As the first financial year under the UAE Corporate Tax Law (“CT Law”) draws to a close for many United Arab Emirates businesses, it’s crucial for taxpayers to meet all statutory deadlines and have a solid grasp of the primary technical requirements essential for financial reporting and audits.
Businesses with the financial year 1 June – 31 May
- The first tax period started from 1st June, 2023 and concluded on 31st May, 2024.
- The due date for filing tax return for first tax period is 28th February, 2025.
Businesses with the financial year 1 January – 31 December
- The first tax period started from 1st January, 2024 and conclude on 31st December, 2024.
- The due date for filing tax return for first tax period is 30th September, 2025.
The businesses who have not yet registered for UAE Corporate Tax must take an action instantly to avoid the unfortunate penalty of AED 10,000.
To assist companies in this final stretch, FinGuard has highlighted critical actions to guide you through the pre-year-end period.
Pre Year-End Actions Required to Meet Statutory Deadlines
- Corporate Tax Registrations: Taxable entities are required to register for corporate tax by the deadlines specified by the Federal Tax Authority (“FTA”) to avoid penalties. Businesses that haven’t registered for Corporate Tax yet should check the deadlines and take the necessary steps.
- Submission of Tax Group Applications: Entities intending to establish or join a Tax Group must submit their applications to the FTA before the end of their first tax period. Companies with their financial year ending on 31 December 2024 should submit their applications by that date.
Preparing for Year-End Tax Accounting and Disclosures
Addressing the following points will not only support year-end tax accounting but also help companies anticipate questions from auditors, ensuring that corporate tax obligations do not delay financial reporting.
- Assess Eligibility for Key Entity-Level Tax Exemptions:
- Small Business Relief: Verify eligibility based on revenue thresholds.
- Qualifying Free Zone Person (QFZP) Status: Confirm compliance with QFZP requirements, such as adequate substance, Qualifying Income, meeting the de-minimis threshold, and compliance to Transfer Pricing regulations.
- Government Entity (GE) and Government Controlled Entity (GCE) Exemption: Obtain verification from relevant authorities on whether your organization qualifies as a GE or GCE. GCEs must be recognized in a (private) Cabinet Decision. For Article 4(1)(h) entities, evaluate eligibility and prepare to submit an exemption request to the FTA.
- Extractive and Non-Extractive Natural Resource Business Exempt Status: Assess if any ancillary or incidental business income is taxable, especially if it exceeds 5% of total revenue.
- Plan Key Tax Elections for the Tax Return:
- Unrealised Gains or Losses: Explore the available election options and the implications of making an irrevocable choice.
- Transitional Rules: Determine whether specific assets or liabilities qualify and if this election would benefit the company.
- Foreign Permanent Establishment (PE) Exemption: Confirm compliance with the PE conditions and assess if making this election would be advantageous when considering all foreign PEs.
- Evaluate Tax Relief Options for Eligible Transactions and Other Tax Reductions:
- Participation Exemption for Income and Losses from Participating Interests
- Group Relief for Asset and Liability Transfers within group companies
- Business Restructuring Relief for Business Transfer in Exchange for shares
- Foreign Tax Credit Opportunities
- Ability to Offset Losses Across Group Companies
- Identify Material Tax Adjustments:
- Interest Deductibility Limits
- Entertainment Expenses for customer, shareholder, supplier or other business partner entertaining
- Transfer Pricing Adjustments
- Confirm Overseas Entities Do Not Create a UAE Taxable Presence:
Verify that overseas entities of a business do not give rise to a UAE taxable presence by assessing if overseas companies:
- Are effectively managed and controlled in the UAE
- Have a UAE permanent establishment
- Have a UAE nexus
For guidance tailored to your company’s corporate tax requirements, reach out to FinGuard today.