As the deadline for filing UAE corporate tax returns approaches, business owners are increasingly concerned about how to comply with the new law and avoid financial penalties. There’s no need to worry. In this comprehensive guide, we provide a clear and practical roadmap to help you understand and meet your tax obligations with ease and confidence.
What is Corporate Tax in the UAE?
Corporate tax is a federal direct tax imposed on the net income or taxable profits of corporations and other businesses in the country. This system was introduced to enhance the UAE’s position as a leading global hub for business and investment while adhering to international standards of tax transparency. Furthermore, the law aims to diversify the state’s economy and ensure its financial sustainability.
Who is Subject to Corporate Tax?
The scope of the tax includes all companies and businesses in the UAE, with some exceptions for specific activities. Generally, the entities required to comply are:
- Companies and resident individuals conducting business activities under a commercial license.
- Permanent establishments of non-resident persons in the UAE.
- Businesses operating in Free Zones (subject to specific conditions and exemptions).
- Foreign companies that are effectively managed and controlled from within the UAE.
Practical Steps for Corporate Tax Compliance Before the Deadline
To avoid any delays or penalties, follow these organized steps to ensure your company’s full compliance.
1. Register with the Federal Tax Authority (FTA)
The first mandatory step is to register your company to obtain a Tax Registration Number (TRN). This must be completed even if your profits fall within the tax-exempt threshold. You can start the registration process on the official Federal Tax Authority portal.
2. Maintain and Organize Accounting Records
The law requires all businesses to keep accurate and organized financial records. This includes not only invoices and receipts but also approved financial statements that show the taxable net profit.
3. Calculate Your Taxable Income
The tax is calculated on the accounting net profit after making specific adjustments as per the Corporate Tax Law. Here are the applicable tax rates:
| Taxable Income (AED) | Applicable Tax Rate |
|---|---|
| From 0 to 375,000 | 0% |
| Above 375,000 | 9% |
4. File the Tax Return and Pay the Tax
Finally, the tax return must be filed electronically via the FTA portal within 9 months from the end of your company’s financial period. After filing, the due tax amount must be paid on time.
Corporate Tax in Free Zones: What You Need to Know
Companies established in Free Zones benefit from a 0% tax rate on “Qualifying Income.” Therefore, it is crucial to understand what constitutes qualifying versus non-qualifying income to avoid any surprises. Generally, qualifying income includes income from transactions with other Free Zone businesses or from outside the UAE. Choosing the right free zone is critical, and you can learn more in our guide on setting up a company in a Free Zone.
Tips to Avoid Fines and Penalties
- Don’t Delay: Start the compliance process now and don’t wait until the last minute.
- Documentation is Key: Keep all financial documents and records organized.
- Seek Expert Advice: Tax laws can be complex. Consulting a tax expert like Tdabeer ensures correct compliance and helps you avoid costly mistakes.
- Understand Your Free Zone Status: If you are in a free zone, make sure you fully understand the requirements for qualifying income.
How Can Tdabeer Help You?
At Tdabeer, we don’t just help you set up your company; we support you every step of the way to ensure its growth and continuity. Our team of experts specializing in UAE corporate tax is ready to provide full support, from tax registration and bookkeeping to filing your tax return accurately and professionally.
Let us handle the tax complexities so you can focus on what you do best: managing and growing your business.
Frequently Asked Questions (FAQ)
1. What is the deadline for the first tax return filing?
The deadline depends on your financial year. For companies whose financial year starts on January 1, 2024, and ends on December 31, 2024, the filing deadline is September 30, 2025.
2. Is corporate tax calculated on total revenue or net profit?
The tax is calculated on the taxable net profit after deducting allowable costs and expenses, not on the total revenue.
3. Am I required to register if my profits are below AED 375,000?
Yes, all businesses subject to the law must register for corporate tax regardless of their profit level. Being exempt from payment does not mean you are exempt from registering and filing a tax return.
