UAE Corporate Tax Returns

UAE Corporate Tax Returns is a mandatory obligation for companies operating in the UAE, and failure to comply with this requirement can lead to penalties and fines. With the announcement of the UAE corporate tax law, companies are gearing up to submit their corporate tax returns within the specified timeframe set by the Federal Tax Authority (FTA).

The inception of Corporate Tax occurred in January 2022 under the auspices of the Ministry of Finance, UAE, paving the way for implementation either by June 2023 or by January 2024. The Corporate Tax Law is scheduled to take effect on June 1, 2023, featuring a headline rate of 9%. Profits below AED 375,000 annually are taxed at a 0% rate. The legislative framework incorporates elements aligned with international best practices in taxation.

Every taxable entity is required to register for Corporate Tax and obtain a Tax Registration Number. Additionally, in certain scenarios, the tax authority may mandate exempt entities to register for Corporate Tax as well.

What is Corporate Tax Return Filing in UAE?

Corporate tax return filing in the United Arab Emirates (UAE) involves submitting a comprehensive report to the appropriate tax authority, outlining a company's income and expenses. The UAE Corporate Tax Return Filing is filed by the Taxable Person for a designated tax period, providing details regarding corporate tax liability and payments. It is imperative to file the Tax Return within the specified timeframe as stipulated by the Corporate Tax Law.

Corporate Tax Rates and Applicability in the UAE

The United Arab Emirates (UAE) has implemented a federal corporate tax regime effective for financial years starting on or after June 1, 2023. The standard corporate tax rate is 9% on taxable income exceeding AED 375,000 Income below this threshold is not subject to corporate tax, effectively allowing small businesses and startups to operate without tax burdens on their initial earnings.

• Taxable Income Thresholds:
  • Up to AED 375,000, there is no tax on taxable income.
  • 9% tax on taxable income exceeding AED 375,000.
• This structure is designed to support small businesses while ensuring that larger corporations contribute to the national revenue.

Who Needs to File Corporate Tax Returns?

In the UAE, Corporate Tax is governed by Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses. Corporate Tax returns must be filed by individuals and entities that meet the following criteria:

Resident Juridical Persons

• These include companies and other legal entities incorporated in the UAE or foreign entities that are effectively managed and controlled within the UAE​.
• Examples include Limited Liability Companies (LLCs), Public and Private Joint Stock Companies, and partnerships that conduct business activities in the UAE​.

Non-Resident Juridical Persons

• Foreign entities that have a Permanent Establishment in the UAE or derive income from a nexus in the UAE (e.g., earning income from UAE immovable property) are required to file corporate tax returns​.
• Non-residents with State Sourced Income can opt not to register if they do not have a Permanent Establishment, but those with a nexus are required to register and file​.

Natural Persons Conducting Business

• Natural persons, such as sole proprietors or individuals involved in unincorporated partnerships, must file corporate tax returns if they:
  • Conduct business or business activities in the UAE.
  • Earn an annual turnover exceeding AED 1,000,000 in a Gregorian calendar year​.

Free Zone Persons

• Businesses operating within Free Zones that are classified as Qualifying Free Zone Persons need to file corporate tax returns, even if they benefit from a 0% tax rate on qualifying income​.

Exempt Persons

Certain categories, such as government entities, qualifying public benefit entities, pension funds, and investment funds, may be exempt from corporate tax. However, they still need to meet specific conditions and may need to notify the Federal Tax Authority (FTA) and file returns to maintain their exemption status​

In the UAE, is it mandatory to file corporate tax returns?

Yes, if you have a company in the United Arab Emirates (UAE), you have to do something called filing Corporate Tax returns. This means you have to give some information about your company's money to the government. Even if your company didn't make any money, you still have to do this. But if your company made less than AED 375,000, you don't have to pay any tax. It's important to follow these rules because if you don't, you might have to pay fines.

Do companies in Free Zones need to do Corporate Tax returns too? 

Yes, they do. Even if they're in a Free Zone, they still have to file Corporate Tax returns. It doesn't matter if they qualify for certain benefits or not; they still have to do it.

How often do businesses in the UAE have to do Corporate Tax returns? 

They only have to do it once for each tax period. After the tax period ends, they get nine months to file their Corporate Tax return. They don't need to do any preliminary filings or pay anything in advance.

Key Components of Corporate Tax Return Filing Services 

When you're doing Corporate Tax Return filing, you need to give details about how much money your company made and spent. Then, after calculating everything, you figure out how much tax your company owes the government.

 Here are some important documents you'll need:

• Financial records: These show how much money your company made and spent.
• Calculations of taxable income: This shows any changes in your company's profits based on accounting.
• Records and plans for tax depreciation: This is about how assets decrease in value over time for tax purposes.
• Transfer pricing records: This includes details about transactions between different parts of your company.
• Information on transactions involving relatives: This is about any business deals with family members.
• Movements of provisions: These are funds set aside for certain purposes.

At Reyson Badger, tax experts and professionals make sure all this information is correct and help you get the most out of your tax claims while keeping you safe from audits.

What is the Deadline for Filing Corporate Tax Returns?

Businesses in the UAE are granted a timeframe of up to 9 months from the conclusion of the relevant tax period to submit their tax return and settle the Corporate Tax dues with the Federal Tax Authority (FTA). For instance, a company whose first tax period commences on June 1, 2023, will have until February 28, 2025, to meet this deadline. Similarly, a company with a first tax period beginning on January 1, 2024, would be required to file by September 30, 2025.

This initiative underscores the UAE's commitment to ensuring the seamless implementation of Corporate Tax policy. The advantages of timely corporate tax return filing include efficient cost management, effective time management, consolidation of group tax filings into a single return, and the opportunity to offset tax liabilities among group entities, with some entities generating taxable profits while others may incur tax losses.

Procedure of Corporate Tax Return Filing in UAE

• Tax Registration: Initiate the process by obtaining a tax registration number from the Federal Tax Authority (FTA). This involves submitting the requisite documents and information as per FTA guidelines.
• Record Keeping: Maintain meticulous records of all financial transactions and tax-related documents in strict adherence to UAE tax laws.
• Preparation of Tax Return: Calculate the taxable income accurately and prepare the tax return based on the maintained records. Ensure to account for tax deductions and exemptions as outlined in the UAE tax laws.
• Filing of Tax Return: Utilize the FTA's online platform, e-Services, to submit the tax return within the stipulated time frame, ensuring compliance with the designated due date.
• Payment of Tax: Settle the tax liability in accordance with the filed tax return on or before the specified due date to avoid penalties or fines.
• Tax Audit: In the event of a tax audit, the FTA may request additional information or documents to verify the accuracy of the filed tax return. Cooperation and transparency during this process are crucial.

We are well-equipped to assist you in calculating your tax liability for Corporate Tax and guide you through the entire Corporate Tax return filing process in the UAE, ensuring compliance with regulatory requirements and facilitating a smooth experience.

Fines and Penalties for not Filing UAE Corporate Tax Returns

The UAE imposes penalties for companies that fail to comply with Corporate Tax return filing deadlines. Here's a breakdown of the key fines:

• Late Filing: A flat fine of AED 10,000 applies for not filing your return by the Federal Tax Authority (FTA) deadline. This is according to Cabinet Decision No. 10 of 2024.
• Late Filing - Monthly Penalty: An additional monthly penalty kicks in after the initial AED 10,000 fine. This penalty is AED 500 for each month (or part thereof) for the first year, then increases to AED 1,000 per month thereafter.
• Incorrect Filing: There's a penalty for filing an inaccurate return. The exact amount depends on the severity of the error and the understated tax amount.

Role of Corporate Tax Consultants

Corporate tax consultants play a vital role in assisting businesses with tax compliance, ensuring accurate and timely preparation and filing of tax returns. These experts navigate complex tax laws and regulations, identifying opportunities for tax savings and minimizing potential liabilities. By outsourcing corporate tax compliance, companies can benefit from increased efficiency, reduced risk, and cost savings. As Reyson Badger notes, "Partnering with a reputable corporate tax consultant can provide businesses with peace of mind, knowing their tax obligations are being managed by experienced professionals.

Corporate Tax Return Consultants in UAE

Reyson Badger Auditing Services gives you highly knowledgeable and experienced tax consultants in the UAE, dedicated to providing clients with top-tier Corporate Tax services. Our expertise ensures that clients remain compliant with the laws and regulations set forth by the Tax Authority.A company's UAE Corporate Tax Returns are an important element of compliance for companies operating in the region.

Our comprehensive services encompass guiding clients through document preparation, calculating tax liabilities, and ensuring compliance with Corporate Tax activities such as registration, filing returns, and managing refunds, among others.

Require assistance with filing Corporate Returns? Contact us today!!! We're here to help!