Tax Compliance and Administration - UAE Corporate Tax Law

The UAE Corporate Tax Law (CT Law) introduces a federal corporate income tax regime for the first time in the UAE. The law applies to all businesses operating in the UAE, with a few exceptions. This blog post will provide an overview of the key tax compliance and administration requirements under the CT Law.

Key Tax Compliances Under the UAE Corporate Tax Law

The UAE CT Law outlines a range of tax compliance obligations for taxable entities, including:

• Tax Registration: All taxable entities must register for CT with the Federal Tax Authority (FTA) within 30 days of becoming liable for Corporate Tax.
• Tax Return Filing: Taxable entities must file CT returns electronically with the FTA within the prescribed deadlines.
• Tax Payment: Taxable entities must pay their CT liability within the prescribed deadlines.
• Record Keeping: Taxable entities must maintain accurate and complete records for at least five years to support their CT returns.

Tax Administration under the UAE CT Law

The FTA is responsible for administering the UAE CT Law, including:

• Issuing Tax Regulations and Rulings: The FTA has the authority to issue regulations and rulings to provide further guidance on the interpretation and application of the CT Law.
• Tax Audits: The FTA may conduct tax audits to verify the accuracy of CT returns and assess compliance with the CT Law.
• Tax Assessments: The FTA may issue tax assessments if it determines that a taxable entity has understated its CT liability.
• Tax Disputes: Taxable entities may appeal against tax assessments or penalties imposed by the FTA through the established dispute resolution process.

You can also read: Registration and Record-keeping Obligations of Exempt Persons Under Corporate Tax

How to Prepare for Corporate Tax

To ensure your business adheres to the UAE Corporate Tax (CT) Law, it's crucial to stay informed about the latest developments and comply with the established guidelines. Here's a step-by-step guide to help you navigate the CT regime effectively

• Review the Corporate Tax Law published by the Ministry of Finance to determine if your business meets the criteria to be subject to tax.

• Check the Ministry of Finance and Federal Tax Authority websites for guidance on the implementation date that taxes will apply to your particular industry or business activities.

• Understand the basic tax compliance requirements, like the accounting/tax period, deadlines for filing tax returns, and financial records that must be maintained. Both government websites provide this type of information.

• Maintain regular awareness of any updates or additional guidance from the tax authorities by periodically checking their websites. As corporate tax in UAE is newly implemented, details may continue to evolve over time.

• Keep thorough financial records according to best accounting practices, as these will be necessary both for basic business operations as well as future tax compliance needs.

Financial Statements

Financial statements are a key element of the CT Law, as a taxable person's accounting income (profit or loss) as stated in the financial statements is used as the starting point for calculating taxable income. Taxable persons who earn revenue that does not exceed AED 3,000,000 in the tax period may use the cash basis of accounting. However, once a taxable person's revenue exceeds AED 3,000,000 in the tax period, they must prepare financial statements using the accrual basis of accounting.

Applications and Elections

Taxable persons will need to make elections or applications to benefit from certain provisions in the CT Law. Elections can be made unilaterally by taxable persons and do not require approval from the FTA. Some examples of elections include small business relief, exemption of foreign permanent establishment income, and the option to be subject to corporate tax at the general rate if they are a Qualifying Free Zone Person.

Applications, on the other hand, require approval from the FTA. Some examples of provisions that require an application include the exemption from corporate tax for certain types of persons, the treatment of a group of companies as a single taxable person, and the formation of a tax group.

You can also read: Effect of UAE Corporate Tax Law On International Businesses

Tax Returns and Payments

Taxable persons must file their corporate tax return and pay corporate tax within nine months from the end of the relevant tax period. Late filing or payment will result in penalties.

Clarifications and Assessments

The CT Law provides mechanisms for taxable persons to obtain certainty on their tax position upfront through clarification requests and for the FTA to undertake assessments of a person's corporate tax affairs under certain circumstances.

General Anti-Abuse Rule

The CT Law includes a general anti-abuse rule to prevent the use of abusive transactions or arrangements to obtain a corporate tax advantage that is not consistent with the intention of the law.

Tax compliance and administration are essential for the smooth functioning of any country's economic system. In the UAE, the Corporate Tax Law governs the taxation of corporations and businesses, providing exemptions for certain entities and individuals, specifying the rates of corporate tax, and defining taxable persons and taxable income. 

CDA: Your Tax Advisor

As businesses adapt to the UAE CT Law, CDA is here to help you navigate the complexities of tax compliance and administration. CDA is committed to providing our clients with the highest quality tax compliance and administration services. We stay up-to-date with the latest developments in the UAE CT regime and leverage our deep expertise to provide tailored solutions that meet the specific needs of our clients.

Contact CDA today to learn more about our UAE Corporate Tax compliance and administration services.

Mark Thompson

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Mark specializes in digital marketing, SEO, and content strategy.