BrazilSuntech experts on a company's first corporate tax return filing in the UAE
The UAE’s introduction of a federal Corporate Tax on business profits means that many companies will in the coming period be busy with their first tax return filing. Shiny Mascarenhas and Riddhesh Shah from accounting and advisory firm Suntech outline some of the key factors to consider.
Filing your first corporate tax return in the UAE isn’t just another box to tick – it marks the end of the tax-free era and the beginning of something more structured and demanding. But this isn’t just about checking off a box on the compliance list; it’s about understanding the new landscape and what it means for your business moving forward.
The first return is your introduction to the UAE’s corporate tax landscape. It’s not just about filing on time; it’s about getting it right. Every figure you report will set the standard for future returns, making accuracy and completeness non-negotiable.
With the first filing, you’ll need to make key decisions that could impact your tax liability. These include forming a tax group to streamline reporting and potentially reduce liabilities by consolidating profits and losses. Opting for Small Business Relief, if eligible, can unlock substantial tax savings. The ability to carry forward tax losses offers future tax relief. Free Zone entities must select their tax regime to maximize exemptions.
Additionally, deciding between cash and accrual accounting will affect how income and expenses are recorded. These are foundational choices – make them wisely, as they’ll influence your tax obligations for years to come.
It’s crucial for businesses to ensure that related party balances and opening inventory on the first day of the tax period comply with the Arm's Length Principle (ALP). This means all transactions with related parties must be at market value, mirroring what independent entities would agree upon. If these balances align with normal business practices and are settled within standard credit periods, compliance is straightforward. However, any deviation could lead to costly adjustments in the first corporate tax return. To stay ahead, businesses should promptly square off these balances, ensuring they meet ALP standards and avoid potential financial repercussions.
Going beyond compliance
This isn’t just another compliance task – your first return sets the tone for your business in this new regulatory environment. It’s a litmus test for your readiness, transparency, and adaptability. Nail it, and you’re not just complying; you’re demonstrating that your business is prepared to thrive in a more regulated world.
Missing deadlines or making errors in your first return doesn’t just risk penalties – it signals a lack of preparedness. On the other side, timely and accurate filing shows that your business is on top of its game, ready to meet the challenges of this new era head-on.
After submission, the Federal Tax Authority (FTA) may scrutinize your return. This isn’t something to fear but a chance to prove your compliance. If you’ve done your homework, you’ll sail through this process, strengthening your business’s credibility and preparedness.
Filing your first corporate tax return is more than just a legal obligation – it’s an opportunity to refine your operations, optimize your tax strategy, and set your business on a path to success. The stakes are high, but so are the rewards for getting it right. Welcome to the new era of doing business in the UAE – structured, demanding, but full of potential.
About the authors: Shiny Mascarenhas is an Executive at Suntech, where Riddhesh Shah is an Associate Partner. Suntech is an audit and advisory firm in the UAE specialised in business set-up, financial accounting, and internal controls.
