Disclosures while Filing corporate tax returns in UAE

When filing *corporate tax returns in the UAE, businesses need to comply with the newly introduced **Federal Corporate Tax (CT), which will apply starting from **June 1, 2023. The UAE has traditionally been a tax-free jurisdiction for corporate income, but the new tax regime introduces a **9% corporate tax rate* on business profits exceeding *AED 375,000*.

Below are the *key disclosures* and important points to consider while filing corporate tax returns in the UAE:

1. General Information and Corporate Details

Businesses need to provide general information, including:

• Business Name and Legal Form: Clearly state the legal structure (LLC, LLP, Free Zone entity, etc.) and business name.
• *Tax Registration Number (TRN): Ensure your business is registered with the UAE Federal Tax Authority (FTA) and the correct *TRN is disclosed.
• *Financial Year: Mention the *financial year relevant to the tax return.
• Registered Address and Contact Information: Provide up-to-date contact information.

2. Income Disclosures

Gross Revenue* and *Profits* must be clearly disclosed, including:

• Total Revenue: Report the total revenue generated from the business activities.
• Domestic and International Income: Businesses operating in both UAE and internationally should disclose income sourced within and outside the UAE.
• *Free Zone Businesses: Companies in UAE *Free Zones may still qualify for 0% corporate tax on income earned from qualifying activities (as per the Free Zone rules). This must be separately disclosed.

3. Exempt and Non-Taxable Income

Disclose any *exempt income* such as:

• Capital Gains and *Dividends: Most capital gains and dividends earned from UAE companies will be *exempt from corporate tax.
• Intra-group Transactions and Reorganizations: Certain transactions between related parties (intra-group transfers) and corporate reorganizations can be exempt, provided certain conditions are met.
• *Income from Foreign Permanent Establishments: If applicable, any income exempt due to *double taxation agreements (DTA) or Foreign Permanent Establishment Exemption should be clearly stated.

4. Taxable Income and Adjustments

Taxable income* must be computed after adjustments:

• Adjustments to Accounting Income: Corporate tax is based on the accounting profit reported in the financial statements, but some adjustments must be made (e.g., non-deductible expenses, exempt income).
• Deductible Expenses: Only business-related expenses are deductible. Ensure you properly disclose:
• Employee salaries and benefits.
• Interest on business loans (subject to interest deduction limitations).
• Depreciation and amortization based on allowable tax rates.
• Operating costs (rent, utilities, administrative costs).

Make sure non-deductible expenses (like personal or capital expenditures) are added back to the taxable income.

5. Related Party Transactions (Transfer Pricing)

Businesses must disclose any *related-party transactions, and the UAE follows **OECD Transfer Pricing Guidelines*. Important aspects include:

• *Transfer Pricing Disclosures: Clearly disclose any *transactions with related parties (e.g., parent companies, subsidiaries, affiliates) involving the transfer of goods, services, or intellectual property.
• *Transfer Pricing Documentation: Large businesses might need to provide detailed *transfer pricing documentation to show that the pricing of related-party transactions is consistent with the arm’s length principle.

6. Losses and Tax Credits

*Loss Carry-Forward: Disclose any **tax losses* carried forward from previous years. The UAE allows companies to *carry forward losses* to offset future taxable income (up to 75% of the taxable income).

Foreign Tax Credits: If your company has paid taxes on foreign income, you may be able to claim **foreign tax credits* under *Double Taxation Agreements (DTAs)*. Make sure to disclose and calculate these credits correctly.

7. Financial Statements and Supporting Documents

Attach necessary supporting documents, including:

• Audited Financial Statements: Financial statements, typically audited, must be submitted to support the figures declared in the tax return.
• *Tax Reconciliations: Provide a reconciliation of the *accounting profit (as per financial statements) to taxable income.

8. Free Zone Entities and Qualifying Income

If your company is registered in a *Free Zone, disclose the qualifying income that is subject to a **0% tax rate, ensuring it aligns with the **specific rules for Free Zones. Any non-qualifying income will be taxed at the standard **9% rate*.

9. Capital Gains and Dividends

Disclose capital gains and dividends separately:

• *Capital Gains: If capital gains are part of the income, ensure they are correctly categorized and whether they qualify for *exemption under UAE corporate tax law.
• Dividends: Dividends from foreign subsidiaries may be taxable, and they should be disclosed with relevant exemptions or tax credits applied.

10. Tax Payments and Refunds

Clearly disclose the *tax payable* or any *refunds* due based on the calculations:

• *Corporate Tax Liability: Disclose the final *corporate tax liability after taking into account all deductions, exemptions, and tax credits.
• *Advance Tax Payments: If your business has made any *advance tax payments, ensure they are reported to offset the final tax payable.

11. Compliance with Anti-Avoidance Rules

Ensure that the company complies with the *General Anti-Avoidance Rules (GAAR)* to prevent tax evasion or avoidance. Disclose if there have been any transactions or structures that might fall under GAAR scrutiny.

Conclusion

Filing corporate tax returns in the UAE involves several disclosures to ensure compliance with the new Corporate Tax Law. Businesses need to report income, related-party transactions, taxable adjustments, and supporting documentation thoroughly and accurately. Companies should also be mindful of tax exemptions for certain types of income, especially for Free Zone businesses and entities with foreign tax credits.

As the UAE tax regime evolves, it’s crucial to stay updated on regulatory changes and work closely with tax professionals to ensure full compliance with the UAE’s Federal Tax Authority (FTA).

If you need more detailed insights on any specific disclosure or section, feel free to ask!