Corporate Tax Guide - Part 1 -Overview of Tax Return

Introduction

The UAE’s Federal Tax Authority (FTA) has issued a detailed guide on filing and completing Corporate Tax (CT) Returns. This essential resource is applicable to all Taxable Persons in the UAE, including natural persons engaged in business activities, juridical entities, Qualifying Free Zone Persons, and Tax Groups. The guide offers general instructions for completing a Corporate Tax Return, providing an overview of the information required for each field in the order they typically appear in the return.

Tax Return Overview

Taxable Persons in the UAE must file a Tax Return and pay Corporate Tax to the Federal Tax Authority (FTA) within nine months of their Tax Period’s end, following a self-assessment process. Returns, completed online via EmaraTax, must be accurate and timely to ensure compliance and avoid penalties.

Tax Returns can be submitted by the Taxable Person or an authorized representative, such as a Tax Agent or Legal Representative. For Unincorporated Partnerships, the responsible partner files on their behalf, while the Parent Company files for Tax Groups.

Structure of a Tax Return

The Tax Return consists of sections for reporting Taxable Income and adjustments, including:

• Part A: Taxable Person Information

• Part B: Elections

• Part C: Accounting Schedule

• Part D: Adjustments & Exemptions

• Part E: Reliefs

• Part F: Other Adjustments

• Part G: Tax Liability & Credits

• Part H: Review & Declaration

• Part I: Schedules

Key Details

In EmaraTax, only relevant fields appear; any discrepancies should be checked against Tax Registration details. Entities exempt under a Double Taxation Agreement will not need to file a full return, as clarified in the Guide issued by FTA.

Taxable Person Details

This section of the Tax Return includes pre-populated data and fields requiring input from the Taxable Person. EmaraTax customizes the Tax Return to display only relevant fields and schedules. If pre-filled information is incorrect, it must be updated before proceeding.

The Tax Return applies to the following Taxable Persons:

• Juridical Persons: Resident or Non-Resident with a UAE Permanent Establishment.

• Natural Persons: Resident or Non-Resident with a UAE Permanent Establishment.

• Qualifying Free Zone Persons: Entities in Free Zones meeting eligibility conditions.

  o Those not meeting these conditions file as Resident or Non-Resident Juridical Persons.

• · Tax Groups: Approved by the FTA upon application by the Parent Company and Subsidiaries.

• Unincorporated Partnerships: Approved as separate Taxable Persons.

• Exempt Persons: Generally not required to file unless conducting taxable business, in which case they are treated as Resident Persons for taxable activities.

Elections Overview

The Tax Return allows Taxable Persons to make specific elections, provided they meet the necessary conditions . Once an election is made, it becomes effective automatically, without further confirmation from the FTA. Elections applying to multiple Tax Periods will carry over to subsequent returns. Below is a summary of key elections:

1. Realisation Basis:

o Allows gains and losses to be recognized only upon realization, disregarding unrealized ones in Financial Statements.

o Irrevocable unless approved by the FTA; applicable only for the first Tax Period.

2. Transitional Rules:

o Excludes certain gains and losses on assets or liabilities owned before the first Tax Period.

o Irrevocable, except under exceptional circumstances with FTA approval.

3. Small Business Relief:

o Available annually for Resident Persons with revenue ≤ AED 3 million, excluding MNE Group members and Qualifying Free Zone Persons.

o Simplifies tax filing and exempts eligible businesses from calculating Taxable Income or paying Corporate Tax.

4. Transfers Within a Qualifying Group:

o Enables transfer of assets/liabilities within a Qualifying Group without tax implications.

o Irrevocable unless approved by the FTA; applies to current and future Tax Periods.

5. Business Restructuring Relief:

o Removes tax impact for eligible restructuring transactions.

o Election required for each transaction; does not apply to future transactions automatically.

6. Foreign Permanent Establishment (PE) Exemption:

o Annual election to exclude income and expenses of foreign PEs from Taxable Income.

o Applies to PEs taxed at ≥9% or under a similar Corporate Tax regime.

These elections offer flexibility and relief options, subject to specific conditions and approval processes.

Tax Computation

Taxable Income is calculated by adjusting Accounting Income for Corporate Tax purposes. Detailed guidance is available in the Corporate Tax Guide on Determination of Taxable Income (issued by FTA)

The Tax Return includes specific fields to determine Taxable Income, guiding the Taxable Person to complete relevant schedules.

Qualifying Free Zone Persons must also complete applicable sections of the Tax Return, identifying:

• Qualifying Income (taxed at 0%).

• Non-Qualifying Income (taxed at 9%).

Tax Period

For natural persons, the Tax Period is typically the Gregorian calendar year, starting in 2024.

For other Taxable Persons, the Tax Period aligns with their Financial Year, which may be the Gregorian calendar year or a 12-month reporting period. It can also vary in length under certain conditions. Changes to the Tax Period require FTA approval.

In the Tax Return, the Tax Period is pre-populated in EmaraTax, and Taxable Persons must verify its accuracy before proceeding.

Tax Return Schedules

Schedules in the Tax Return facilitate calculations and populate relevant figures. Taxable Persons are directed to complete schedules as needed and are redirected back to their Tax Return with the updated figures. Schedules can be revisited and modified before submitting the Tax Return.

The Tax Return includes 20 schedules tailored to specific circumstances. Taxable Persons will only be directed to complete schedules relevant to their situation.

1. Free Zone Schedule: For Qualifying Free Zone Persons to report Revenue, Qualifying Income, and additional details.

2. Free Zone IP Income: For Free Zone Persons earning income from Qualifying Intellectual Property.

3. UAE Dividends: For reporting Dividends from Resident juridical persons.

4. Foreign Permanent Establishment: For excluding income and expenses of eligible foreign establishments.

5. Tax Credit: For claiming Foreign Tax Credits.

6. Related Party Transactions: For disclosing Related Party dealings.

7. Connected Persons: For reporting payments to Connected Persons.

8. Tax Losses: For reporting Tax Losses brought forward, utilized, received, or transferred.

9. Tax Group Loss: For Tax Group-specific loss reporting and adjustments.

10. Participation Exemption: For exempt income or losses from certain Participations.

11. Interest Capping: For those subject to interest deduction limitations.

12. Qualifying Group Transfers: For reporting transfers with relief or clawback provisions.

13. Business Restructuring Relief: For relief-related restructuring transactions and clawbacks.

14. Transitional Rules – Immovable Property: For gains on property owned before the first Tax Period.

15. Transitional Rules – Intangible Assets: For gains on intangible assets before the first Tax Period.

16. Transitional Rules – Financial Assets/Liabilities: For gains or losses on pre-existing financial items.

17. Non-Income Statement Gains/Losses: For gains/losses excluded from future income statements.

18. Unrealised Gains/Losses: For those taxed on a realisation basis with unrealised items.

19. Adjustments for Unrealised Gains/Losses: For deferred gains/losses realised in the current Tax Period.

20. Attachments: For submitting supporting documents or justifying omissions.

Each schedule helps streamline calculations and reporting in the Tax Return.

Required documents for the Tax Return may vary based on the Taxable Person's category and any reliefs claimed. These documents must be uploaded during the completion process as needed.

Understanding corporate tax compliance is crucial for businesses operating in the UAE. For expert guidance tailored to your business needs, contact ALWAHAT ACCOUNTS & INTERNAL AUDIT SERVICES. Their experienced professionals provide comprehensive support in corporate tax registration, compliance, and filing, ensuring your business stays compliant with UAE tax regulations. Reach out today for personalized consultation and clarity on your corporate tax obligations.