Calculating Corporate Tax Liability in the UAE: Overview
of a Tax Return

In this article, we’ll walk you through the essentials of preparing and filing a Tax Return for corporate tax in the UAE, key requirements for different types of entities, and common elections and reliefs available.


What is a Tax Return?
A Tax Return is a mandatory filing submitted by a Taxable Person to the Federal Tax Authority (FTA) to report taxable income and pay corporate tax. It must be filed within 9 months after the end of the tax period. The process is self-assessment based, ensuring businesses meet their obligations and avoid penalties.

Key highlights include:

  • Filing must be done online via EmaraTax.

  • Taxable Persons may include juridical persons, natural persons conducting business, Qualifying Free Zone Persons, Tax Groups, and approved Unincorporated Partnerships.

  • The Parent Company of a Tax Group is responsible for filing the Tax Return on behalf of the group.

Parts of a Tax Return

A Tax Return comprises several parts where a Taxable Person must provide information regarding taxable income, exemptions, adjustments, and tax credits. The key sections are:


  • Part A: Taxable Person Information

  • Part B: Elections

  • Part C: Accounting Schedule

  • Part D: Adjustments and Exempt Income

  • Part E: Reliefs

  • Part F: Other Adjustments

  • Part G: Tax Liability and Tax Credits

  • Part H: Review and Declaration

  • Part I: Schedules



Pro Tip: Make sure your pre-populated data is accurate before filing. Incorrect data may require updates in your EmaraTax profile.

Key Categories of Taxable Persons


  1. Juridical Persons: Both Resident and Non-Resident juridical persons with UAE Permanent Establishments.

  2. Natural Persons: Individuals conducting business activities within the UAE.

  3. Qualifying Free Zone Persons: Must meet specific criteria to benefit from a 0% tax rate on qualifying income.

  4. Tax Groups: Consolidated tax returns filed by the Parent Company on behalf of group members.

  5. Exempt Persons: Required to file only under certain conditions where taxable business activities exist.



Elections Available in a Tax Return

Taxable Persons can make various elections to optimize their tax liability. Key elections include:


  1. Realisation Basis Election: Disregards unrealized gains and losses for corporate tax purposes.

    • Irrevocable unless approved by the FTA under exceptional circumstances.


  2. Transitional Rules Election: Adjusts taxable income by excluding gains/losses from assets owned before the first tax period.

  3. Small Business Relief Election: Available to Resident Persons with annual revenue under AED 3 million. It eliminates the need to calculate taxable income or pay corporate tax.

  4. Transfers within a Qualifying Group: Allows asset and liability transfers within a Qualifying Group without triggering a tax event.

  5. Business Restructuring Relief: Provides relief for transactions as part of business restructuring.

  6. Foreign Permanent Establishment Exemption: Excludes income and expenses of foreign branches subject to foreign corporate tax.



Practical Example: Filing a Tax Return for a Qualifying Free Zone Person

Assume a Free Zone company meets the conditions to be a Qualifying Free Zone Person. Here's how the company should proceed:


  1. Verify Eligibility: Ensure it meets the FTA’s requirements for a Qualifying Free Zone Person.

  2. Complete Free Zone Schedule: Report qualifying and non-qualifying income.

  3. Apply Small Business Relief (if applicable): If revenue is under AED 3 million, elect to apply the relief.

  4. Review and Submit: Ensure all sections are accurately completed, attach relevant documents, and submit within the timeline.



Tax Return Schedules

The Tax Return includes several schedules that assist in calculations. Important schedules include:


  • Free Zone Schedule: For Qualifying Free Zone Persons.

  • Tax Credit Schedule: For claiming foreign tax credits.

  • Related Party Transaction Schedule: For disclosing transactions with related parties.

  • Participation Exemption Schedule: For reporting exempt income from participation.



FAQs: Q: What happens if I file a late Tax Return? A: Late filing results in penalties and interest on unpaid tax. Ensure timely filing to avoid additional costs.

Q: Can I amend a submitted Tax Return? A: Yes, amendments can be made through EmaraTax, subject to FTA approval.

Q: Is Small Business Relief applicable to Free Zone companies? A: No, Qualifying Free Zone Persons cannot avail of Small Business Relief.

Key Takeaways


  • Deadline: File your Tax Return within 9 months of the end of the tax period.

  • Eligibility: Verify your category (Resident, Non-Resident, Free Zone, Tax Group).

  • Reliefs and Elections: Understand available elections to optimize tax liability.

  • Accurate Filing: Ensure pre-populated data and completed fields are correct.



How Fastlane Consultancy Can Help


  • Expert Tax Guidance: Fastlane provides tailored advice for corporate tax compliance, ensuring accurate tax returns.

  • Reliefs and Elections Support: We help identify and apply the best elections for your business.

  • Timely Filing Assistance: Our experts ensure your Tax Return is filed on time, avoiding penalties.

  • Ongoing Compliance: Stay compliant year-round with our comprehensive tax services.



Ready to simplify your corporate tax filing process? Enquire Now for a consultation.

 



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