The Essentials 

For many UK families moving to the UAE, preserving wealth across generations is just as important as growing it. The challenge lies not only in transferring assets but also in ensuring continuity, clarity, and governance for future decision-makers. 

ADGM and DIFC foundations are increasingly seen as the solution of choice. They provide a structured, secure, and internationally recognized framework that allows families to: 

• Protect assets 

• Simplify inheritance and succession 

• Empower heirs responsibly 

• Preserve long-term family vision 

In recent years, an increasing number of UK families moving to the UAE have looked beyond familiar shores, gravitating towards Dubai and Abu Dhabi as strategic bases for preserving and growing wealth. While the UAE’s tax-free status often steals the spotlight, its true appeal runs much deeper: world-class asset protection, flexible succession planning, investor-friendly property markets, and secure pathways to long-term residency. 

Supported by internationally recognized legal systems and adaptable ownership structures, the UAE offers a stable, transparent, and strategically located platform for both immediate relocation and multi-generational planning. Its economic resilience, global connectivity, and cosmopolitan lifestyle create an environment where wealth and quality of life can thrive in tandem. 

Let’s explore the many layers behind this migration, revealing how UK families moving to the UAE are harnessing the region’s unique advantages to safeguard assets, seize opportunities, and shape enduring legacies. 

Why are UK Families Moving to the UAE? 

1. Tax Advantage – But Not the Only Reason 

The UAE’s no personal income tax, no capital gains tax, and no inheritance tax remain powerful magnets. When compared to the UK’s high tax environment, with income tax up to 45%, capital gains up to 28%, and a 40% inheritance tax, the savings are significant. 

However, for many UK families, tax is only one part of the equation. Increasingly, they are drawn by the UAE’s ability to offer not just financial efficiency but also long-term security, flexible wealth planning, and a globally respected legal framework. 

2. Wealth Protection and Risk Management 

When relocating and investing in overseas property, one of the key considerations for UK families moving to the UAE is how to protect assets from potential risks. High-value real estate portfolios can be vulnerable to unforeseen events such as legal disputes, business-related liabilities, or creditor claims. 

In the UAE, certain corporate and holding structures available through jurisdictions like the Abu Dhabi Global Market (ADGM) and the Dubai International Financial Centre (DIFC) offer a legal environment rooted in English common law. This framework is widely recognized internationally, making it easier to enforce contracts, manage cross-border transactions, and maintain credibility with global stakeholders. 

3. Succession and Estate Planning 

Passing wealth to the next generation is rarely a simple process, especially across borders. In the UK, inheritance can involve prolonged probate procedures, high legal costs, and significant tax liabilities. For families with international assets, these challenges multiply. 

In the UAE, legal and ownership frameworks allow for arrangements where control of an asset can change hands without the need to sell it outright, which helps reduce delays and administrative complexity. These frameworks can also be paired with governance tools such as family constitutions, trusts, or foundations to ensure that decision-making and asset management align with the family’s long-term vision. 

4. Access to the UAE Golden Visa and Lifestyle Benefits 

The UAE’s Golden Visa program grants long-term residency to property investors who meet specific thresholds, currently a minimum property value of AED 2 million. Qualifying assets can be residential or, in certain cases, commercial, provided they meet the valuation criteria and other eligibility requirements. 

This residency pathway offers a range of advantages, including: 

• Stability for the entire family, with access to world-class education and healthcare 

• Independence from local sponsorship requirements, allowing greater personal and business freedom 

• Full access to UAE banking and investment opportunities 

• Long-term planning certainty, with visas valid for up to 10 years and renewable 

For UK families moving to the UAE, the Golden Visa creates not only a secure legal foothold in the country but also the flexibility to live, work, and invest in one of the region’s most dynamic markets. 

5. Market Opportunity and Diversification 

Dubai’s property market has consistently outperformed many Western markets in recent years. Prime villa prices rose by almost 94% between 2020 and 2024, and rental yields often average 7–8%, compared to the UK’s 3–5%. 

For UK families, investing in UAE real estate offers: 

• Exposure to a fast-growing, globally attractive market 

• A hedge against volatility in the UK property sector 

• Diversification into a region with a currency pegged to the US dollar, providing exchange rate stability 

• Opportunities across both residential and commercial property segments 

6. Compliance and Global Credibility 

Ownership and holding structures available in the UAE’s ADGM and DIFC operate under internationally recognized regulatory frameworks that emphasize transparency and robust governance. These frameworks: 

• Strengthen investor confidence when engaging with global stakeholders 

• Streamline due diligence processes for banks and financial institutions 

• Ensure high standards of corporate governance and clear reporting practices 

7. Flexibility in Ownership and Control 

UAE property ownership arrangements can be tailored to accommodate different needs, such as: 

• Dividing benefits and responsibilities clearly among multiple family members 

• Allocating decision-making authority through defined voting rights 

• Allowing ownership interests to be transferred or sold without affecting the underlying property title 

How MS Can Help the UK families moving to the UAE 

At MS, we specialize in guiding families through every stage of their UAE journey, from initial exploration to full integration. Our expertise spans wealth structuring, succession planning, and residency solutions, ensuring your move is not only seamless but strategically aligned with your long-term goals. 

We combine deep knowledge of Dubai and Abu Dhabi’s regulatory landscapes with an understanding of the unique priorities of UK families. Whether it’s establishing the right corporate or ownership structure, navigating property investments, or ensuring compliance with local and international frameworks, our multidisciplinary team delivers solutions tailored to protect and grow your assets. 

The Essentials: First Corporate Tax Return Filing in the UAE 

• Deadline: 30 Sept 2025 (for FY Jan–Dec 2024). 

• Who Files: Mainland & Free Zone companies, foreign PEs, and individuals with >AED 1M turnover. 

• Rates: 0% up to AED 375K, 9% above AED 375K, 0% for Qualifying Free Zone income. 

• Penalties: AED 500/month (first year), AED 1,000/month after, plus 14% interest. 

• Key Prep: TRN active, audited/IFRS accounts, supporting docs, transfer pricing records (if relevant). 

The UAE’s introduction of Corporate Tax marks a new chapter in the country’s business landscape and 2025 is when theory turns into practice. For thousands of businesses, this year will bring their first Corporate Tax return filing in the UAE. 

Your first filing sets the tone for how your business will approach tax compliance in the years ahead. A rushed or inaccurate submission can lead to costly penalties, while a well-prepared return can protect your reputation, potential tax efficiencies, and build confidence with regulators. 

1. Key Filing Deadline 

For businesses whose financial year runs from 1 January 2024 to 31 December 2024, the first corporate tax return filing in the UAE must be submitted on or before 30 September 2025. This 9-month post-year-end window is fixed by the Federal Tax Authority (FTA). 

If your financial year does not follow the calendar year, your filing deadline will be different. Always confirm your entity’s exact due date through the EmaraTax portal. 

2. Who Must File a Return? 

You must file if you are: 

• Mainland companies operating in the UAE. 

• Free Zone companies, including those enjoying the 0% rate on Qualifying Income (must still file to maintain status). 

• Foreign companies with a Permanent Establishment in the UAE. 

• Natural persons carrying on a business, with annual turnover exceeding AED 1 million in 2024. 

3. Corporate Tax Rates to Remember 

• 0% rate on taxable income up to AED 375,000. 

• 9% rate on taxable income above AED 375,000. 

• 0% rate for Qualifying Free Zone income (subject to substance and compliance requirements). 

Even if you fall entirely under the 0% bracket, you must still file your return. 

4. Consequences of Missing the Deadline 

Failing to submit your first corporate tax return filing in the UAE on time can result in: 

Administrative Penalties: 

• AED 500 per month for the first 12 months of delay. 

• AED 1,000 per month thereafter. 

Interest Charges: 14% per year on unpaid tax, calculated monthly from the due date. 

Increased Audit Risk: Late filings can draw greater scrutiny from the FTA. 

Compliance Impact: Non-compliance may affect your ability to obtain clearances, licenses, or maintain Free Zone benefits. 

5. Essential Preparations Before Filing 

To ensure smooth submission, start working on the following now: 

A. Registration Check 

• Confirm that your Corporate Tax Registration Number (TRN) is issued and active. 

• Verify your entity is correctly listed on the EmaraTax portal. 

B. Financial Statement Readiness 

• Prepare audited (or IFRS-compliant) financial statements for the tax period. 

• Ensure they reflect all tax adjustments, such as non-deductible expenses or exempt income. 

C. Supporting Documents 

• Invoices, contracts, and bank statements. 

• Records of related-party transactions for transfer pricing compliance. 

• Proof for exemptions (e.g., qualifying investment income). 

D. Transfer Pricing Disclosures 

• If your business transacts with related parties or connected persons: 

• Prepare the Transfer Pricing Disclosure Form for submission with your return. 

• Maintain Local File and Master File documentation if applicable thresholds are met. 

Practical Tips for Your First Corporate Tax Return Filing in the UAE 

• Start Early: Leaving filing to the last week increases error risk and may delay FTA portal acceptance. 

• Use the EmaraTax Portal Efficiently: Familiarize yourself with its navigation and upload requirements in advance. 

• Plan for Tax Payment: Have funds ready to pay any tax due at the time of filing to avoid interest charges. 

• Seek Professional Support: A qualified tax partner can ensure your return is accurate, compliant, and penalty-free. 

How Can MS Help in the First Corporate Tax Return Filing in the UAE? 

Your first corporate tax return filing in the UAE is a chance to set the right compliance standards. MS handles it end-to-end: preparing accurate financials, managing EmaraTax submissions, meeting deadlines, and identifying savings opportunities. Our expertise ensures full compliance, reduces risk, and keeps you penalty-free. 

The UAE Ministry of Finance (MoF) has enacted a pivotal Ministerial Decision, introducing new guidelines for tax depreciation in the UAE on investment properties held at fair value. The decision aims to align the treatment of investment properties with Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses, providing clarity and parity for property owners under the corporate tax regime. 

Tax Depreciation in the UAE for Fair Value Investment Properties: Key Highlights of the Decision 

1. Eligibility for Tax Depreciation: 
   Taxpayers who hold investment properties (excluding land) on a fair value basis, and who opt for the “realisation basis,” can now elect to deduct tax depreciation in the UAE from their taxable income. This deduction was previously only available to those using a historical cost basis. 

2. Calculation of Depreciation Deduction: 
   The annual tax depreciation allowance is set as the lower of: 

• The tax written down value of the investment property at the beginning of the Tax Period, or 

• 4% of the original cost of the investment property, 

• Calculated for each 12-month tax period, with pro-rata adjustments where applicable for partial periods. 

3. Application Across Timeframes: 
   The deduction is open to taxpayers who held investment properties before or after the introduction of corporate tax. This ensures inclusivity across different tax years, promoting continuity and fairness. 

Election Requirements and Process for Tax Depreciation in the UAE 

• Irrevocable Election Needed: 
  Taxpayers wanting to benefit from this provision must make an irrevocable election in their first tax period beginning on or after January 1, 2025, in which they hold investment property. This election will then apply to all investment properties held by the taxpayer going forward. 

• Realisation Basis Election Window: 
  Recognizing that the realisation basis is usually chosen at the start of a taxpayer’s interaction with the regime, the Decision provides an exceptional opportunity for those who have not yet opted in to do so during their initial relevant tax period. 

Tax Depreciation in the UAE for Fair Value Investment Properties: Clarity and Guidance for Property Transfers and Construction 

The Decision clarifies the precise value upon which tax depreciation in the UAE claims may be based, including scenarios where: 

• Investment property is transferred between related or unrelated (third) parties. 

• Future acquisitions of investment property not currently held by the taxpayer are also covered under the Decision. 

This explicit guidance helps ensure all taxpayers can accurately assess compliance obligations and fairly benefit from the regime. 

Ensuring Parity and Tax Neutrality 

With these changes, parity is established between: 

• Taxpayers who use historical cost and can already deduct accounting depreciation, and 

• Those using fair value accounting, who are now similarly permitted tax depreciation. 

This promotes the principles of tax neutrality and equity, ensuring a level playing field in line with international best practices in corporate taxation. 

Provisions for Claw-back and Compliance  

The new rules also define when a reversal of tax depreciation in the UAE might occur, including circumstances beyond the simple disposal of an investment property. This ensures taxpayers remain aware of potential liabilities and maintain sound records for compliance purposes. 

The Ministry’s commitment is clear: to foster an equitable and transparent tax climate in the UAE, offering certainty for investment property owners and enhancing the country’s appeal for both local and international investors. 

If your company’s first corporate tax period ended on 31 December 2024 and you missed the registration deadline, there’s still time to avoid penalties, but you must act fast. 

Under the UAE Corporate Tax Penalty Waiver initiative, the Federal Tax Authority (FTA) has confirmed that eligible businesses can still qualify for a full waiver of administrative penalties, only if they file their corporate tax return or annual statement within 7 months from the end of their first tax period. This 7-month window from the end of your first tax period is critical. Filing after this deadline means the penalties will apply, even if you’ve since registered. 

Understanding the UAE Corporate Tax Penalty Waiver Initiative 

The UAE corporate tax penalty waiver initiative aimed at assisting businesses that either missed the corporate tax registration deadline or were previously fined for late compliance. This initiative offers a structured opportunity for businesses to resolve their tax obligations without facing additional financial penalties, reflecting the FTA’s efforts to promote voluntary compliance during the initial phase of the new tax regime. 

For many businesses, this presents a much-needed chance to reduce financial pressure and transition into the UAE’s tax system with greater ease and clarity. 

Who Can Take Advantage of the UAE Corporate Tax Penalty Waiver? 

The waiver is designed to accommodate various non-compliance scenarios. You may be eligible if: 

• You were fined for late registration but haven’t yet paid the penalty 

• You haven’t registered for corporate tax at all 

• You already paid the fine but now meet the criteria for a refund 

This inclusive approach of UAE corporate tax penalty waiver ensures that both late filers and those seeking to rectify their compliance status still have a clear path forward, provided they act promptly. 

The Core Condition: The 7-Month Filing Rule 

To benefit from this UAE corporate tax penalty waiver, either through avoiding a pending penalty or reclaiming one already paid, you must adhere to a 7-month compliance window: 

• Taxable persons must submit their Corporate Tax Return within 7 months from the end of their first tax period 

• Exempt persons must file their Annual Declaration within the same timeframe 

Meeting this condition is essential for accessing relief under the FTA’s initiative. 

Why the UAE Corporate Tax Penalty Waiver Initiative Matters:

Beyond penalty relief, this initiative serves a broader purpose:

• Encourages early and voluntary compliance in the first year of the new regime 

• Reduces the initial compliance burden for businesses still adapting 

• Supports smoother integration into the corporate tax framework 

• Boosts confidence in the UAE’s business environment by making the transition supportive and fair 

Don’t Miss This Second Chance! 

This is a one-time opportunity for businesses to correct their course without facing penalties. If your first tax period ended in December 2024 and you haven’t registered yet, the clock is ticking. 

File by 31 July 2025. Avoid penalties. Protect your compliance standing. 

Missed the Deadline? MS Helps You Qualify, Comply, and Claim Relief 

At MS, we offer end-to-end support to help businesses take full advantage of the UAE Corporate Tax penalty waiver. Whether you’ve missed the registration deadline, already paid a penalty, or are unsure about your eligibility, our team assesses your specific situation and guides you through the necessary steps. We ensure your Corporate Tax Return or Annual Declaration is filed accurately within the required 7-month window, enabling you to qualify for the waiver or initiate a refund. For those still unregistered, we handle late registration and bring your compliance status up to date.  

The UAE Federal Tax Authority (FTA) has rolled out a significant Corporate Tax penalty waiver initiative to support businesses that missed the corporate tax registration deadline or have already been penalized for late compliance. This initiative aims to support businesses that may have missed the corporate tax registration deadline or have already been penalized for late compliance. By providing a clear path to penalty relief, the FTA is encouraging businesses to regularize their tax status without the burden of additional fines. 

This is a valuable opportunity for affected entities to avoid further financial strain and align with the UAE’s evolving tax requirements smoothly. 

In this article, we’ll break down the key aspects of this initiative, explain who is eligible, and walk you through the important steps you need to take to benefit from the penalty waiver or refund. 

Why This Corporate Tax Penalty Waiver Initiative Matters? 

• Enhance voluntary compliance 

• Support businesses adjusting to the new tax regime 

• Promote timely filing and accurate reporting practices 

With corporate tax now a core feature of the UAE’s economic framework, such measures are essential to ensure a smooth transition for entities across all sectors. 

Who Can Benefit from This Corporate Tax Penalty Waiver? 

This targeted penalty waiver applies to a range of situations. You may qualify if: 

• You incurred a penalty for late registration but haven’t paid it yet 

• You haven’t registered for corporate tax at all 

• You already paid a penalty but now meet the filing and submission criteria 

This makes the initiative inclusive of both proactive and late-responding entities, provided they now take timely action. 

The Key Requirement: 7-Month Rule 

To qualify for either a waiver (if you haven’t paid the penalty yet) or a refund (if you have) under this corporate tax penalty waiver, you must meet one of the following requirements: 

• Taxable persons must file the Corporate Tax Return within 7 months from the end of their first tax period 

• Exempt persons must submit their Annual Declaration within the same timeframe 

Practical Scenarios and Outcomes 

Scenario 1: Penalty Issued but Not Paid 

The taxpayer completed the registration process and was issued a penalty for late registration, which has not yet been paid. The taxpayer then submitted the tax return within seven (7) months from the end of the first tax period. The individual will be exempted from the penalty. 

Scenario 2: Penalty Issued, Not Paid, Return Pending 

The taxpayer completed the registration and was issued a penalty for late registration, which has not yet been paid. The taxpayer has not yet submitted the tax return for the first tax period. In this case, the taxpayer must submit the tax return or the annual declaration within seven (7) months from the end of the first tax period, and the penalty will be waived. 

Scenario 3: Penalty Paid, Return Pending 

The taxpayer completed the registration and was issued a penalty for late registration, which has already been paid. However, the tax return for the first tax period has not yet been submitted. In this case, the taxpayer must submit the tax return or the annual declaration within seven (7) months from the end of the first tax period. The amount paid will be refunded to their tax account. 

Scenario 4: Penalty Paid, Return Submitted 

The taxpayer completed the registration, was issued a penalty for late registration, and has already paid the penalty. The taxpayer also submitted the tax return within seven (7) months from the end of the first tax period. In this case, the amount paid will be refunded to their tax account. 

Scenario 5: Registration Not Yet Completed 

The taxpayer has not submitted a corporate tax registration application. In this case, the taxpayer must complete the registration and submit the tax return or the annual declaration within seven (7) months from the end of the first tax period. The penalty will be waived if it is imposed. 

How to Comply?  

All tax-related actions, including registrations, corporate tax return submissions, and annual declarations, must be completed via the EmaraTax platform. This is a time-sensitive opportunity. Ensure your submissions are completed within 7 months from the end of your first tax period to benefit from the corporate tax penalty waiver or refund. 

Not sure if you qualify for the corporate tax penalty waiver or refund? 

MS can help you get clarity and results. We provide end-to-end support to help you benefit from the Corporate Tax penalty waiver in the UAE: 

• Determine your eligibility 

• Handle your registration and filings via EmaraTax 

• Secure waivers or refunds before the deadline lapses 

With MS, you stay compliant, avoid penalties, and reclaim what’s yours on time and with confidence. 

In a landmark move to support businesses during the initial phase of the UAE’s corporate tax regime, the Ministry of Finance (MoF) and the Federal Tax Authority (FTA) have jointly announced a UAE corporate tax penalty waiver initiative that offers relief to corporate taxpayers and certain exempt entities. This decision, implemented via a Cabinet Decision, waives administrative penalties for entities that missed the deadline to register for corporate tax provided they meet a key condition: they must file their tax return or annual statements within a period not exceeding 7 months from the end of their first tax period. 

UAE Corporate Tax Penalty Waiver: What the Initiative Entails? 

The newly launched initiative waives administrative penalties for companies and certain exempt persons that failed to register for corporate tax within the prescribed timeframe. To qualify for this waiver, eligible parties must file their corporate tax returns or annual statements within seven (7) months from the end of their first tax period, in alignment with the UAE Corporate Tax Law. 

Notably, under this UAE corporate tax penalty waiver, the FTA has confirmed that fines already paid by qualifying entities will also be refunded, offering welcome financial relief for businesses that have already settled penalties but now meet the waiver conditions. 

The Broader Objective of UAE Corporate Tax Penalty Waiver 

This initiative is not just about waiving penalties but part of a broader national effort to foster a robust tax compliance culture in the UAE. The MoF and FTA emphasized that the UAE corporate tax penalty waiver is designed to: 

• Encourage early and voluntary compliance during the first year of corporate tax implementation 

• Ease the administrative and financial burden on businesses adapting to the new regime 

• Simplify tax registration procedures for companies and exempt entities alike 

• Support the UAE’s economic competitiveness and investor confidence by ensuring a fair and business-friendly regulatory environment 

UAE Corporate Tax Penalty Waiver: Supporting Transition CT Era and Enhancing Global Competitiveness 

This initiative of UAE corporate tax penalty waiver sends a strong and positive signal from the UAE government: that it is fully committed to enabling a smooth and supportive transition into the corporate tax era. By reducing the penalties for non-compliance, the initiative reflects a proactive and business-friendly policy approach. 

It also aligns with the UAE’s wider ambition of reinforcing its position in global competitiveness indices, which consider ease of doing business and regulatory efficiency as key metrics. 

Businesses are encouraged to act swiftly to qualify for this UAE corporate tax penalty waiver: ensure timely filing within the prescribed seven-month period and take full advantage of this waiver to start their corporate tax journey on the right foot. 

For more information, reach out to MS today! 

In its continued effort to refine the corporate tax landscape and align with international standards, the UAE Ministry of Finance has introduced a new compliance milestone: Ministerial Decision No. 84 of 2025. This Decision reshapes the requirements around audited financial statements under the UAE Corporate Tax Law and replaces the earlier Ministerial Decision No. 82 of 2023 for tax periods beginning on or after 1 January 2025. 

The key change? All tax groups must now prepare audited special purpose financial statements, a notable departure from the previous AED 50 million threshold. The Decision also offers important clarifications for non-resident businesses and maintains the audit requirements for standalone entities claiming Qualifying Free Zone Person (QFZP) status or crossing the revenue threshold. 

As the UAE moves closer to full implementation of its corporate tax regime, this UAE corporate tax update on audited financial statements marks a significant step toward ensuring financial transparency, standardized reporting, and better tax compliance across all business structures. 

Let’s unpack the key changes brought by the new Decision, what they mean for your business, and what actions you should consider now to stay compliant in the 2025 financial year and beyond. 

UAE Corporate Tax Update on Audited Financial Statements: Key Highlights of Ministerial Decision No. 84 of 2025 

1. Mandatory Audited Financial Statements for All Tax Groups 

One of the most notable updates is the removal of the AED 50 million consolidated revenue threshold for tax groups. Under the previous rule, only tax groups with consolidated revenue above AED 50 million were required to prepare audited financial statements. 

This marks a significant shift in compliance expectations. The intention behind this change seems to be greater transparency and consistency in financial reporting among tax groups. Further guidance is expected from the FTA on how these special purpose FS should be prepared, especially in light of practical implementation challenges taxpayers faced under the earlier decision. 

2. Clarification on Existing Requirements for Other Taxpayers 

For individual taxpayers not part of a tax group, the Decision maintains the existing requirements. These taxpayers must maintain audited financial statements if: 

• Their revenue exceeds AED 50 million, or 

• They are claiming Qualifying Free Zone Person (QFZP) status. 

This reiteration helps ensure continued compliance for a wide range of business structures, particularly those operating within UAE Free Zones and claiming the 0% corporate tax rate. 

3. Additional Procedures for Free Zone Distribution Activities 

The UAE corporate tax update on audited financial statements hints at upcoming procedures tailored specifically for QFZPs engaged in distribution of goods or materials in or from a Designated zone. These activities are considered as Qualifying Activities under UAE Corporate Tax Law.

While details are yet to be released, businesses involved in importing and storing goods in or from a Designated zone in the UAE for resale should keep an eye out for this guidance, as it may affect both their tax status and reporting obligations. 

4. Revenue Threshold for Non-Resident Persons: UAE Nexus Clarified 

For non-resident entities, the UAE corporate tax update on audited financial statements makes an important clarification: only revenue derived through a UAE nexus or permanent establishment shall be taken into account when determining whether the AED 50 million threshold has been exceeded.  

Implications for Businesses Operating with the UAE Corporate Tax Update on Audited Financial Statements 

The issuance of Decision No. 84 of 2025 signals a more structured and detailed compliance landscape for corporate tax in the UAE. Businesses, especially those part of Tax Groups, must reassess their current financial reporting frameworks and engage with their tax advisors to ensure alignment with the new requirements. 

Taxpayers can expect further updates from the Ministry of Finance, especially regarding: 

• Format and standards for special purpose FS 

• Additional conditions for QFZPs, engaged in distribution activities.

UAE Corporate Tax Update on Audited Financial Statements: Next Steps for Taxpayers 

If your business falls into any of the categories outlined in the new UAE corporate tax update on audited financial statements, now is the time to: 

• Review your financial reporting processes to ensure audit readiness. 

• Assess whether your current audit scope meets the new special purpose requirements. 

• Stay alert for upcoming guidance, especially for Free Zone entities and tax groups. 

• Engage early with your advisors to plan for compliance in your 2025 financial year. 

As the UAE Corporate Tax Law continues to evolve, Ministerial Decision No. 84 of 2025 represents a move toward more rigorous, transparent, and standardized financial reporting. While the UAE corporate tax update on audited financial statements may pose additional compliance efforts for some taxpayers, it also underscores the country’s commitment to aligning with global best practices in tax administration. 

Corporate restructuring is often seen as a smart way to streamline operations, optimize tax efficiency, and position a business for long-term success. But beneath the surface, financial and tax complexities can turn a well-intentioned strategy into an expensive miscalculation. 

One such hidden trap is bargain purchase gain, a scenario where acquiring a company for less than its fair market value unexpectedly triggers taxable income. Without careful planning, what seems like a routine transaction can result in significant, unforeseen tax liabilities, creating financial strain instead of the intended benefits. 

Understanding the interplay between accounting standards and tax regulations is critical for businesses undergoing corporate restructuring in the UAE. A misstep in structuring a deal could mean turning non-cash gains into real tax expenses, impacting cash flow and overall financial health. A proactive approach, involving both tax and accounting expertise, can help companies avoid costly surprises and structure deals in the most efficient way possible. 

Let’s explore this through a hypothetical case study. 

Case Study on Corporate Restructuring in the UAE: The Unintended Tax Bill 

In 2023, XYZ Group, a UAE-based conglomerate, restructured its operations in preparation for the new Corporate Tax regime. Their plan was to consolidate subsidiaries under a newly created holding company, DEF Holdings LLC, with the expectation of simplifying compliance and improving tax efficiency. Prior to the company’s corporate restructuring in the UAE, the group consisted of: 

• ABC Manufacturing LLC: A company with substantial assets but struggling financially, holding AED 10 million in retained earnings. 

• DEF Holdings LLC: A newly formed entity intended to serve as the parent company. 

XYZ Group’s tax consultants advised that the consolidation would streamline operations. However, the restructuring involved DEF Holdings acquiring ABC Manufacturing for AED 3 million even though ABC’s net assets were valued at AED 10 million. 

The Problem: Unexpected Tax on Negative Goodwill 

This acquisition created what is known as a bargain purchase, where the acquired company is bought for less than its fair market value. According to International Financial Reporting Standards (IFRS), the difference between the purchase price and the fair value of net assets (AED 7 million in this case) must be recorded as a bargain purchase gain (or negative goodwill) in the Profit & Loss statement. Under the UAE Corporate Tax regulations, this AED 7 million gain is treated as taxable income. At a 9% tax rate, XYZ Group suddenly faced a tax bill of AED 630,000, an expense that could have been avoided with better planning. 

Avoiding the Trap in Corporate Restructuring in the UAE: Alternative Strategies 

To prevent similar costly mistakes, companies should take a holistic approach to corporate restructuring in the UAE, carefully evaluating both the tax and accounting impacts. Here are several strategies that could have helped XYZ Group: 

1. Asset Transfer Instead of Share Acquisition 

• Strategy: Instead of acquiring the entire company, DEF Holdings could have purchased specific assets (such as equipment or intellectual property) while leaving behind tax-sensitive items like high retained earnings. 

• Benefit: This approach would have avoided triggering a bargain purchase gain and the associated taxable income. 

2. Partial Ownership Transfer 

• Strategy: Structure the deal as a gradual acquisition, where the parent company first takes a minority stake in the target company, gradually increasing its ownership over time. 

• Benefit: This method spreads out the financial impact, reducing the immediate tax burden and avoiding a sudden taxable gain. 

3. Group Tax Planning Before Restructuring 

• Strategy: Engage both tax and IFRS experts during the planning phase to analyze the treatment of retained earnings and other financial statement impacts. 

• Benefit: Early and thorough planning could help carry forward losses or adjust the purchase price, preventing the creation of artificial taxable gains. 

Key Considerations for Corporate Restructuring in the UAE 

• Engage Experts Who Understand Both Tax & Accounting: 
  Rely on professionals with expertise in both areas to ensure that the plans of corporate restructuring in the UAE are aligned with tax regulations and accounting standards. 

• Analyze All Financial Statement Impacts Before Execution: 
  Understand the effects on the balance sheet, profit & loss statement, and overall tax liability before finalizing any restructuring deal. 

• Avoid Creating Taxable Gains from Non-Cash Transactions: 
  Be cautious when companies opt for corporate restructuring in the UAE with significant retained earnings to prevent generating taxable income without any corresponding cash flow benefits. 

• Explore Alternative Legal Structures: 
  Consider mergers, joint ventures, or asset purchase agreements as potentially more tax-efficient options compared to establishing a new holding company. 

Smart Corporate Restructuring in the UAE: Minimize Tax Risks & Optimize Your Business with MS 

At MS, we specialize in Corporate Tax (CT) impact assessments and advising on optimal incorporation structures to ensure tax efficiency and regulatory compliance. Our experts help businesses navigate restructuring with tailored strategies that minimize tax risks, align with IFRS standards, and streamline incorporation procedures. Trust MS to structure your business for long-term success while avoiding costly tax surprises. 

In a recent media statement, the Federal Tax Authority (FTA) made it clear that businesses failing to pay corporate tax on time will face significant consequences. Taxpayers who miss the payment deadline will incur a 14% annual penalty, calculated monthly on the unpaid tax amount. The penalty begins accruing the day after the payment deadline and continues to compound on the same date each subsequent month. 

Here’s what you need to know about the latest notification on FTA corporate tax penalties. 

Understanding the FTA Corporate Tax Penalties: How It Adds Up Over Time? 

At first glance, a missed corporate tax payment may seem like a minor oversight, but the penalties associated with late payments can quickly escalate. The FTA corporate tax penalties have a system designed to encourage timely compliance, but for businesses, this means that even a short delay can lead to significant financial consequences. 

The penalty is calculated on the unpaid tax amount, starting the day after the payment is due. Each additional month that passes without payment results in the penalty continuing to compound, leading to a growing burden. The longer the delay, the higher the penalty. For businesses already operating with narrow margins or tight budgets, these FTA corporate tax penalties can disrupt cash flow and inflate operating costs. 

What might seem like a small, manageable amount at first could quickly snowball into a much larger sum as the interest compounds. For example, if a business misses the deadline by three months, the penalty would be calculated at 14% per annum, but it would be charged on the unpaid tax for each of those three months. This makes timely payments all the more critical to avoid unnecessary financial strain. 

Why Compliance Is Essential for Your Business to Avoid FTA Corporate Tax Penalties? 

Staying compliant with corporate tax regulations is one of the most effective ways to protect your business. By ensuring that payments are made on time, you avoid the compounding FTA corporate tax penalties and safeguard your financial health. Beyond avoiding penalties, there are several reasons why timely tax payments are essential for businesses: 

1. Financial Health 

Timely tax payments ensure that your business avoids accumulating avoidable FTA corporate tax penalties. These penalties can quickly grow into substantial amounts, affecting your cash flow and potentially diverting funds from essential operations or growth opportunities. By staying ahead of tax deadlines, you keep your business’s financial health in check. 

2. Maintaining a Strong Reputation 

Regular compliance with corporate tax regulations reflects positively on your business, showing that you are reliable and responsible. This is important not only for your relationship with the tax authorities but also for investors, clients, and other stakeholders. Trustworthiness and financial stability are key factors that can make or break business relationships. 

3. Long-Term Business Sustainability 

One of the key benefits of staying compliant is the long-term stability it offers your business. When you manage your tax responsibilities effectively, you avoid the risk of sudden, unexpected costs that can disrupt operations. Moreover, maintaining a good standing with tax authorities and other regulatory bodies helps ensure that your business is positioned for continued success. 

The Corporate Tax Payment Deadline: What You Need to Know 

The Federal Decree-Law No. 47 of 2022 on Corporate Tax stipulates that corporate tax payments are due no later than nine months after the end of the relevant tax period. Understanding this deadline is crucial, but it’s only part of the picture. To avoid FTA corporate tax penalties, businesses must be proactive in managing their tax obligations. This means keeping track of deadlines, ensuring that the tax returns are filed correctly, and making payments on time. 

Don’t Wait to Incur the FTA Corporate Tax Penalties: Act Now to Stay on Top of the Deadlines 

Procrastination can be costly when it comes to corporate tax payments. With the FTA’s 14% annual penalty accruing each month, even a brief delay can result in significant financial repercussions. Don’t wait for the FTA corporate tax penalties to pile up—ensure that your business remains compliant by making your corporate tax payments on time. 

If you’re unsure about your tax obligations or need help managing your corporate tax affairs, contact MS today. Our experienced team is ready to help you stay on top of your tax responsibilities and avoid any surprises down the road. 

As the year draws to a close, businesses in the UAE with a tax period from 1 January 2024 to 31 December 2024 are racing against the clock. The 31 December 2024 deadline to submit the application for forming a UAE Tax Group is fast approaching, and it’s one that could significantly impact your company’s tax strategy.

Forming a Tax Group under the UAE Corporate Tax Law can offer a range of benefits, from simplified filings to potential cost savings. However, if you miss the deadline, your business may face the consequences of being taxed individually, which could lead to higher liabilities and greater administrative work.

What is the UAE Tax Group under the Corporate Tax Law?

A Tax Group allows multiple entities, such as a parent company and its subsidiaries, to consolidate their tax filings and be treated as a single taxable entity for the purposes of UAE Corporate Tax. By forming the UAE Tax Group, businesses can optimize their tax obligations, streamline compliance, and reduce administrative burdens. However, there are specific requirements and deadlines that must be met for businesses to qualify for this option.

Key Conditions for Forming the UAE Tax Group Under Corporate Tax Law

To qualify for forming a Tax Group under the UAE Corporate Tax Law, businesses must meet several specific conditions. These criteria ensure that only eligible entities can benefit from the consolidation of tax filings and other advantages of being part of a UAE Tax Group.

Residency Requirement:
Only resident entities in the UAE are allowed to form or join a Tax Group.

Eligible Entities:
The entities wishing to form a UAE Tax Group must be juridical resident persons (i.e., registered companies). Natural persons and unincorporated partnerships (even if applied to be treated as a separate taxable person) are not eligible.

Parent-Subsidiary Relationship:
A Tax Group can only consist of a parent company and its subsidiaries, and certain criteria must be met:

• The parent company must hold at least 95% of the subsidiary’s shares and voting rights.
• The parent must be entitled to at least 95% of the subsidiary’s profits and net assets.

Exemption Status:
Neither the parent company nor any subsidiary in the proposed Tax Group can be exempt from Corporate Tax, nor can they be a Qualifying Free Zone Person (a company benefiting from specific tax exemptions in certain zones).

Financial Year Consistency:
To form a Tax Group, all entities—parent and subsidiaries—must share the same financial year and adhere to consistent accounting standards across the group.

Getting Ready to Form the UAE Tax Group? Start with Corporate Tax Registration

Before you can submit the application to form a Tax Group, it is essential that each member entity—both the parent company and all subsidiaries—obtain individual Corporate Tax Registration. This registration is a mandatory prerequisite for all entities seeking to be part of the UAE Tax Group under the Corporate Tax Law.

The process involves registering each entity with the Federal Tax Authority (FTA), which ensures that they are recognized for tax purposes. Only after each entity has successfully completed this registration can the application to form the Tax Group be submitted to the FTA for approval. This step is crucial as without it, the application will not be processed, and the opportunity to form a Tax Group for the tax period may be lost.

Advantages of Forming a Tax Group

Simplified Compliance: By consolidating tax filings into a single return, businesses can simplify the compliance process, saving time and resources.

Cost Savings: Streamlined filing could lead to cost savings, as for companies there are no fees for filing CT returns on the portal or for external consultants to manage CT matters.

Improved Cash Flow: A Tax Group allows entities to offset tax losses from one member against taxable profits from another, which can optimize cash flow and potentially reduce the overall tax burden.

No Transfer Pricing for General Transactions Within the Group: Transactions between group members are eliminated when calculating taxable income, which reduces the need for complex transfer pricing documentation and administrative oversight.

At MS, we specialize in providing tailored tax advisory services to businesses in the UAE. Our experienced team can guide you through every step of the process, from Corporate Tax registration to UAE Tax Group formation, ensuring full compliance and optimizing your tax strategy. With our deep knowledge of UAE tax laws and our commitment to delivering exceptional service, we’re here to help you with this important transition with ease.