Corporate Tax Return Filing in UAE

Corporate tax (CT) is a tax that the government imposes on the profits of businesses. The UAE announced in January 2022 that it would introduce federal corporate tax (CT) on the profits of businesses, and it officially began on June 1, 2023. The tax rate is 9%, but if a company makes less than AED 375,000 in profits each year, they don't have to pay. Every company has to register for corporate tax and get a Tax Registration Number. Even some exempt companies might have to register too. It will apply to businesses across all the emirates.

What is Corporate Tax (CT)?

Corporate tax is a type of tax that companies have to pay on their profits. It's governed by specific laws, like Federal Decree-Law No.60 of 2023. Companies will start paying corporate tax from the beginning of their first financial year starting on or after June 1, 2023. By introducing corporate tax The UAE wants to achieve several goals which include ,

• Become a top global destination for business and investment.
• Speed up its development and reach its goals faster.
• Show its commitment to international tax standards and prevent unfair tax practices.

Corporate tax in the UAE will apply to all businesses and individuals who have a commercial license to operate in the UAE. This includes both local and foreign companies. Free zone businesses will also be affected, but those that follow all the rules and do not set up in the UAE's mainland will continue to have some benefits.  Foreign companies and individuals who regularly do business in the UAE will also have to pay this tax. This includes banks and businesses in real estate, construction, development, agency, and brokerage.

Corporate Tax Rates

The UAE's corporate tax rates are made to be fair and help the country's economic growth. They provide a clear and transparent system for all businesses in the UAE. Most businesses in the UAE will pay a standard corporate tax rate. This rate applies to many sectors and aims to create a level playing field for all companies.

In the UAE, both people and companies have to pay taxes based on how much money they are earning . If someone's income is AED 375,000 or less, they don't have to pay any taxes (that's the 0% rate). But if they are earning  more than that, they have to pay a 9% tax on the extra money they earn above AED 375,000. Any income that does not meet the qualifying criteria is taxed at a rate of 9%, as specified in Cabinet Decision No. 55 of 2023.

Some industries, like oil and gas, have special tax rates. These rates are usually higher because these sectors make more money and are very important. The special rates reflect the unique impact and rules of these industries.The Federal Tax Authority (FTA) will manage corporate tax. 

Corporate Tax Return Filing - Eligibility Criteria

To know if a business must pay corporate tax in the UAE, it needs to meet certain conditions. Following these conditions helps businesses follow UAE tax laws and support the country's economy.

• If a business or person has a license to do business in the UAE, they need to pay corporate tax.
• Businesses in free zones must also pay corporate tax. But if they follow all the rules and don't set up in the main areas, they might get some benefits.
• Companies and individuals from other countries doing regular business in the UAE must pay corporate tax.
• Certain types of businesses like banks, real estate companies, builders, and brokers have to pay corporate tax.
• Any business that regularly operates in the UAE needs to follow the rules for corporate tax.

Corporate Tax Filing - Required Documents

To pay corporate tax in the UAE, businesses must collect documents. These papers are important for showing how much money the business makes and spends. They also help follow tax rules.

• Balance Sheets showing the financial position of the business at a specific point in time.
• Profit and Loss Statements detailing the business's revenues, costs, and expenses during a specific period.
• Cash Flow Statements tracking the inflow and outflow of cash, showing how the business's cash position changes over time.
• A Tax Residency Certificate (TRC) proving that the business is a tax resident of the UAE, which affects tax rates and benefits.
• The Business License, which is the official license to operate in the UAE.
• Detailed Records of Financial Transactions, including sales, purchases, expenses, and investments.
• Statements of Incoming and Outgoing Funds related to business activities.
• Invoices and Receipts supporting records of sales, purchases, and expenses.
• Employee Records, including details of salaries, benefits, and taxes paid.
• Contracts and Agreements related to business activities, partnerships, or services provided.
• Previous Tax Returns filed by the business.
• Audit Reports, if the business has been audited.
• Statements of Financial Position used to determine taxable income.
• Receipts for Claimed Deductions as proof of deductions claimed on tax returns.
• Depreciation Records as proof of asset depreciation for tax purposes.
• Transfer Pricing Documentation related to transactions with related parties.
• Details of Transactions Involving Related Parties.
• Changes in Financial Reserves that affect the company's taxable income.
• Statements of Financial Position to calculate exempt income.
• Documentation of Exemption Status as proof of any tax exemptions.
• Business Loan Documents indicating interest paid.
• Records of Foreign Taxes Paid for foreign tax credits.

Here's a more detail overview on Corporate Tax Filing Documents.

Corporate Tax Return Filing - Procedure

• First, get a tax registration number from the Federal Tax Authority (FTA) by giving them the needed documents and info.
• Keep good records of all money transactions and tax papers as per UAE tax laws.
• Find out how much money is taxable and prepare a tax return using the records you kept. Consider any tax deductions or exemptions allowed by UAE tax laws.
• Send the tax return to the FTA using their online platform called e-Services. Do this before the due date.
• Pay the tax you owe based on the tax return before the due date.
• If the FTA checks your taxes (called a tax audit), they might ask for more info or papers to make sure your tax return is correct.

UAE Corporate Tax Return Filing Steps

Step 1: Taxpayer Information

Provide detailed information about the taxpayer, including:

• Entity name
• Tax Registration Number (TRN)
• Entity type and subtype
• Contact details and address
• Tax period details

Step 2: Election

Choose the applicable elections for the tax return, such as:

• Small Business Relief
• Realization basis
• Excluding Foreign Permanent Establishment Income
• Adjusting Taxable Income for gains on Qualifying Immovable Property or Intangible Assets
• Business Restructuring Relief
• Additional information or disclosures

Step 3: Schedule of Accounting

Fill in the financial details, including:

• Revenue and other income
• Various expenses (excluding specific categories like salaries, wages, depreciation)
• Earnings before Interest, Taxes, Depreciation, and Amortisation (EBITDA)
• Net profit or loss before tax

Step 4: Tax Computation

Calculate the income before and after adjustments, which involves:

• Accounting Income
• Adjustments for exempt income, reliefs, and non-deductible expenditures
• Adjustments for related party transactions and connected persons
• Determine the taxable income after all adjustments

Step 5: Additional Information involved

Provide any additional documents or information requested, such as:

• Proforma Invoice or other supporting documents
• Explanation for non-provision of any required document

Step 6: Declaration

Declare the accuracy and completeness of the information provided:

• Fill in the declarant’s name in both English and Arabic
• Submission date and time
• Generate and submit the document for official processing

These steps ensure that all necessary details and computations are accurately recorded for the UAE Corporate Tax Return filing process​​.

Corporate Tax Exemptions in UAE

Some entities and income types in the UAE are exempt from corporate tax. These include:

Basic Exemptions

• Small and Medium-Sized Businesses: Businesses with revenue up to AED 375,000.
• Free Zone Businesses: Multiple incentives and exemptions apply to Free Zones.
• Non-Mainland Businesses: Businesses not located on the mainland.
• Dividends and Capital Gains: Income from shareholdings is not taxed.
• Inter-group Transactions and Restructuring: Certain transactions within group companies are exempt.

Specific Exemptions

Government Entities: 

• Exempt from Corporate Tax unless conducting business under a license.
• Licensed business activities must be treated as independent entities with separate financial statements.

Government-Affiliated Entities:

• Exempt unless engaging in non-mandated business activities, which must be treated independently.

Extractive Businesses:

• Exempt if holding a right or license from the local government and affected by specific Emirate regulations.
• Income from supportive activities should not exceed 5% of total revenue to maintain exemption.

Non-Extractive Natural Resource Businesses:

• Exempt if holding a right or license from the local government.
• Similar conditions as extractive businesses apply for income from supportive activities.

Qualifying Public Benefit Entities:

• Established for religious, charitable, scientific, artistic, educational, or similar purposes.
• Must follow with additional conditions set by the Cabinet.

Qualifying Investment Funds:

• Regulated by an appropriate authority.
• Interests are traded on a recognized stock exchange or made available to investors.
• Not intended to avoid Corporate Tax.

Corporate Tax Filing Deadline

Knowing when to file corporate tax in the UAE is important. Companies need to file their annual tax return within 9 months after their financial year ends. They also have to make estimated tax payments every three months, depending on their financial year. The final tax payment is due with the annual tax return, also within 9 months after the financial year ends. Sometimes, companies can ask for more time to file, but they need approval from the tax authorities. Missing these deadlines can lead to penalties, so it’s important to follow the schedules set by the UAE tax authorities.

To know more about Corporate Tax Filing Deadline, check out here.

Penalties for Non-Compliance

In the UAE, not following corporate tax rules can result in big penalties. According to Cabinet Decision No. 75 of 2023, if you don't keep required records, you could be fined AED 10,000 per violation, which can go up to AED 20,000 if you repeat the violation within 24 months. Not submitting required documents in Arabic can result in a AED 5,000 fine. Submitting a deregistration application late can lead to a AED 1,000 fine, plus an extra AED 1,000 each month, up to AED 10,000. If you don't inform the tax authority of changes to your tax records, you could be fined AED 1,000 per violation, or AED 5,000 for repeated violations within 24 months. Legal representatives who don't notify their appointment will face a AED 1,000 fine. Filing a tax return late will cost AED 500 per month for the first 12 months, then AED 1,000 per month after that. If you don't pay your taxes on time, there is a monthly penalty of 14% per year on the unpaid amount until the tax is paid. These penalties show how important it is to follow the tax rules on time and correctly in the UAE.

To know more about Corporate Tax Filing Penalties, check out here.

Corporate Tax Return Filing Services in UAE - Reyson Badger

Reyson Badger offers easy  corporate tax return filing services in the UAE, ensuring your business follows all tax regulations accurately. Our services include preparing and filing your annual tax returns, managing quarterly estimated tax payments, and handling any extensions needed for filing. We also assist with maintaining proper records and documentation to avoid penalties. With our expert team,you can be sure that your corporate tax duties are taken care of on time, so you can focus on growing your business. Trust Reyson Badger for simple and stress-free tax return filing in the UAE