How to File Corporate Tax in the UAE: A Complete Guide for Businesses

What You Need to Know About Corporate Tax in the UAE

The UAE's introduction of Corporate Tax is a big step in aligning with global tax standards of organizations like the OECD  under the Base Profit Erosion and Profit Shifting Initiative (This will be covered in another blog). As a business owner, it’s crucial to understand how this new law applies to you, whether you’re a small startup, an established company, or a multinational operating in the UAE. The good news is, once you understand the key points, the process becomes much easier to manage.

Who Needs to File?

If your business is registered in the UAE, you need to file a Corporate Tax return. While the general rules apply to most businesses, certain details differ depending on your company’s setup. Here's a quick breakdown:

• Mainland Companies: These businesses are subject to the standard 9% Corporate Tax rate on profits exceeding AED 375,000. If your business earns less than that, you will qualify for a zero tax rate (for the first AED 375,000).
• Free Zone Companies: Free zone businesses may qualify for special reliefs. However, if you conduct business with mainland companies or have certain types of income, you’ll need to check whether you still qualify for the full tax relief or if it can only be partially applied.
• Foreign Branches: If you're a foreign branch operating in the UAE, you’re generally required to comply with Corporate Tax laws. However, there are specific rules regarding the treatment of profits earned from your foreign operations.

When is the Deadline?

The good news is that the deadline for filing your Corporate Tax return is set 9 months after the end of your financial year. Here’s an example:

• If your financial year ends on December 31, 2024, your return will be due by September 30, 2025.

While this might seem like a lot of time, we always recommend starting your preparations as soon as possible. That way, you’ll avoid rushing to meet the deadline and reduce the chances of making mistakes.

Key Steps in the Filing Process

Filing Corporate Tax in the UAE isn’t just about filling out a form, it’s about ensuring that all your financial records are in order and aligned with the tax laws. Here’s how to get prepared:

1. Register for Corporate Tax

Make sure you’ve registered with the Federal Tax Authority (FTA) before you file. If you’re already registered for VAT, you’ll need to separately register for Corporate Tax.

2. Prepare Financial Statements

These are crucial. You’ll need your balance sheet and profit & loss statement for the year. Make sure they’re accurate and reflect your true financial standing. Inaccurate statements could cause delays or penalties.

3. Gather Revenue and Expense Records

You’ll need to submit detailed records showing all your income and expenses. This includes:

• Sales revenue and income from services, investments, and other sources.
• Expenses, such as salaries, office supplies, and operational costs. Make sure you’ve kept good documentation, especially for related-party transactions or international business dealings.

4. Support Documents for Deductions

Certain deductions, like research and development expenses or business-related travel, can reduce your taxable income. Be sure to have all receipts, contracts, and invoices ready to back up your claims.

How to Avoid Common Errors

One of the biggest mistakes businesses make is underestimating the complexity of tax filing. Here are a few common errors to avoid:

1. Misunderstanding Taxable Income

Many businesses assume only profits are taxable, but the calculation can be more complex. Taxable income includes various types of income, and there are allowances for specific deductions. Know what qualifies as taxable income in your case, and make sure you don’t miss out on any potential tax savings.

2. Failing to Keep Proper Records

If you haven’t been keeping good records throughout the year, you’ll find it difficult to prepare your return. Proper record-keeping isn’t just about convenience, it’s essential for ensuring compliance and avoiding penalties. Start organizing your documents now to prevent scrambling later.

3. Missing Deductions and Reliefs

There are several reliefs and deductions available, particularly for businesses in free zones. Don’t assume you’re not eligible. Free zone businesses may qualify for full tax exemptions or reduced rates, but only if you meet certain conditions. Check your eligibility and make sure you're claiming all the deductions you're entitled to. You can also consult with a professional to plan on optimizing your tax position. 

4. Inaccurate Filing

Small mistakes in your filing can lead to big penalties. Ensure your return is as accurate as possible, and double-check your numbers. If you're unsure, it’s worth consulting a tax professional to review your return before submission.

The Real Cost of Non-Compliance

We know that no one wants to think about penalties, but it’s crucial to understand the consequences of not meeting the filing requirements. Here’s what you could face:

• Late Registration: A penalty of AED 10,000 for failing to register within the required time frame.
• Incorrect Returns: If your return contains errors, you could face fines based on a percentage of the tax owed, the more errors, the higher the penalty.

By staying ahead of the deadline and being thorough in your preparations, you can avoid these penalties and stay compliant.

Actionable Steps to Make the Process Manageable

Here’s how to break the process down into smaller, manageable steps so you’re not overwhelmed:

1. Assess Your Financial Records Now

Don’t wait until the last minute to get organized. Review your financial statements and ensure everything is complete and accurate. If you notice any gaps, fill them in immediately.

2. Gather and Organize Your Documentation

Ensure you have all the necessary documents, such as revenue records, invoices, and supporting paperwork for deductions. Keep everything neatly organized so it’s easy to access when it’s time to file.

3. Consult a Tax Professional

If you’re unsure about the tax filing process or need help optimizing your deductions, consider hiring a tax professional. They can guide you through the process and ensure you’re taking advantage of all available tax benefits.

4. Use a Tax Filing Checklist

To avoid missing anything, create a checklist of everything you need to prepare before filing. This can include documents like financial statements, tax registration, and receipts for deductions.

FAQ: Your Top Questions Answered

Here’s a quick look at some of the most common questions business owners have about Corporate Tax filing in the UAE:

1. Who needs to pay Corporate Tax in the UAE?

All businesses registered in the UAE and have a profit threshold of more than 375,000 AED might fall under the scope of paying Corporate Tax, including mainland companies, free zone businesses, and foreign branches. 

2. What documents do I need to file?

You’ll need financial statements, revenue and expense records, and any supporting documents for deductions or exemptions you plan to claim.

3. Can I claim deductions?

Yes! Many businesses can claim deductions, especially for business expenses, research and development costs, and certain investments. Free zone businesses may also qualify for special tax reliefs.

4. What happens if I miss the deadline?

Late submissions can result in penalties, including fines for late registration and for filing incorrect returns. It’s always best to file on time.

5. How do I register for Corporate Tax?

Registration is done through the Federal Tax Authority (FTA). We recommend using a tax professional to complete this step and avoid errors. If you're already registered for VAT, you’ll still need to register separately for Corporate Tax.

Looking Ahead: The Future of Corporate Tax in the UAE

The introduction of Corporate Tax is a major change for businesses in the UAE, but it’s also an opportunity to align with global standards and bring more transparency to the UAE business landscape. By embracing these changes and staying proactive with your filings, your business will continue to thrive in the UAE’s evolving economic landscape.

In Summary

Corporate Tax filing doesn’t have to be a daunting task. By staying organized, being proactive, and taking the time to understand the requirements, you can ensure a smooth filing process. Whether you choose to handle it on your own or work with an expert, following these steps will set you on the right path to compliance and success.

If you need any help along the way, remember, tax professionals are here to guide you. You’ve got this!

By: Grace Sogbesan 
Business Development/Marketing Executive at Emirabiz