UAE Federal Tax Authority Releases Guide on Corporate Tax (CT) Return: Key Obligations

The UAE Federal Tax Authority (FTA) has published a guide on filing the corporate tax (CT) return, outlining procedural and reporting requirements. It includes step-by-step guidance on completing the CT return form and details the necessary disclosures across various schedules.

On November 11, 2024, the United Arab Emirates (UAE) Federal Tax Authority (FTA) released an official guide to streamline the corporate tax return filing process. This initiative follows the UAE’s implementation of corporate income tax (CIT) on June 1, 2023, marking a significant shift in the nation’s tax landscape. The guide provides structured instructions for taxpayers on preparing and submitting tax returns via the EmaraTax portal, reinforcing compliance with UAE corporate tax laws.

The document lays out a robust framework that includes detailed schedules and specific requirements tailored to various taxpayer profiles. Below is an overview of the guide’s key compliance points, reporting obligations, and implications for businesses operating in the UAE.

1. Structure of the UAE Corporate Tax Return

The FTA’s guide segments the corporate tax return filing process into multiple parts, each addressing critical aspects of taxation. The tax return comprises eight sections and 20 schedules that taxpayers must complete based on their tax registration details. These schedules are automatically displayed on the EmaraTax portal, depending on the information provided during registration. Ensuring the accuracy of initial data is pivotal, as it directly affects the schedules that appear for completion.

The guide is categorized into the following sections:

• Part A: Taxable Person Information
• Part B: Elections
• Part C: Accounting Schedule
• Part D: Accounting Adjustments and Exempt Income
• Part E: Reliefs
• Part F: Other Adjustments
• Part G: Tax Liability and Tax Credits
• Part H: Review and Declaration
• Part I: Schedules

The sections collectively guide taxpayers through reporting their financial data, making adjustments, claiming exemptions, and ensuring accurate final declarations. All corporate tax returns must be filed within nine months of the end of the taxpayer’s tax period.

2. Key Features of the UAE FTA’s Guide on Corporate Tax Return

Tax Loss Management

Effective tax loss management is critical for businesses seeking to optimize their taxable income. The guide introduces separate schedules for standalone taxpayers and tax groups, enabling them to report and adjust tax losses accurately.

• Pre-populated fields: Data such as carried-forward losses is pre-populated, but manual inputs are required for adjustments resulting from business restructuring or changes in ownership or activity.
• Adjustments for listed entities: Special provisions allow for loss adjustments for entities listed on recognized stock exchanges and natural persons, bypassing certain restrictions.

Foreign Tax Credits (FTC)

The FTA emphasizes the correct claiming of foreign tax credits to prevent double taxation:

• Documentation requirements: Taxpayers must provide information on the origin and nature of foreign income, evidence of taxes paid abroad, and detailed income attribution.
• Group applications: FTC claims within tax groups are allocated to the specific group member earning the income, thereby reducing group-level tax liability.

Disclosure Requirements

Transparency in financial and transactional reporting is a cornerstone of the UAE tax system. Key disclosures include:

1. Dividends and profit distributions:
   • Dividends from resident persons subject to UAE CIT are reportable, while dividends from exempt entities are not.
   • Participation exemptions require proof of compliance with a minimum 9 percent CIT rate and ownership conditions.
2. Unrealized gains and losses:
   Taxpayers opting for realization-based taxation must complete relevant schedules for deferred gains and losses.

Transfer Pricing (TP)

Transfer pricing compliance is crucial for related-party transactions:

• Thresholds:
  • Transactions exceeding AED 40 million require comprehensive reporting.
  • For specific categories, such as services and intellectual property, individual disclosures are needed for amounts above AED 4 million.
• Connected persons:
  A dedicated schedule is required if transactions with connected persons exceed AED 500,000. Payments exceeding this threshold must adhere to the arm’s-length principle.

Administrative Guidance

The FTA outlines administrative policies for error correction, exempt entity declarations, and estimated financial data submissions:

• Error correction:
  • Errors increasing the tax payable by up to AED 10,000 can be rectified in subsequent returns.
  • Errors exceeding AED 10,000 must be disclosed voluntarily.
• Exempt entities:
  Exempt entities need to file annual declarations. If their exemption status changes, corporate tax returns must be filed for the relevant period.
• Estimated figures:
  Taxpayers submitting estimated data must disclose that the figures are non-final.

Tax Elections

Tax elections made for a specific period, such as opting out of the 0 percent tax rate for free zone persons or applying transitional rules, will automatically apply to subsequent tax returns. These elections are generally irrevocable, requiring careful consideration during the initial filing period.

3. Compliance Challenges and Advisory Actions

The introduction of corporate tax in the UAE represents a transformative phase for businesses. To navigate these changes effectively, taxpayers must prioritize accuracy, documentation, and proactive planning. Here are strategic actions for UAE businesses:

Understand tax reporting obligations

Review the guide thoroughly to understand requirements, particularly for reporting tax losses, FTC claims, and related-party transactions. Awareness of schedules and documentation will minimize errors.

Data collection and preparation

Ensure that all required data points, including granular details beyond general ledger accounts, are collected. This includes:

• Employee data for free zone compliance.
• Foreign tax evidence for FTC claims.
• Asset details for transitional rule elections.

Transfer pricing compliance

Conduct arm’s-length reviews of related-party transactions, ensuring thresholds are not exceeded. Finalize transfer pricing assessments before closing financial accounts to avoid adjustments requiring FTA approval.

Leverage technology solutions

Adopt technology to automate tax schedule preparation, ensure data accuracy, and streamline governance. Pre-populated fields in the EmaraTax portal can be utilized but should be manually verified.

Plan for voluntary disclosure

For errors exceeding AED 10,000 in previous returns, prepare a voluntary disclosure. Addressing discrepancies early reduces penalties and audit risks.

EmaraTax portal review

Regularly update information on the EmaraTax portal. The penalty-free grace period for updates ends on March 31, 2025, making timely accuracy a priority.

4. Additional Reporting Requirements

The guide also introduces additional reporting obligations for specific taxpayer categories:

• Free zone persons:
  • Report average full-time employees and attach financial statements.
  • Disclose the split between qualifying and non-qualifying income.

• Audited financial statements:
  Taxpayers exceeding AED 50 million in revenue or availing QFZP benefits must provide audited financial statements, including auditor details and opinions.
• Transitional rules compliance:
  Detailed asset information must be disclosed, even if no disposals occurred during the tax period.

Conclusion

The UAE’s corporate tax return guide is a critical resource for navigating the complexities of the nation’s corporate tax regime. By outlining clear processes and compliance measures, the guide equips taxpayers with the tools to meet their obligations efficiently.

To achieve compliance, businesses should:

• Invest in robust data management practices.
• Engage tax professionals for intricate scenarios like transfer pricing.
• Leverage FTA resources and automation technologies to streamline filings.

Early adoption of these practices will not only mitigate risks but also position businesses to adapt effectively to the evolving UAE tax landscape. By embracing the guide’s provisions, taxpayers can ensure accurate filings, minimize penalties, and align with global tax compliance standards.

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