ALKETBI GUIDE TO UAE CORPORATE TAX RETURNS: KEY TAKEAWAYS AND NEXT STEPS

05 December 2024

Bini Saroj

The UAE’s Federal Tax Authority (FTA) has introduced a detailed guide on filing and completing Corporate Tax (CT) returns. This guide is essential for all taxable persons in the UAE, including natural persons conducting business activities, juridical persons, Qualifying Free Zone Persons (QFZPs), and Tax Groups. It outlines step-by-step instructions for accurate filing while emphasizing the data and documentation required to meet compliance standards.

Dubai: The UAE CT return process is notably dynamic. We outline below the key features of Filing corporate Tax.

Unlike static forms used in many jurisdictions, the UAE requires online filing through the EmaraTax portal. This interactive process tailors questions and schedules based on the taxpayer's selected options. Despite the UAE’s straightforward tax regime, the CT return demands considerable detail, requiring taxpayers to carefully plan and prepare their data in advance.

I. Essential Schedules for Taxable Persons and Tax Groups

1. Taxable Person Details: Taxable persons must ensure that their registration details in EmaraTax are accurate. These details determine the specific fields required in their tax return.
2. Free Zone Schedule: Relevant to QFZPs, this schedule evaluates whether the de minimis requirement is met. It includes detailed disclosures of Qualifying and non-Qualifying revenue, capital and operating expenses, and other financial metrics, such as EBITDA per emirate. For income derived from Qualifying Intellectual Property, additional information is mandatory.
3. Elections: Taxpayers can make elections under various provisions, such as realisation basis, transitional rules, and Small Business Relief. Elections like the Foreign Permanent Establishment election are annual and must be carefully assessed.
4. Accounting Schedule: Filing financial statements with the CT return is mandatory. Taxable persons must include their auditor’s details, registration number, and audit opinion when applicable.
5. Reliefs: Excluding QFZPs, this schedule provides relief for transfers within a qualifying group and business restructuring. Taxpayers must meet specific conditions to claim these reliefs and account for potential clawback scenarios.
6. Adjustments and Exempt Income: Adjustments to accounting income must be disclosed to determine taxable income. This schedule also includes unrealized gains/losses, participation exemptions, and income/losses from foreign permanent establishments.
7. Other Adjustments: Non-deductible expenses such as entertainment, donations, and transfer pricing adjustments require detailed reporting. Supporting schedules for interest capping and related-party transactions are also mandatory.
8. Tax Liability and Credits: Taxable income, CT payable, and supporting details for tax losses and foreign tax credits must be reported in this section.

II. Transfer Pricing (TP) Compliance Requirements

1. Transaction Thresholds: Taxpayers must disclose related-party transactions exceeding AED 4 million per category and connected-person benefits exceeding AED 500,000.
2. Market Value Adjustments: Adjustments to transactions that deviate from market value must be reported. While upward adjustments are automatically accepted, downward adjustments require prior FTA approval.
3. Asset/Liability Transactions: Gains or losses from related-party assets or liabilities must be disclosed, emphasizing arm's length compliance.
4. Free Zone TP Documentation: QFZPs must confirm that all related-party transactions adhere to arm's length principles and provide mandatory TP documentation.

III.  Next Steps for Taxpayers

Given the complexity of data and documentation requirements, taxpayers should proactively plan their approach to filing CT returns. Early preparation is crucial, even for those outsourcing the process. Key recommendations include:

• Undertake a “Dry Run”: Simulate the CT return process using preliminary data to identify gaps and challenges.
• Leverage Technology: Utilize tools and software to streamline data collection and compliance.
• Assess TP Strategies: Review compliance strategies for related-party transactions to align with reporting requirements.
• Prepare Financial Data Early: Gather and validate all financial statements, including those required for the accounting and free zone schedules.

Proactive planning and accurate data management will ensure smooth compliance with the UAE’s corporate tax regime, minimizing risks and streamlining the filing process

In Conclusion

In summary, understanding and adhering to the UAE's corporate tax regulations is paramount for businesses operating in the region. By grasping the key takeaways and following the outlined next steps, companies can ensure compliance, mitigate risks, and leverage potential benefits within the regulatory framework.

As you prepare your tax returns, remember to:

·        Stay Informed: Keep abreast of any changes or updates to tax laws and regulations.

·        Maintain Accurate Records: Ensure thorough documentation and accurate record-keeping to support your tax filings.

·        File Timely: Adhere to filing deadlines to avoid penalties and maintain good standing with tax authorities.

We advise you to take these proactive steps, so your business can meet its tax obligations and enhance its financial health and sustainability in the UAE’s dynamic economic landscape.

ALKETBI TOUCH

ALKETBI Professional Guidance can provide you with invaluable assistance by ensuring your corporate tax returns are compliant with UAE regulations, reducing the risk of penalties and audits. They can also offer expert advice on tax planning and strategies to optimize your tax position. Contact us for more