information must be done in less than 9 months of the tax period|
|Due Date for CT Filing and Payment||31 Mar 2025||30 Sept 2025||31 Dec 2025|
Corporate Tax Evaluation in UAE
A self-evaluation principle will be applicable to all businesses that come under the scope of the UAE corporate tax law. In other words, each business is accountable to make sure that the tax return and other supporting aspects that are provided to the FTA are complete, correct and in accordance with the regulations set forth in the UAE corporate tax law.
Furthermore, the FTA may state the way of evaluation within the duration specified in the Tax Procedures Law, in regards to reviewing filed corporate tax returns. This will be done to protect the integrity of the corporate tax law.
In addition, the Tax procedures law also states the processes and procedures for challenging an amended evaluation by the FTA, if a taxpayer feels the need to do so.
You may also like: Deductible Expenses Under Corporate Tax Law
Clarifications on Compliance
In order to ensure a well-functioning corporate tax system in the UAE, clarity around how to comply is an essential aspect. This is why the FTA provides a means for businesses to apply for clarifications if there is confusion regarding any suggested or commenced transaction or arrangement, on the condition that the facts and circumstances of the business outlined in the clarification still apply, then such clarification is obligatory on the part of the FTA.
Requirements for Documentation
Financial and additional records are to be maintained by a business, explaining the information present in the corporate tax return submitted to the Federal Tax Authority (FTA). This also applies to specifically exempt persons as such records enable the FTA to establish such persons exempt status.
Pertinent company regulations and laws will determine whether a company’s financial statements need to be audited by a licensed audit firm or not. However, as per the UAE corporate tax law, if a free zone person wants to take advantage of the 0% corporate tax rate, it needs to have its financial statements audited.
Transitional Rules Under Corporate Tax
Businesses do not need to reiterate or renew their balance sheet in order to enter the UAE corporate tax regime. On the other hand, the opening balance sheet of a taxable person for corporate tax reasons would in general be considered their closing balance sheet for the purpose of financial reporting for a period that closes instantly right before the beginning of their first tax period.
Corporate Tax Experts at Corporate Tax UAE and All-Over UAE
Corporate tax is a new regime introduced in the UAE and keeping up-to-date with legislation, regulations and processes for compliance can be overwhelming.
At Corporate Tax UAE, our experts provide the best corporate tax advisory services for diverse industries and help businesses with filing, returns as well as planning and management of corporate tax.
We would be delighted to discuss how we can assist your company manage corporate tax compliance more proficiently and effectively. Give us a call today!
Abrar Ahmad holds a Master’s as well as an MPhil in Finance and has an extensive experience of 10+ years in managing all aspects of Taxation, VAT Consulting and Accounting. He also carries with him a working knowledge of corporate tax and has helped drive value and growth to the businesses of numerous clients.