How to Prepare Yourself for Corporate Tax Return Filing

A User Guide –Prepare Corporate Tax Return Filing

Don’t panic about how to prepare yourself and what documents need to align with the federal tax authority when filing your Corporate Tax Return. As we all know it's completely new to UAE businesses and this is the first time where people will file a return for their Corporate Tax. Today I am going to brief you about all the things that you should keep ready when filing a corporate tax return.

The first thing you must have registered for Corporate Tax is to know your Corporate Tax period and financial period. Once your financial period ends, you need to do the return filings within 9 months from the end of the financial year.

Here are a few things that you must take care of-

1. Tax Registration Number (TRN) Certificate

Once you register your business, there are certain regulations that you need to comply with, such as the FTA (Federal Tax Authority) and some other authorities. Nowadays once you get your license, within the 3 months from the day of the date of license issuance, you need to apply for corporate tax registration. You’re Tax Registration Number (TRN), issued by the Federal Tax Authority. So, at the time of filing make sure your TRN is readily available, as it ensures that your business is registered for Corporate Tax. If there are discrepancies in your TRN, make sure to update them on the FTA’s EmaraTax portal before proceeding with the filing process.

2. Keep Your Financial Statements Ready

Financial statements are the backbone of any kind of taxation as well as for your Corporate Tax Return. These include:

Income Statement: Must maintain your business’s income, and expenses, then, calculate net profit or loss for that relevant tax period.
Balance Sheet: A balance sheet is a summarized document for your business’s financial position, including assets, liabilities, and equity.
Cash Flow Statement: Cash flow is sometimes required to show your inflow and outflow of cash.

These statements must be prepared as per International Financial Reporting Standards (IFRS).

3. Maintain Supporting Accounting Records

Supporting accounting documents are also quite essential for verifying the accuracy of your tax return. These records may include:

General Ledger: This includes details of all financial transactions.
Invoices: Take care of all sales invoices and purchase invoices as well.
Bank Statements: To reconcile reported figures with actual transactions.
Payroll Records: Details of employee salaries, benefits, and bonuses given to them.

Detailed supporting accounting records ensure that your tax return aligns with your business’s financial activities.

4. Explanation of Taxable Income and Their Adjustments

As per the UAE regulations companies need to calculate taxable income, to calculate this, you need to do:

Breakdown of Revenue Streams: Bifurcate your revenue from taxable and non-taxable sources.
Details of Exempt Income: Income earned from qualifying dividends, qualifying intellectual property, or through any of the qualifying investment funds.
Adjustments for Non-Deductible Expenses: If a company has any fines, penalties, or even any personal expenses that are not considered under the Corporate Tax Law.
Carried Forward Tax Losses: If applicable, details of prior-period losses to be offset against current taxable income.
Arm’s Length Pricing: Any transactions with a related party or connected person are required to be reinstated to market value while calculating the Corporate Tax.

5. Tax Relief Documentation

There are certain tax reliefs offered by authorities such as Small Business Relief, Business Restructuring Relief, or Group Taxation Relief, so to avail of these kinds of reliefs make sure you have the necessary supporting documents, including:

Proof of eligibility like core income generating activities, turnover for the year, and other certain documents to become a qualifying person for these reliefs.
Such agreements or contracts should be there to avail these tax reliefs.
Details of intra-group transactions or restructuring activities.

Strong documentation will substantiate your claim, speed up the process for these benefits, and help avoid disputes with the Federal Tax Authority.

6. Free Zone Entity Records (If Applicable)

Businesses operating in UAE Free Zones must have related documentation to claim tax benefits under the Qualifying Free Zone Person status. Key records include:

Proof of Free Zone Registration: The Company must have valid trade licenses which is issued by the respective Free Zone authority.
Revenue Details: Bifurcate qualifying and non-qualifying revenue for the de-minimis condition.
Substance Documentation: Evidence of economic substance such as office leases, assets, employee contracts, and other operational expenses.
Core Income Generating activities- Core income-generating activities must performed in the UAE office.
Comply with Arm’s Length principle- A Qualifying person must comply with Arm’s length principle for any connected person transactions and related party transactions.
Audited Financial Statements – A Qualifying Free Zone person shall prepare and maintain an audited financial statement.

7. Related Party Transactions

If a company is involved in transactions with related parties or connected parties, then there will be some essential documents including:

Transfer Pricing Documentation: Maintain documents as per the UAE’s transfer pricing rules.
Related Party Transaction Schedules: Records of all the transactions with connected persons, including the nature, value, and purpose of each transaction.
Arm’s Length Principal: Documents needed for the transactions are conducted at market value.

8. Tax Credits and Withholding Tax Details

Proof of Tax Payments: If you are showing that you are paying some withholding taxes then, in such cases foreign tax receipts or any issued certificates from overseas jurisdictions.
Double Taxation Agreement (DTA) Evidence: To avail of this benefit you must carry proof of eligibility for tax treaty benefits.
Withholding Tax Certificates: Issued by foreign entities where taxes were withheld at the source.

9. Declaration and Authorization Forms

Certain declaration forms need to be taken care:

Review and Declaration Form: Signing needs to be done by an authorized signatory, confirming the accuracy of the tax return.
Power of Attorney (If Applicable): If you hired any tax agent or a legal representative is file a tax return on your behalf, submit the relevant authorization documents.

10. Additional Attachments

Some additional schedules or attachments might be asked by the authority. Include:

Schedules for Tax Loss Transfers: Details of losses transferred between taxable persons.
Schedules for Exempt Income or Participations: For dividends, participations, or other exempt income.
Unrealized Gains/Losses Schedules: For taxpayers using the realization basis of accounting.

These attachments must be uploaded to the FTA’s EmaraTax portal along with your tax return if FTA.