UAE Corporate Tax Law –
Year-End Compliance & Readiness
UAE Corporate Tax Law –
Year-End Compliance & Readiness
- As the calendar year 2024 has concluded, businesses following the calendar year as their financial year are now in the process of finalizing and closing their books of accounts. With the introduction of the UAE Corporate Tax Law (‘UAE CT Law’), companies and auditors must pay close attention to additional disclosure requirements in financial statements related to tax implications under the new legislation.
To assist businesses in this process, we have outlined key considerations for finalizing books of accounts and preparing for tax return filings.
Corporate Tax Registration &
Grace Period for Updating Tax Records
- All companies incorporated in the UAE, including offshore and dormant entities that have not been liquidated or struck off, are required to apply for Corporate Tax Registration. Failure to submit the registration application on time may result in an automatic penalty of AED 10,000.
- Recently, the Federal Tax Authority (FTA) issued a Public Clarification, providing a grace period until 31 March 2025 for businesses to update their tax information on the Emara Tax portal. During this period, no administrative penalties will be imposed for delays in updating records. Businesses are encouraged to use this opportunity to review and update their information on the Emara Tax portal, even if they have already registered. Updates may include changes to:
- Name, address, and email;
- Trade license activities;
- Legal entity type, partnership agreements (for unincorporated partnerships), or articles of association;
- Nature of the business; or
- The address from which business operations are conducted.
Finalization of Books of Accounts for FY 2024
The process of finalizing books of accounts for 2024 requires businesses and auditors to account for tax provisioning and related disclosures for current and deferred taxes. A detailed analysis of the company’s tax liability under the UAE CT Law is essential, including the impact of deferred taxes arising from temporary differences between accounting and tax treatments of assets and liabilities. These differences may result from elections such as the realized basis of taxation or tax losses.
Ascertaining Qualifying Free Zone Person Status for FY 2024
- Entities claiming Qualifying Free Zone Person (QFZP) status must ensure that all conditions are met throughout the tax period to retain this benefit. While many businesses may have conducted impact assessments earlier, it is crucial to review these analyses to confirm compliance for 2024. Failure to meet the conditions could result in the loss of QFZP status for the subsequent four tax periods.
Corporate Tax Return Readiness
Filing the first Corporate Tax Return involves making certain irrevocable elections, which require careful consideration. Below are key aspects to keep in mind:
Data Requirements: The tax return includes various schedules that require detailed information, such as the average number of employees during the year and whether the company is part of a Multi-National Enterprise (MNE). Uploading financial statements is mandatory.
Tax Elections: Businesses must decide whether to opt for the realized basis of taxation in their first tax return. This election is irrevocable for subsequent periods and should be factored into tax provisioning during the finalization of books.
Transitional Provisions: Businesses wishing to benefit from transitional provisions for Qualifying Immovable Property, Qualifying Financial Assets or Liabilities, or Qualifying Intangible Assets must make the election in their first tax return. Details such as historical cost, acquisition date, and net book value must be disclosed, regardless of whether the asset was disposed of during the tax period.
Tax Losses and Relief Schedules: Entities with tax losses must disclose necessary information for carrying forward losses or transferring them to another entity. Similarly, businesses availing reliefs such as Qualifying Group Relief or Business Restructuring Relief must provide accurate details in the relevant schedules.
Filing Deadlines: Tax returns must be filed within nine months of the end of the financial year. For example, entities with a financial year ending on 31 May 2024 must file their return by 28 February 2025.
Conclusion
The UAE tax landscape is evolving rapidly, and businesses must conduct a thorough analysis of applicable provisions, reliefs, and disclosures to ensure compliance not only for 2024 but also for future years. If you require assistance with Corporate Tax compliance, feel free to reach out to us. We are here to help!
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