Preparing for Dubai's Corporate Tax: A Checklist for Compliance

It is extremely important for all businesses in Dubai to take the necessary measures to show full compliance with the region’s corporate tax regulations. Keeping up with the changing UAE corporate tax laws as well as the amendments to the value-added-tax laws is crucial if a business is to show compliance which is something that most businesses struggle with a lot.

However, following the introduction of the corporate tax in the region, many businesses have been able to fulfill their tax obligations successfully by using a systematic and proactive approach.

This blog covers one such approach that businesses can implement to better prepare for Dubai’s corporate tax. This article gives you a comprehensive checklist that both small and large businesses can use when preparing for corporate tax.

So, without any further ado, let’s get right into this checklist for corporate tax compliance and see what it entails.

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• Understand Corporate Tax Applicability
• Corporate Tax Registration
• Financial Record Maintenance
• Accurate Calculation of Taxable Income
• Timely Tax Return Filing
• Show Compliance with Transfer Pricing Rules
• Conduct Internal Tax Audits
• Consider International Tax Regulations
• Hire a Corporate Tax Consultant

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Understand Corporate Tax Applicability

The first thing your business needs is to determine whether it is eligible to pay corporate tax or not based on the total revenue generated.

Here are some key details that you need to know

• If the taxable income of your business is less than AED 375,000 0% corporate tax rate will be applied.
• However, if your taxable income exceeds AED 375,000 in one financial year then you will have to pay the corporate tax at a rate of 9% on the excess income.
• You also need an understanding of taxable, exempt, and out-of-scope supplies along with reliefs available as well as free zone benefits to better prepare for your tax returns.
• You also need to consider whether the status of your company is resident or non-resident as it can affect the registration requirements as well as tax liability.

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Corporate Tax Registration

After checking the applicability, the next step is to register for the corporate tax in the UAE. Make sure to know the exact deadline for your corporate tax registration. This can help you register within the timeframe specified by the FTA. Not meeting the deadlines can lead to a penalty of AED 10,000.

You need to make sure the details you provide to the authorities at the moment of registration are all up-to-date. Any recent developments such as a change of ownership, change of legal status, change of address, or change of business activity must be disclosed to the FTA within 20 days of the events.

Failure to do so can lead to an AED 5,000 fine for the first offense and AED 10,000 for repeated non-compliance.

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Financial Record Maintenance

The next step is to make sure you have robust systems in place to accurately collect and store financial information. Here are a few things to consider

• Businesses have to prepare their books according to the approved accounting standard i.e., International Financial Reporting Standard (IFRS).
• Records related to revenues, purchases, expenses, and other key financial transactions must be carefully and accurately maintained and preserved. These records must be kept for at least 7 years.
• Businesses with annual revenue of more than AED 50 million must submit an audited financial statement while filing the returns.

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Accurate Calculation of Taxable Income

Businesses in Dubai must pay extra attention when calculating taxable income to avoid violations. When calculating this income, you need to differentiate between expenses that are allowed or disallowed for deduction.

You also need to look at the tax laws to determine eligible tax credits, exemptions, and reliefs. You also need to identify exempt income, capital gains, and interest expense capping rules and factor these in when calculating the taxable income.

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Timely Tax Return Filing

Another important thing is the timely tax return filing. Usually, businesses in the UAE are required to submit their tax returns within 9 months from the end of the relevant tax year.

When filing, make sure to keep all the supportive documents by your side and review the previous tax filing to identify and remove errors. You can also use approved accounting software to further ensure accurate and timely corporate tax filing.

Show Compliance with Transfer Pricing Rules

Here are a few things that you must consider to show compliance

• Identify every related party and connected person that pertains to your business.
• Make sure to use at arm’s length principle in every transaction with the company’s owners/directors, their relatives, and other connected persons.
• Keep accurate transfer filing documents and disclose them with FTA.
• It is also a better idea to create Local and Master files to help you with audits as well as scrutiny from tax authorities.
• Conduct fair benchmarking studies to create better transfer pricing strategies.

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Conduct Internal Tax Audits

Internal audits can help you review your current tax position and pinpoint areas where you are deviating from the compliance. It is always a better idea to seek help from professionals who can give you objective insights into complex matters like tax position, tax calculation, and cross-border transactions.

Consider International Tax Regulations

If your business is involved with cross-border operations, you must consider the international taxation laws along with their implications when filing corporate tax returns.

Here are some key things you can pay attention to

• Look at permanent establishment policies to figure out your tax liability in multiple jurisdictions.
• Consider VAT implications for transactions related to imports/exports.
• Take the time to learn more about global tax trends and guidelines given by BEPS (Base Erosion and Profit Shifting) and OECD.
• Verify double taxation treaties for withholding tax implications.

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Hire a Corporate Tax Consultant

Last but not least, you can seek assistance from professional accounting services or tax experts who can help you navigate every stage of the corporate tax filing process.

These professionals can help you stay updated with the recent changes in corporate tax laws and implement better tax planning and compliance strategies. This can help you avoid issues like late or inaccurate filing penalties as well as additional scrutiny from tax authorities saving you a lot of time and trouble.

Conclusion

Showing full compliance with Dubai’s corporate tax laws is not an easy endeavor. You need to stay on top of your tax liability, registration, filing, record-keeping and several other related things to ensure you do not violate the tax rules of the region.

This is where a robust tax strategy that covers every aspect of corporate tax filing can prove to be a useful asset. By using the checklist given above businesses can prepare for their corporate tax returns in a much better way.

Moreover, to further ensure compliance and foolproof tax preparation, businesses can also partner with experts in the field. These professionals can prevent common mistakes by helping these businesses with better planning and adherence which guarantees much better tax performance.

You can visit us at Alpha Pro Partners if you are looking for the top corporate tax services in Dubai, UAE under the guidance of the experts in the industry.

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