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.

If your business was established on or after June 1, 2023, and your tax period ends on or before February 29, 2024, the final deadline for Corporate Tax filing deadline is December 31, 2024. This is your critical moment to ensure compliance with the UAE’s Corporate Tax requirements.

To support your filing process, the Federal Tax Authority (FTA) has published a comprehensive Corporate Tax Return Filing Guide, which is designed to help businesses understand the filing process, regulatory changes, and avoid common mistakes.

How to Prepare for Your Corporate Tax Filing Deadline:

Organize Your Financial Documents

The first step to ensure meeting the corporate tax filing deadline is gathering all the required documents. This includes your financial statements, income statements, invoices, receipts, and any records supporting your deductions or credits. Organizing these early on will save you time and effort as you approach the filing deadline. By having all your financial data organized in one place, you minimize the chances of overlooking important details, leading to a more accurate tax return.

Stay Updated on Tax Regulations

Corporate tax laws can change, and it’s important to stay informed about the latest rules and regulations to avoid potential penalties. The FTA regularly issues updates on tax laws that may affect your corporate tax filing deadline. The Corporate Tax Return Filing Guide is an excellent resource to keep track of any modifications to tax laws. Understanding these regulations will help you avoid mistakes and also provide opportunities to optimize your tax position.

Double-Check for Accuracy

 Accuracy is crucial when it comes to Corporate Tax filing. Ensure that your financial data is correctly recorded, and your tax calculations are accurate. Take extra time to verify all the details before submitting your tax return. Errors or omissions can lead to delays, penalties, or even audits. If you’re unsure about specific calculations or deductions, it’s a good idea to consult with a tax professional to meet the corporate tax filing deadline. They can help review your return and ensure that everything is in compliance with current regulations, helping you avoid costly mistakes.

What Happens If You Miss the Corporate Tax Filing Deadline?

The deadline to file your Corporate Tax Return for applicable entities and make any outstanding payments is December 31, 2024. If you miss this date, your business could face significant penalties:

Non-Filing Penalty: If you fail to file your return on time, you will be penalized AED 500 per month for the first 12 months. After that, the penalty increases to AED 1,000 per month. Over time, these penalties can add up and become a substantial financial burden for your business.

Late Payment Penalty: If you do not pay your tax by the corporate tax filing deadline, a 14% annual penalty will be charged on the outstanding amount, compounded monthly. This can result in a significant increase in your tax liability as the penalty compounds over time.

How MS Can Help You Meet Your Corporate Tax Filing Requirements

At MS, we offer expert assistance throughout the Corporate Tax filing process. Our experienced team will help you gather, organize, and review your financial documents, ensuring everything is in order for a smooth filing. We will also calculate your tax liabilities, ensuring full compliance with the latest UAE tax laws. If there are any changes in tax regulations, we’ll ensure you’re informed and equipped to optimize your tax return.

Additionally, we provide proactive reminders as the corporate tax filing deadline approaches, so you never miss a critical step. With MS by your side, you can confidently meet the December 31, 2024, deadline and avoid costly penalties.

If your business was incorporated on or after 1st June 2023 and has a tax period ending on or before 29th February 2024, the clock is ticking! With the first corporate tax return filing deadline set for 31st December 2024, now is the time to ensure your tax filings are accurate and error-free.

Read on to discover the common mistakes in corporate tax filing to avoid as you prepare for this crucial deadline!

1. Inaccurate or Incomplete Financial Statements

One of the most significant mistakes businesses make is submitting inaccurate or incomplete financial statements. This often happens due to poor bookkeeping practices, which can result in miscalculations of taxable income. Incorrect financial statements can lead to either overpayment or underpayment of taxes, potentially triggering audits or penalties.

How to Avoid It:

• Maintain Detailed Records: Keep comprehensive records of all financial transactions, including invoices, receipts, and bank statements.
• Categorize Transactions Accurately: Ensure personal expenses are not mixed with business expenses.
• Retention Period: Retain records for the legally required period (usually five years) to ensure they are available in the event of an audit.

2. Failure to Claim Eligible Deductions and Exemptions

Many businesses fail to claim all the deductions and exemptions available under UAE corporate tax law, which can lead to overpayment of taxes. Companies may overlook tax benefits such as small business relief or sector-specific reliefs, losing out on potential savings.

How to Avoid It:

• Stay Informed About Deductions: Regularly review available deductions, including sector-specific reliefs and small business exemptions.
• Consult a Tax Advisor: Work with a tax professional to ensure all applicable benefits are claimed.

3. Improper Classification of Income and Expenses

Another frequent error is the improper classification of income and expenses. Businesses sometimes misclassify personal expenses as business-related or fail to properly distinguish between different types of income. This can lead to an incorrect calculation of taxable income, resulting in errors in tax filings.

How to Avoid It:

• Accurate Classification: Ensure that all income and expenses are classified correctly in your financial records.
• Review Regularly: Periodically review income and expenses to ensure they are categorized properly.

4. Lack of Conformity with Transfer Pricing Regulations

For companies involved with related parties (e.g., subsidiaries, directors, or shareholders), failure to comply with transfer pricing regulations can result in tax adjustments and penalties. Incorrect documentation of intercompany transactions can trigger audits.

How to Avoid It:

• Adhere to the Arm’s Length Principle: Ensure that transactions between related parties are priced similarly to transactions with unrelated third parties.
• Document Transactions Thoroughly: Keep detailed records of all intercompany transactions to comply with UAE transfer pricing rules.

5. Poor Record-Keeping and Documentation

Inadequate record-keeping and poor documentation practices can make it difficult for a business to substantiate claims for tax deductions and exemptions. Missing invoices, receipts, and contracts can lead to lost tax benefits or errors in tax filings.

How to Avoid It:

• Organize Documents Properly: Maintain a structured system for storing records related to all financial transactions.
• Stay Compliant: Keep all relevant documents (e.g., contracts, invoices, receipts) for the legally mandated period.

6. Failure to Register for Corporate Tax or Obtain a Tax Registration Number (TRN)

Companies operating in the UAE must register for corporate tax and obtain a Tax Registration Number (TRN). Failing to do so can result in hefty penalties and interest charges, as it constitutes a violation of tax laws.

How to Avoid It:

• Register on Time: Ensure that your business is registered for corporate tax as soon as it meets the relevant criteria.
• Set Reminders: Use tax management tools to help you track important filing and registration deadlines.

7. Misjudging Tax Liabilities

Many businesses miscalculate their tax liabilities by either underestimating or overestimating them. This can result from errors in calculating taxable income, misunderstanding deductions, or applying the wrong tax rate.

How to Avoid It:

• Engage Tax Professionals: Consult with tax experts to accurately calculate your tax liabilities.
• Regularly Review Tax Liabilities: Conduct quarterly or annual reviews to ensure accuracy in tax planning and filings.

8. Missing Out on Tax Incentives

The UAE offers various tax incentives, including relief for small businesses, exemptions for free-zone entities, and tax credits for qualifying expenses. However, many businesses fail to take advantage of these incentives, leading to higher tax payments.

How to Avoid It:

• Stay Updated on Incentives: Regularly review the tax incentives available to your business.
• Develop a Tax Strategy: Work with a tax advisor to incorporate these incentives into your tax strategy.

9. Overpaying on Transactions Between Related Parties

For transactions between related parties (e.g., payments to directors or shareholders), businesses may overpay or underpay, which can trigger tax audits. The UAE tax system follows the “arm’s length principle,” meaning that related-party transactions should be priced similarly to transactions with unrelated third parties.

How to Avoid It:

• Follow the Arm’s Length Principle: Ensure that payments to related parties are fair and comparable to those made to independent third parties.
• Document All Transactions: Keep thorough records of related-party transactions to avoid complications during audits.

What Happens When You Make Mistakes in Corporate Tax Filing

Failing to comply with tax regulations in the UAE can lead to serious consequences for businesses. The penalties for mistakes in corporate tax filing can range from fixed amounts for late submissions to percentages based on unpaid taxes. Interest may also be charged on unpaid taxes, further increasing a business’s financial liability. In addition, mistakes in corporate tax filing can also damage a company’s reputation and relationships with clients, partners, and investors.

How MS Helps You Avoid Mistakes in Corporate Tax Filing

At MS, we make corporate tax filing simple and error-free. Our experienced team will help you avoid mistakes in corporate tax filing like misclassifying expenses, missing out on eligible deductions, or failing to meet transfer pricing requirements. We ensure your financial documents are accurate, calculate your tax liabilities with precision, and guarantee compliance with the latest UAE tax laws. From start to finish, we manage the entire filing process, ensuring your return is submitted on time—so you can avoid the mistakes in corporate tax filing and the associated penalties.

Is your company ready to meet the 31st of December 2024 deadline for Corporate Tax Return filing and payment? If your business was incorporated on or after 1st June 2023, with a tax period ending on or before 29th February, this is your critical moment to act!

To guide you through this critical process, the Federal Tax Authority (FTA) has introduced a comprehensive Corporate Tax Return Filing Guide—your ultimate resource for staying compliant. Let’s explore the essential updates, step-by-step filing procedures, and practical tips to help you file accurately and on time.

How to Prepare for Your Corporate Tax Return Filing Process?

Organize Your Financial Documents

The first step in preparing for the Corporate Tax filing is to gather all the necessary financial documents. This includes your financial statements, invoices, receipts, and any other relevant documents that support your tax deductions and credits. Organizing these documents early on will streamline the filing process and ensure accuracy when submitting your tax return. Having everything ready well in advance can help you avoid delays and reduce the risk of errors during the corporate tax return filing.

Stay Informed on Tax Regulations

Tax laws are subject to change, and it is important to stay updated on any new developments or modifications to corporate tax regulations. Understanding the latest rules issued by the UAE government and the FTA will ensure that you are compliant with the current tax environment. The new Corporate Tax Return Filing Guide from the FTA is a valuable resource that provides clarity on the latest changes and requirements. Additionally, staying informed allows you to take advantage of any opportunities to minimize your tax liabilities through available tax planning strategies. This proactive approach will help avoid mistakes and ensure your filing is in line with all applicable requirements.

Avoid the Common Mistakes in Filing

As the deadline approaches, it is essential to verify that all financial data and tax calculations are accurate. Double-check your documents to ensure there are no discrepancies or missing information. This is the time to resolve any uncertainties you may have regarding your corporate tax return filing. If you are unsure about any aspect of your Corporate Tax filing, consulting with a tax professional can help prevent costly mistakes. Submitting incorrect or incomplete filings can result in penalties, so taking the time to review everything thoroughly is crucial.

What if you miss the deadline for Corporate Tax Return Filing?

The final day for filing your Corporate Tax Return and paying any outstanding taxes is 31st December 2024. Missing this deadline can result in significant financial penalties:

Non-filing Penalty: AED 500 per month for the first 12 months, escalating to AED 1,000 per month thereafter. Over time, this penalty can accumulate and significantly affect your business’s finances.

Late Payment Penalty: Any unpaid tax after the deadline will incur a 14% annual penalty, calculated monthly on the outstanding balance. This penalty compounds over time, increasing the financial burden on your business.

To avoid these penalties and ensure smooth business operations, it is critical to meet the deadline for both filing your return and settling your tax liabilities.

How MS Can Support Your Corporate Tax Return Filing

At MS, we offer comprehensive services to help you in the Corporate Tax filing process with ease and precision. Our expert team will assist you in gathering and reviewing your financial documents, ensuring all necessary information is accounted for. We will accurately calculate your tax liabilities, ensuring compliance with the latest UAE tax regulations, and handle the entire filing process to ensure everything is submitted on time.

We offer proactive reminders as the deadline approaches, so you never miss a critical step. Our team remains up-to-date with any changes in tax laws, including the new Corporate Tax Return Filing Guide, and provides strategic guidance to help minimize your tax liabilities.

On November 11, 2024, the Federal Tax Authority (FTA) unveiled a pivotal corporate tax return guide to simplify the journey for businesses filing their first UAE Corporate Tax (CT) returns. Packed with in-depth insights, this guide breaks down essential steps, from navigating complex procedures to managing transfer pricing (TP) disclosures and tax elections. With the clock ticking toward the first filing deadline on December 31, 2024, businesses must act swiftly to ensure they are ready and compliant for the corporate tax return.

Key Takeaways from the UAE Corporate Tax Return Guide

The guide introduces several important concepts and procedures that businesses must be aware of when filing their tax returns. Let’s dive into the key insights from the corporate tax return guide:

1. Accurate Information is Crucial

The UAE CT return consists of 20 schedules. However, only the applicable schedules will be presented to the taxpayer based on the information entered during the tax registration process on the EmaraTax portal. Accuracy is essential here: the details you provide during registration determine which schedules will appear, so it is crucial to ensure that all fields are completed correctly to avoid irrelevant or incorrect schedules from being included.

2. Transfer Pricing Reporting Requirements

One of the significant elements in the recently published corporate tax return guide is the detailed reporting requirements related to transfer pricing. If a business has related-party transactions exceeding AED 40 million, disclosure of aggregate related-party transactions per category (e.g., sale of goods, provision of services, IP, interest) is mandatory. Additionally, any transactions with connected persons exceeding AED 500,000 must be disclosed. It is important to note that dividends paid to related parties do not count toward these thresholds.

For businesses that need to make transfer pricing adjustments that reduce taxable income, preapproval from the FTA will be required. Furthermore, errors in previous tax returns that result in a reduction of tax by AED 10,000 or less can be corrected in the current period’s return.

3. Electing Tax Regimes

Tax elections made during the first tax period will be final, and these elections will automatically carry over to subsequent years. This includes elections related to the 0% rate for free zone persons, the realization basis of taxation, and the application of transitional rules. The corporate tax return guide reinforces that it is important to make these elections carefully, as they impact your tax filing for multiple periods.

4. Mandatory Attachments and Employee Data

Businesses are required to attach financial statements to their CT return. For free zone persons like the ADGM and DIFC, the average number of full-time employees (calculated from the beginning and end of the year) must also be reported.

5. Managing Data for Tax Filing

Given the granular level of detail required for completing the tax return, businesses should ensure they have access to all the necessary data points, many of which may not be easily obtainable from the General Ledger (GL). This includes HR employee data and other specifics relevant to transfer pricing and business activities. The corporate tax return guide asks the businesses to consider implementing a technology solution that can automate the process and help govern the required tax schedules effectively.

6. Free Zone Persons (QFZP) and Substance Requirements

Free Zone Persons (QFZPs) who have opted out of the Free Zone regime will not see the relevant fields in the CT return for the current and next four tax periods. QFZPs must disclose information about the level of substance maintained in the Free Zone, including the average number of full-time employees, operating and capital expenditures, and details about outsourced activities. If core-income generating activities are outsourced, the QFZP must provide additional details about the outsourcing provider, including their name, corporate tax registration number, and total expenditures spent on outsourcing.

Now that you’ve gone through the key takeaways from the corporate tax return guide, it’s crucial to stay on top of UAE Corporate Tax filing requirements to ensure everything is in order, here are the key next steps for businesses:

1. Review EmaraTax Information: Ensure that all data on the EmaraTax portal is complete and accurate. This is crucial for determining which schedules will appear on your tax return.
2. Complete Transfer Pricing Assessments: Before closing your financial accounts, conduct a thorough transfer pricing assessment to avoid needing downward adjustments that require FTA approval.
3. Prepare for Elections: Make your tax elections during the first tax period, as they will carry forward to future periods.
4. Meet Free Zone Requirements: If you’re a QFZP, ensure that all substance-related requirements and disclosures are ready and accurate.

Understanding the Corporate Tax Return Guide: How MS Makes Compliance Easy

The UAE Corporate Tax return guide offers a thorough overview of the filing requirements and provides detailed information that taxpayers must review and interpret to successfully complete their first CT return. With the introduction of these new regulations by the FTA, MS supports clients through every stage, from preparing financial statements and assessing TP policies to completing the CT return and related disclosures. Our team also helps ensure your data is ready for compliance, supports tax provisioning for reporting, and ensures all necessary documentation is in place.