Corporate Tax Filing in the UAE: Key Insights on Reliefs, Adjustments, and Tax Liability

Tax Liability and Tax Credits

Taxable Income

Taxable Income for a Tax Period is calculated by adjusting the Accounting Income based on the provisions of the Corporate Tax Law. This calculation is automated, considering inputs provided in Sections 7 to 9 of the Tax Return.

Practical Example: Imagine a UAE-based company, XYZ Trading LLC, with an Accounting Income of AED 1,000,000 for the tax period. After adjustments for non-deductible expenses and exempt income as per the Corporate Tax Law, the Taxable Income is determined to be AED 900,000. Since the first AED 375,000 is exempt, only AED 525,000 is subject to tax at 9%, resulting in a Corporate Tax Liability of AED 47,250.

Tax Losses

Tax Losses occur when deductible expenditure exceeds income subject to Corporate Tax. Taxable Persons can carry forward or transfer Tax Losses under specific conditions:

Key Features:

• Carried Forward Losses: Tax Losses can be carried forward and offset against future Taxable Income, subject to limits.
• Transferred Losses: Tax Losses may be transferred between Taxable Persons within a group if conditions are met.

If you have brought forward or transferred Tax Losses, this section will pre-populate the relevant amounts from the Tax Losses Schedule.

Tax Group Tax Losses

Applicable to Tax Groups, this section outlines the specific rules for utilising Tax Losses within a group:

• Pre-Grouping Losses: Unutilised losses of a subsidiary joining a Tax Group become pre-Grouping losses and can only be offset against the income attributable to that subsidiary.
• Transferred Losses: Tax Groups can transfer or claim Tax Losses from entities outside the group if conditions are met.

Tax Calculation and Tax Credits

This section calculates the Corporate Tax Liability:

• Standard Rate: Taxable Income above AED 375,000 is taxed at 9%.
• Qualifying Free Zone Persons: Qualifying Income is taxed at 0%, while other income is taxed at 9%.

If you wish to claim available tax credits, such as a Foreign Tax Credit for taxes paid in another jurisdiction, indicate this in the Tax Return. Tax credits are deducted from the Corporate Tax Liability to arrive at the final Corporate Tax Payable.

Case Study: Consider a Qualifying Free Zone entity, ABC Logistics FZ, earning AED 800,000 in total income during the tax period. Of this, AED 600,000 qualifies for the 0% tax rate, while AED 200,000 is considered other income subject to 9% tax. The resulting Corporate Tax Liability is AED 18,000 (9% of AED 200,000). ABC Logistics FZ can also claim a Foreign Tax Credit of AED 5,000, reducing its Corporate Tax Payable to AED 13,000.

Estimated / Provisional Figures

If any estimated figures are used in the Tax Return due to unavailability of final figures at the time of filing, this must be disclosed. Provide details of where and why estimates were used.

Taxable Income

Taxable Income for a Tax Period is calculated by adjusting the Accounting Income based on the provisions of the Corporate Tax Law. This calculation is automated, considering inputs provided in Sections 7 to 9 of the Tax Return.

Tax Losses

Tax Losses occur when deductible expenditure exceeds income subject to Corporate Tax. Taxable Persons can carry forward or transfer Tax Losses under specific conditions:

Key Features:

• Carried Forward Losses: Tax Losses can be carried forward and offset against future Taxable Income, subject to limits.
• Transferred Losses: Tax Losses may be transferred between Taxable Persons within a group if conditions are met.

If you have brought forward or transferred Tax Losses, this section will pre-populate the relevant amounts from the Tax Losses Schedule.

Tax Group Tax Losses

Applicable to Tax Groups, this section outlines the specific rules for utilising Tax Losses within a group:

• Pre-Grouping Losses: Unutilised losses of a subsidiary joining a Tax Group become pre-Grouping losses and can only be offset against the income attributable to that subsidiary.
• Transferred Losses: Tax Groups can transfer or claim Tax Losses from entities outside the group if conditions are met.

Tax Calculation and Tax Credits

This section calculates the Corporate Tax Liability:

• Standard Rate: Taxable Income above AED 375,000 is taxed at 9%.
• Qualifying Free Zone Persons: Qualifying Income is taxed at 0%, while other income is taxed at 9%.

If you wish to claim available tax credits, such as a Foreign Tax Credit for taxes paid in another jurisdiction, indicate this in the Tax Return. Tax credits are deducted from the Corporate Tax Liability to arrive at the final Corporate Tax Payable.

Estimated / Provisional Figures

If any estimated figures are used in the Tax Return due to unavailability of final figures at the time of filing, this must be disclosed. Provide details of where and why estimates were used.

Review and Declaration

Once all sections are completed, the responsible person must review the Tax Return and make a declaration confirming its accuracy.

Steps for Declaration:

1. Date of Filing: Input the date of filing.
2. Preparer Confirmation: Specify whether the Tax Return was prepared by the Taxable Person, a Tax Agent, or a Legal Representative.
3. Authority Confirmation: Confirm that the preparer has full authority to file the Tax Return on behalf of the Taxable Person.
4. Accuracy Confirmation: Declare that the information provided is complete and accurate to the best of the preparer’s knowledge.
5. Signature: Enter the name and capacity of the person signing the declaration.

How Fastlane Consultancy Can Help

Corporate tax compliance in the UAE involves intricate calculations, adjustments, and declarations. Fastlane Consultancy offers:

• Expert Tax Advisory: Our specialists guide you through every step of corporate tax filing.
• Accurate Tax Filing: We ensure precise tax calculations and adherence to UAE tax laws.
• Audit Assistance: We support you during audits and help in choosing registered auditors.
• Comprehensive Compliance Solutions: From managing Tax Losses to claiming tax credits, we provide end-to-end support.

Need help with your corporate tax obligations? Contact Fastlane Consultancy today for expert assistance!