Corporate tax return filing in UAE is a legal requirement for businesses as it helps maintain transparency and accountability within the organization. The introduction of corporate tax has come about as a significant development for companies operating in the region. Although the tax rates are comparatively lower than in other countries, companies must meet their obligation of corporate tax filing UAE. This showcases their commitment to operating ethically and contributing to the growth of the economy.
Through this blog post, we will thoroughly understand the process of corporate tax return filing in UAE and other critical considerations in order to keep the functioning of the business smooth and hassle-free.
Introduction of Corporate Tax in the UAE
The Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses issued by the Ministry of Finance UAE stated the institution of Corporate Tax in the UAE with effect from June 1, 2023. It was employed as a direct tax levied on the taxable income of entities operating in the country, including partnerships, unincorporated entities, and individuals involved in any business activity.
The new tax regime was introduced to diversify the revenue sources of the nation and associate with international tax standards. According to the law, entities with a taxable income exceeding the threshold of AED 3,75,000 will be subject to a 9% corporate tax. The taxpayers are required to pay the corporate tax for the annual tax period. During this period, they must prepare the financial statements and file the tax returns. However, prior to filing returns, they are required to register for it with the FTA.
Corporate tax return filing in UAE
Corporate tax filing UAE refers to the process in which the taxable entity provides the details of the income and expenses of the business for a specific tax period to the Federal Tax Authority (FTA). Through this report, FTA determines the taxable income and the amount of tax the business owes. According to the law, all taxable entities, including those who qualify for a 0% tax rate, are required to file a corporate tax return.
Who should file for Corporate Tax Returns?
Most businesses in the UAE are required to file corporate tax returns, including:
- Businesses and individuals – Any individual or corporation, both local and foreign, conducting business activities under a commercial license in the UAE.
- Free zone companies – Every free zone entity, except Qualifying Free Zone persons with certain benefits.
- Minimum threshold – Businesses whose annual taxable income exceeds AED 375,000 are subject to corporate tax registration, and hence, are required to file returns as well.
Under the UAE corporate tax law, every taxable person is required to pay corporate tax, including residents with companies based in the UAE and non-residents with a permanent establishment in the UAE or deriving UAE-sourced income.
Entities exempt from corporate tax return filing in UAE
The following entities are exempt from Corporate tax filing UAE:-
- Public benefit entities – Non-profit organizations that are established for charitable purposes, provided they meet specific criteria.
- Natural resource extraction – Businesses that are solely engaged in extracting UAE natural resources.
- Investment funds – Certain investment funds that meet the conditions of the UAE’s corporate tax law.
If you need more information regarding exemptions and free zone benefits, consult with a Shuraa tax professional.
Deadlines for Corporate tax return filing in UAE
Businesses in the UAE are offered a generous window to file their corporate tax returns. The deadline for filing the returns falls 9 months from the end of the relevant tax period.
For example, if the financial year of the company is ending on December 31, 2024, the tax period would be January 1, 2024 – December 31, 2024. 9 months to the end date would be September 30, 2025, which is the deadline for the company to file its corporate tax return for the mentioned tax period.
The self-assessment system in the UAE allows businesses to calculate, report, and pay their tax liability.
Documents required for the CT returns filing process:-
- Copy of valid trade license
- Emirates ID and Passport copies of business owners/partners/shareholders
- Memorandum of Association (MOA)
- Financial statements
- Records showing supporting deductions (For example, receipts, invoices, etc.)
- Calculation of Taxable income
- Details of Depreciation and Repayment
- Loan Documents (if required)
- Records of Exempt Income (if required)
Corporate tax return filing in UAE: Step-by-step procedure
The process involves several steps, such as:-
Ensure corporate tax registration – Confirm whether your company has a valid Tax Registration Number (TRN) issued by the tax authorities. If not, then complete the registration process and obtain the TRN. You can seek expert help from the professional tax agents of Shuraa Tax.
Gather the required documents – Accumulate the necessary documents such as company registration documents, financial documents, and others, and make sure they are accurate and applicable to the relevant tax period.
Prepare the tax returns – Get the corporate tax return forms from the official site of the FTA or through tax software providers and fill in the mandatory fields such as revenue, expenses, net profit, depreciation, provisions, etc. Calculate the taxable income of the company meticulously, considering all applicable deductions and exemptions, and also, attach the supporting documents for the same.
Submit the tax return – Fill in the declaration section and confirm that the information provided is correct. Once the form is complete, submit it to the FTA.
Confirmation and payment – Upon successful submission, the FTA will share a confirmation receipt. If the company has a tax liability, the FTA will provide the payment details and deadlines. The company has to ensure timely payment of the due taxes.
Maintain records – Make sure to keep all documents used for tax return preparation for future audits or verification purposes. With expert assistance from professionals like Shuraa Tax, you can ensure accurate and timely filing of your corporate tax returns.
Penalties for late filing of Corporate tax returns
The FTA imposes strict penalties for those filing their corporate tax returns late. For the initial twelve months of delay, businesses are subject to a penalty of AED 500 per month. After the first year, the penalty increases to AED 1,000 per month or part of that. Additionally, the specific amount of penalty may vary depending on official announcements.
The FTA imposes these penalties to encourage the timely filing of corporate tax returns and ensure tax compliance. Since late filing can increase the tax burden, companies must ensure to adhere to deadlines. In specific circumstances, the FTA can also waive or reduce penalties altogether.
Get comprehensive assistance from Shuraa Tax
Accurate and timely filing of corporate tax returns in the UAE ensures that the business stays compliant and avoids penalties. However, given the complexity of tax regulations in the UAE, it is better to seek professional tax services from a reliable service provider in the UAE.
Shuraa Tax Consultants and Accountants, with a team of dedicated experts, offer top-notch corporate tax services in the UAE. They not only handle all your tax and accounting needs but also review your finances and assist with tax planning and compliance. The professionals of Shuraa Tax make sure that the tax returns are filed accurately and within the specified timeframe, thereby helping businesses maintain a good name with the authorities.
Contact Shuraa Tax today and get reliable and comprehensive tax services!
