Our dedicated tax experts assist businesses in submitting their corporate tax returns efficiently. Since the UAE introduced corporate tax, companies must contribute fairly to the country’s economy while aligning with global tax standards. Specifically, Federal Decree-Law No. 47 of 2022 governs corporate tax, and it applies to financial years starting on or after 1 June 2023. Corporate tax affects all entities operating in the UAE, though certain rules and exemptions apply.
The law charges businesses a 9% tax on taxable income exceeding AED 375,000. Meanwhile, the government does not tax income below this threshold. This progressive structure ensures that smaller businesses and start-ups with lower profits do not face undue burdens, while larger corporations pay their fair share. In addition, qualifying free zone persons receive a 0% rate on their qualifying income. Furthermore, authorities will set a different tax rate for large multinationals that meet specific criteria under OECD Pillar Two, though the rate has not yet been specified.
Our experts calculate corporate tax based on taxable income after accounting for allowable deductions and adjustments. Deductions generally include legitimate business expenses required to generate revenue, while businesses cannot deduct personal expenses or capital expenditures. Therefore, companies seeking guidance can rely on our Corporate Tax Return Filing services in Dubai to ensure full compliance.
Corporate Tax : What you Need to Know
Corporate tax obligations in the UAE apply to many businesses, but not every entity is subject to the tax. Understanding who must file and who qualifies for exemptions is essential for proper compliance.
Entities and Individuals Subject to Corporate Tax
The following categories are subject to corporate tax in the UAE:
UAE-incorporated juridical persons
Foreign juridical persons effectively managed and controlled in the UAE
Non-resident juridical persons with permanent establishments in the UAE
Non-resident persons earning UAE-sourced income
Non-resident juridical persons with nexus in the UAE (e.g., income from immovable property)
Natural persons conducting business in the UAE with an annual turnover exceeding AED 1,000,000
Certain entities qualify for automatic or conditional exemptions:
Government entities and government-controlled entities
Extractive and non-extractive natural resource businesses
Public and private pension or social security funds
Qualifying investment funds
Juridical persons wholly owned by exempt entities
Qualifying public benefit entities
Timely filing of corporate tax returns is crucial to avoid penalties. The deadline is nine months after the end of the financial year, giving businesses sufficient time to prepare financials and calculate taxable income.
Sometimes, businesses need additional time. In such cases, they may request extensions from the Federal Tax Authority (FTA). Approval is at the FTA’s discretion, so it is important to apply well before the deadline. For instance, FTA Decision No. 7 of 2024 extended the filing deadline to December 31, 2024, for entities incorporated between June 1, 2023, and September 1, 2023.
Failure to comply may result in fines. Late submission, underreporting income, or incorrect returns can attract penalties. For example, Cabinet Decision No. 75 of 2023 specifies a AED 500 fine for missing the original deadline.
The calculation of Corporate Tax in the UAE is based on the taxable income, which is determined after considering deductions and adjustments as per the Corporate Tax Law. Taxable income is derived from the profits reported in a company’s financial statements, prepared in accordance with International Financial Reporting Standards (IFRS) or other generally accepted accounting standards.
Certain expenses, such as personal expenses, fines, and penalties, are not deductible. Additionally, capital expenditures may not be immediately deductible, but businesses can claim depreciation on these assets over time.
For companies operating across borders, special rules apply. The Corporate Tax Law allows for foreign tax credits to avoid double taxation on income taxed outside of the UAE. Transfer pricing rules also apply to businesses with related party transactions, ensuring that income is reported at arm’s length and reflects market value.
Reporting is done annually, where businesses submit their Corporate Tax Return along with financial statements. Companies are encouraged to maintain accurate records and ensure all transactions are correctly documented to avoid any discrepancies during tax audits.
Taxable Persons in the UAE are required to maintain adequate records and documentation supporting their tax filings in the UAE. These records should:
- Support the information provided in tax returns or other documents submitted to the Federal Tax Authority (FTA).
- Allow the FTA to readily ascertain the Taxable Income.
- Include specific documents such as financial statements, transaction records, asset details, liabilities, and stock records.
The type of documents maintained can vary based on the business, but should typically include bank statements, loan documents, sales and purchase ledgers, invoices, and business correspondence. Digital storage is acceptable if paper documents are scanned.
A Taxable Person with Revenue exceeding AED 50,000,000 in the relevant Tax Period, or a Qualifying Free Zone Person, is required to prepare & maintain audited financial statements.
If a Taxable Person fails to keep proper records, penalties can be applied:
- AED 10,000 for a first violation
- AED 20,000 for repeat violations within 24 months
The UAE mandates that businesses retain their financial records for a minimum of Seven years, allowing the Federal Tax Authority to verify the accuracy of filings during audits or assessments.
Additionally, businesses that engage in related party transactions must prepare transfer pricing documentation. This documentation should outline the nature of the transactions and ensure they meet the arm’s length standard, which requires pricing to reflect what independent parties would agree upon in similar circumstances.
Given the complexity of Corporate Tax filing, it’s critical for businesses to ensure that their records are not only accurate but also readily available for review if requested by the authorities.
A tax audit is a detailed review conducted by the Federal Tax Authority to ensure that a tax return is accurate and complies with the law. Audits involve a thorough review of financial statements, tax returns, and supporting documents to identify any discrepancies or errors. The goal of the audit is to verify that the reported taxable income and deductions are correct.
The Federal Tax Authority (FTA) can initiate audits without prior notice. If discrepancies are found during the audit, FTA may issue a tax assessment. This assessment could lead to an adjustment in the taxable income, resulting in additional taxes owed. In some cases, taxable persons may face penalties or fines for underreporting income or failing to comply with tax rules.
The Importance of Tax Planning
Tax planning is not just a compliance exercise; it’s a strategic tool that can significantly enhance a company’s financial health. By engaging in proactive tax planning, businesses can legally reduce their taxable income, ensuring that they only pay the amount of tax required by law while maximizing available reliefs and exemptions. For efficient tax planning and accurate submissions, businesses can rely on our Corporate Tax Return Filing services Dubai.
Structuring Cross-Border Transactions
With numerous Double Taxation Avoidance Agreements (DTAA) in place, UAE-based businesses can benefit from foreign tax credits and avoid being taxed on the same income in multiple jurisdictions, thus optimizing their global tax exposure
How RVG Professionals Can Help
Navigating the complexities of corporate tax in the UAE can be daunting, especially with the evolving regulations and compliance demands. This is where RVG Chartered Accountants come in as your trusted partner. With a team of seasoned tax professionals, RVG offers tailored solutions that not only ensure compliance but also help optimize your tax position, allowing your business to focus on growth and innovation.
Tax Return Filing
Our team handles the entire tax filing process with precision, ensuring that your tax return is submitted accurately and on time. We identify every eligible deduction and exemption, helping you minimize your tax liabilities within the legal framework.
Audit Assistance & Support
In the event of a tax audit, RVG provides comprehensive support, ensuring all necessary documents are in place and helping you respond to the Federal Tax Authority (FTA) efficiently. Our goal is to make the audit process as smooth as possible while protecting your interests.
Tailored Tax Strategies
One size doesn’t fit all. We develop bespoke tax strategies that align with your business goals, industry, and operational structure. From reducing taxable income to making the most of exemptions, RVG ensures your business pays no more tax than necessary
Transfer Pricing Solutions
For businesses involved in related-party transactions, adhering to the UAE’s transfer pricing rules is crucial. RVG ensures that your transfer pricing documentation is prepared according to the arm’s length principle, safeguarding your business from potential penalties or adjustments.
Long-Term Tax Planning
Tax planning isn’t just about the current year—it’s about ensuring your business is tax-efficient in the long run. RVG works with you to devise long-term tax strategies that factor in growth, expansion plans, and evolving regulations, ensuring you’re always prepared for the future.
