Corporate Tax Return Filing

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Corporate Tax Return Filing

Corporate Tax Return Filing in UAE

In the UAE, the Corporate Tax (CT) system came into effect on June 1, 2023, bringing significant changes to the tax landscape. Corporate Tax applies to businesses and entities engaged in commercial activities in the UAE. Understanding the process of CT return filing is crucial for companies to ensure compliance and avoid penalties.

Timeline

Under the UAE Corporate Tax regime, businesses are required to file their returns within 9 months from the end of their financial year. For example, if your financial year ends on December 31, the CT return must be filed by September 30 of the following year.

Corporate Tax Rates

Exemption for Small Businesses: Eligible UAE Businesses having a turnover of less than AED 3MN in a relevant Tax Period and all previous Tax Periods (ending on or before 31 December 2026), can elect for Small Business Relief thereby reducing their Corporate Tax burden and compliance costs in the Corporate Tax regime, primarily by alleviating the burden of having to calculate and pay Corporate Tax in each relevant Tax Period where the conditions are satisfied.
Standard Rate: For taxable income exceeding AED 375,000, a 9% corporate tax rate is applicable. Qualifying income of a Qualifying Free Zone Person (QFZP) may be subject to a corporate tax rate of 0% subject to fulfilment of conditions.
Global Minimum Tax Rates: Large companies, particularly those meeting the criteria of Pillar Two under the OECD Base Erosion and Profit-Sharing (BEPS) project, may face different tax regulations. Companies with global revenues exceeding AED 315 billion (or EUR 750 million) will be subject to a separate tax regime.
On the 9th of December 2024, the Ministry of Finance has confirmed that the UAE will introduce a Domestic Minimum Top-up Tax (DMTT) of 15%, applicable to large groups, with consolidated revenues exceeding EUR 750m and with operations in more than one jurisdiction from the 1st of January 2025.

Eligibility for Corporate Tax Filing in the UAE

The entities required to file Corporate Tax returns include:

Resident Companies: All resident companies in the UAE, regardless of their size or the sector in which they operate, must file Corporate Tax returns. This includes companies operating in both mainland UAE and free zones.

Non-Resident Companies: Non-resident companies must file Corporate Tax returns if they conduct business or have a taxable presence in the UAE. This includes companies with a permanent establishment in the UAE or those earning UAE-sourced income not connected to a permanent establishment.

Free Zone Companies: Although Free Zone companies may enjoy certain tax benefits or exemptions, they are still required to file Corporate Tax returns, especially if they engage in business activities outside the free zones or if their income does not qualify for the tax-exempt status.

Individuals Engaged in Business Activities: Natural persons (individuals) whose business activities in the UAE generate income over a certain threshold are also required to file Corporate Tax returns. This typically applies to individuals operating as sole proprietors or in partnerships.

Why is Timely Filing Important?

Timely filing of CT returns ensures compliance with UAE tax regulations and helps businesses avoid unnecessary penalties. It also demonstrates a company’s commitment to transparency and legal adherence, which is crucial for maintaining a positive business reputation in the UAE.

Stay compliant and seek professional advice from KPHCA to navigate the complexities of CT return filing in the UAE.