Audited financial statements are necessary only when certain revenue levels are cleared
About 40 days are remaining to submit the UAE corporate tax returns for the period ending December 31, 2024. Businesses, big or small, should not wait for the due date of September 30, 2025 and must start preparations now. To prevent a last minute rush, the Federal Tax Authority (FTA) is also encouraging taxpayers for early submission of the CT returns.
Some critical touchpoints would help businesses to prepare well and save costs on corporate tax compliances.
Are corporate tax returns required if there was no business activity and/or profits?
Yes.
Every company registered for corporate tax needs to submit the corporate tax return by the due date. Even if a company has not undertaken any business transaction or earned any profits, the submission of the tax returns is still mandatory.
The non-taxability of income up to Dh375,000 should not be misunderstood as an exception from filing the corporate tax return if the profit or the gross revenue is below such a monetary threshold.
When can I claim Small Business Relief?
The Small Business Relief can be claimed if a taxpayer’s annual revenue does not exceed Dh3 million, Under SBR, no corporate tax is payable irrespective of the actual profits. For example, even if the annual net profit is say, Dh2 million on an annual revenue of say, Dh2.75 million, the small business relief can still be claimed.
Taxpayers will also benefit from a very simplified tax return. Compared to eight detailed sections (and schedules) of a normal corporate tax return, only two sections are applicable under SBR.
Taxpayers should ensure that the annual revenue is correctly calculated. The decision to opt for SBR should be finalised in the light of the eligibility requirements and future tax optimisation strategy.
Do I need to submit audited financial statements?
Audited financial statements are mandatory only if the taxpayer’s revenue exceeds Dh50 million, or if the taxpayer seeks to avail the preferential tax rate of 0%.However, except under SBR, it is mandatory to attach the financial statements along with the corporate tax return.
Is it required to submit transfer pricing Report by September 30?
The detailed transfer pricing/benchmarking report – the master/local file – is not required to be submitted along with the return. Only if the prescribed financial threshold is exceeded, a Transfer Pricing Disclosure Form (TPDF) is required along with the corporate tax return.
The Transfer Pricing Disclosure Form includes the nature and the value of the transactions with each related party and/or connected person, and the benchmarking method(s) used to determine the transactions’ arm’s length value.
What are the other considerations for preparing tax return?
The corporate tax return is a dynamic online form requiring information under eight segregated sections. A strategic evaluation is required to make the relevant ‘elections’ and/or claim the relevant tax ‘reliefs’ as per the factual matrix of a company.
Some of the elections are irrevocable and need a detailed review to optimise the current and future tax positions. Segregating the taxable income and exempt income is equally critical.
Qualifying free zone companies, corporate tax groups, UAE branches of foreign companies and individuals registered for corporate tax need to consider additional information requirements and decision points while preparing their tax returns.
What are the penalties for non-compliance?
A monthly penalty of Dh500 applies for the failure to submit the corporate tax return within the stipulated timeframe, eventually increasing to Dh1,000 per month after 12 months of delay. For the failure to settle the tax liability, a monthly penalty would be imposed at 14% per annum rate.
The preparation and submission of the corporate tax return is time critical and requires a comprehensive review of the financial statements. Taxpayers should prepare in time to ensure strategic tax planning and optimisation.
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