The UAE’s Federal Tax Authority (FTA) has introduced a structured and detailed guide for filing Corporate Tax (CT) returns. With the first year of corporate tax implementation underway, this guide ensures that taxable persons, including businesses, free zone entities, and tax groups, are well-prepared to comply with regulatory requirements.
Filing through the EmaraTax portal, the process demands meticulous attention to tailored schedules and data points, reflecting the UAE’s goal of fostering transparency and compliance.
Contents
- Key Features of the UAE CT Return Process
- 1. EmaraTax: A Dynamic Filing Platform
- Detailed Schedules in UAE CT Returns
- Taxable Person Details
- Free Zone Schedule
- Elections
- Accounting Schedule
- Reliefs
- Adjustments and Exempt Income
- Other Adjustments
- Tax Liability and Credits
- Transfer Pricing (TP) Adjustments
- Applicability and Reporting
- Non-Market Value Transactions
- Gains/Losses from Related Party Transactions
- Free Zone TP Documentation
- Preparing for Compliance
- Next Steps for Taxpayers
Key Features of the UAE CT Return Process
1. EmaraTax: A Dynamic Filing Platform
Unlike static filing systems, EmaraTax uses an interactive format:
- Tailored Fields: The return adjusts dynamically based on taxpayer-specific options and data.
- Mandatory Online Submission: Returns must be filed directly via EmaraTax, without an option for e-file uploads.
- Detailed Schedules: Taxpayers must complete various detailed schedules depending on their tax profile.
Detailed Schedules in UAE CT Returns
Taxable Person Details
- Accurate registration details in EmaraTax are crucial for tailoring tax return fields.
- Ensuring updated financial data helps minimize errors during submission.
Free Zone Schedule
- Qualifying Free Zone Persons (QFZPs): Must disclose qualifying and non-qualifying revenues.
- Breakdown Requirements: Detailed reporting of capital and operating expenses, salaries, and EBITDA by emirate.
- Intellectual property (IP)-related income requires a comprehensive breakdown of related expenses and revenues.
Elections
Taxpayers have several elections under UAE CT, such as:
- Realization Basis: Adjusting taxable income for unrealized gains and losses.
- Small Business Relief: Benefiting eligible businesses under specified thresholds.
- Foreign Permanent Establishment Elections: Made annually to optimize tax liability.
Accounting Schedule
Taxpayers must submit:
- Audited Financial Statements: Including auditor details and CT registration numbers.
- Mandatory Filings: Financial statements are a required component of the CT return.
Reliefs
- Applicable to transfers within qualifying groups or restructuring scenarios.
- QFZPs are not eligible for this relief.
Adjustments and Exempt Income
Adjustments include:
- Unrealized gains and losses.
- Dividends and distributions from UAE residents.
- Participation exemptions for specific income or losses.
Other Adjustments
Non-deductible expenses like entertainment, donations, and interest must be disclosed. Transfer pricing adjustments are also required for transactions not conducted at arm’s length.
Tax Liability and Credits
Taxpayers must provide:
- Taxable income for the period.
- Details of foreign tax credits and losses carried forward.
Transfer Pricing (TP) Adjustments
Applicability and Reporting
Transaction Thresholds:
- Related Parties: Aggregate transactions exceeding AED 40 million require detailed reporting.
- Connected Persons: Payments or benefits exceeding AED 500,000 must be disclosed.
Non-Market Value Transactions
- Upward adjustments do not require further action.
- Downward adjustments reducing taxable income need prior FTA approval.
Gains/Losses from Related Party Transactions
- Taxable persons must report gains or losses from related party transactions involving assets or liabilities.
- Mandatory disclosure ensures alignment with arm’s length principles.
Free Zone TP Documentation
QFZPs must confirm compliance with arm’s length requirements and prepare mandatory documentation for all related party transactions.
Preparing for Compliance
Given the complexity of UAE CT returns, businesses should:
- Plan Early: Identify data sources and evaluate compliance strategies.
- Conduct Dry Runs: Simulate the filing process using early financial data.
- Use Technology: Leverage tools to streamline data collection and reporting.
Next Steps for Taxpayers
The FTA guide emphasizes proactive planning:
- Assess Market Values: Evaluate all transactions involving related and connected parties.
- Align Documentation: Ensure transfer pricing and other required schedules are complete.
- Stay Updated: Monitor FTA guidelines for any amendments or clarifications.
By adopting these practices, businesses can navigate the intricacies of UAE CT filing effectively and meet compliance requirements seamlessly.
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