Filing a corporate tax return is a legal requirement for companies operating in the UAE, and penalties are charged in case of failure to file a tax return. The UAE corporate tax laws are published. Also, companies are preparing to file their corporate tax returns within the time frame set by the Federal Tax Authority (FTA).
Running and flourishing a business can be challenging and the most important aspect for companies. Especially those just starting, is ensuring they comply with the corporate tax laws of the UAE tax system. Building your business is only possible if you are fined or penalized for non-compliance with corporate tax laws.
Corporate tax – what is tax compliance?
The UAE Ministry of Finance first introduced the corporate tax in January 2022, with implementation to be announced in June 2023 or January 2024. The corporate tax law will come into effect in June 2023 at a rate of 9%. Any annual taxable profit below AED 375,000 will be subject to a 0% tax rate. The system includes elements of international tax best practices.
Every taxpayer must register for Corporate Tax UAE and obtain a tax registration number. Sometimes, the IRS requires exempt persons to also register for corporate taxes.
Taxpayers who choose to pay their taxes correctly and on time are said to obey the law. Compliance with regional tax laws and regulations and timely reporting are critical in today’s business environment.
Corporation Tax Requirements
Accurate financial records must be maintained to ensure compliance with UAE corporate taxes. The company’s tax returns must include a detailed description of these records. Entities must also submit all relevant documents to the Federal Tax Office. Under the applicable company rules and regulations, companies must still have their financial statements audited by a qualified audit firm in the UAE. In addition, free zone businesses must have their financial accounts audited to benefit from the zero corporate tax rate.
All companies paying corporate tax in the UAE must be registered with the Federal Revenue Authority. The Federal Revenue Authority can register certain companies if eligible entities need to complete the voluntary corporate tax registration in the UAE. A company may no longer pay UAE corporate tax for several reasons, such as maturity or liquidation.
In this case, the company should file a request for cancellation of registration. Within three months from the termination date, the company must submit a request for deregistration to the Federal Tax Office. In such cases, obtaining the help of a corporate tax advisor is essential to ensure a smooth and efficient corporate tax filing and deregistration process.
Preparing for Corporate Tax
It is convenient to take the following steps to prepare for corporate taxes:
- Learn about corporate tax laws and other information from the Treasury and the Federal Tax Office.
- Use the information available to determine if and when your business is subject to corporation tax.
- Learn about the particular requirements of your business, such as registration needs, accounting/tax deadlines, application deadlines, and any necessary options or requirements.
- Follow any updates or guidance provided by the Treasury and the IRS.
- Maintained all financial information and records required for corporate taxation.
As Dubai’s most dynamic and cosmopolitan free zone, IFZA is committed to supporting the community in adhering to the latest regulations. We have launched several activities designed to equip our members for the upcoming changes in our business ecosystem.
Procedures for filing corporate tax returns in UAE
The procedure for filing corporate tax returns in the UAE includes,
Tax registration:
You will be given a tax registration number from the Federal Tax Agency (FTA) by submitting the required documents and information.
Record Keeping:
Properly document all financial transactions and tax-related documents following UAE tax laws.
Tax return preparation:
Calculate taxable income and prepare tax returns based on records kept and consideration of deductions and exemptions following UAE tax laws.
Tax Return Submission:
File your tax return with the FTA via their online platform, E-Services, on or before the deadline.
Tax Return FTA:
Submit tax returns to the FTA through its online platform, eServices, on or before the due date.
Pay Taxes:
Pay taxes based on tax returns filed on or before the due date.
Tax Audit:
During a tax audit, the FTA may request additional information. Or documentation to verify the accuracy of the tax return filed.
Corporate Tax Compliance in the UAE: Tips for Companies
Here are a few tips to help you understand your tax compliance obligations and outline what you need regarding business tax compliance and tax law. Plus, how to get there with simple tax planning steps.
Focus on building fail-safe processes.
Integrating security checks into your business processes can help you avoid costly mistakes that distract you from your most important business priorities. Manual checklists, reminders, and checkpoints will make completing necessary tasks more accessible and efficient.
Lists provide a comprehensive way to track each process so important dates, processes, and documents are noticed. In addition, a unified approach to data collection and payment processing will save you time developing new products or preparing for the next release.
Assess your liabilities
It may seem daunting, but assessing and organizing all your compliance responsibilities will pay off in the future. If your finance department is overwhelmed, an accounting or tax professional can help you assess your business liabilities and guide you with the information you need to navigate changing regulations and stay compliant.
For each commitment requiring payment, list the submission date and payment date. Different people may perform activities, or there may be processing delays. Separating form submission from payment ensures that both forms are completed.
Create a master calendar.
Large paper and tablet calendars are fine, but a digital calendar with all the details to complete tasks, reminders, and personalization tools is ideal. Include instructions explaining which reports should be checked, the location of the document to print, and anything else that will be beneficial in the future.
This will allow it to be shared globally and used as the basis for your comprehensive tax compliance calendar. The IRS tax calendar includes listings for various entities and different payroll frequencies, so uploading it to a separate calendar is a great way to determine if it works or adds a lot of confusion.
Tax compliance is easy to use
There is no value in standardizing your compliance obligations if the information you collect cannot be easily accessed by those who need it. For example, thick organizational language text can be read during an audit. But it can be approved and trusted with clear instructions and guidelines.
Your compliance calendar will be the main item that users interact with daily. Still, consider setting up a standard operating procedure (SOP) that provides a more in-depth overview of the review process, dates, and instructions. Include them in your business continuity plan, if necessary. Then, have a non-accounting team member review it to ensure you understand the company’s liabilities. However, when they were incurred, and how to extract data to support tax returns and payment preparation.
Rely on a systematic approach.
Investing time and effort into a new process may seem expensive, but starting with an initial one-hour turnaround time and continuing to improve your compliance documentation will quickly yield beneficial results.
Keep your tax compliance process up-to-date as you take on new obligations. Schedule time each year to review the process and ensure it meets your needs. Effective planning for tax and business responsibilities will allow you to move from a reactive to a proactive approach, reducing the time and resources spent on tax compliance.
Final Thoughts
Companies focus more on their areas of expertise and programs to add business value to stay afloat. All businesses and individuals must know the laws and regulations governing their business taxes.
Tax policy changes all the time. Therefore, compliance with tax laws is critical to the operation of a company. Federal agencies and other entities have passed various laws, tax codes, and other initiatives to oversee and administer multiple areas of taxation.