How is UAE Corporate Tax Administered? (Tax Assessment, Filing, Payment)

Only one Corporate Tax return will need to be filed per financial period. No provisional or advance Corporate Tax filings will be required. The deadline to submit the return will be stated in the Decree-Law and the Executive Regulation.

The Corporate Tax return will need to be filed electronically. Similar to other taxes in the UAE (e.g. VAT), businesses will be subject to penalties for non-compliance with the Corporate Tax regime.

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Registration and deregistration with FTA (Federal Tax Authority):

• A business subject to Corporate Tax will need to register with the FTA and obtain a Tax Registration Number within a prescribed period. The FTA can also automatically register a business for Corporate Tax purposes if the person does not voluntarily do so.
• Where a business ceases to be subject to the Corporate Tax (e.g., due to cessation or liquidation of the business), it will need to apply to the FTA to be deregistered for Corporate Tax purposes within three (3) months from the date of cessation.
• The FTA will only deregister a person where the FTA is satisfied that the person has filed Corporate Tax returns and settled all Corporate Tax liabilities and penalties (if any) due for all periods up to and including the date of cessation.
• Where a person does not apply for deregistration within the time limits or comply with the payment and filing obligations, the FTA may deregister the person based on available information.

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Filing, payment and refund:

• In order to keep the administrative burden on taxpayers to a minimum, a business will only need to prepare and file one tax return and other related supporting schedules with the FTA for each tax period. There will be no requirement for a business to file a provisional Corporate Tax return and make advance payments of Corporate Tax.
• Each tax return and related supporting schedules will need to be submitted to the FTA within nine (9) months of the end of the relevant Tax Period.
• Payments to settle a taxpayer’s Corporate Tax liability for a Tax Period will need to be made within nine (9) months of the end of the relevant Tax Period. Where a taxpayer can demonstrate that a Corporate Tax refund may be due, the taxpayer can apply to the FTA to request a refund.
• The below details illustrates the Corporate Tax filing and payment deadlines for businesses with financial year ends of 31 March, 30 June and 31 December:

Assessment:

• The UAE Corporate Tax regime will be based on a self-assessment principle. This means that a business is responsible for ensuring that the tax return and any supporting schedules submitted to the FTA are correct, complete and comply with the UAE Corporate Tax law.
• To ensure the integrity of the Corporate Tax regime, the FTA may review a Corporate Tax return filed and may issue an assessment within the timeframe prescribed in the Tax Procedures Law.
• A taxpayer may challenge an amended assessment issued by the FTA via the processes and procedures outlined in the Tax Procedures Law.

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Clarification:

• Clarity around how to comply with Corporate Tax is essential for a well-functioning Corporate Tax regime. Therefore, where there is uncertainty in relation to a proposed or entered into arrangement or transaction, a business may apply to the FTA for a clarification with regards to the correct or intended Corporate Tax treatment.
• Provided the facts and circumstances outlined in a clarification continue to apply, a clarification would be binding on the FTA.

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Documentation requirements:

• A business will be required to maintain financial and other records that explain the information contained within the Corporate Tax return and other documents submitted to the FTA. Certain exempted persons will also be required to maintain records to allow the FTA to ascertain the person’s exempt status.
• Whether the financial statements of a business are required to be audited by an accredited audit firm is and will continue to be determined by applicable company laws and regulations. However, the UAE Corporate Tax regime will require a Free Zone Person to have audited financial statements if it wants to benefit from the 0% Corporate Tax regime.

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Transitional rules:

• The UAE Corporate T regime is not intending to require businesses to restate their balance sheet upon entering into the Corporate Tax regime. Instead, a taxable person’s opening balance sheet for Corporate Tax purposes would generally be their closing balance sheet for financial reporting purposes for the period that ends immediately before their first tax period begins.

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Note: The information in this article is meant to provide an initial introduction to the proposed UAE Corporate Tax regime and not be used for individual or business decisions as it does not represent the final legislation by the Government. More information o the UAE Corporate Tax regime will be made available in due course.