How to prepare for UAE corporate tax filing?

Priyanka Babu | Updated on: November 11, 2024

For businesses, tax filing is a herculean task heavy with numbers and calculations. If you ask businesses, many talk about tax filing like a cautionary tale to be approached with utmost care and deep focus. Since UAE corporate tax rules might be new for many businesses, it is necessary to prepare for UAE corporate tax filing to efficiently and accurately file your income tax return.

Corporate tax filing basics

As you already know, corporate tax in UAE is calculated based on the net profit shown in the company's financial statements. To file tax returns you would need to organise certain financial documents to accurately calculate corporate tax you are liable to the pay the government.

Have a look at the documents that will help you prepare for corporate tax filing:

• Financial statements for calculation of taxable income
• Receipts for deductions to be claimed
• Financial statements for estimating exempt income
• Records of exemption status
• Business loan documents signifying interest paid
• Transfer pricing records
• Records of foreign tax paid if any

Ascertaining tax implications

Now that you have gathered all documents required, you will have to analyse your business areas to fully understand the implications of the corporate tax regime on people and systems involved in your business. This is necessary for assessing taxable income accurately and complying with all the rules before the tax filing period approaches.

Have a look at the key business areas you must analyse to prepare for UAE corporate tax filing:

• Financial status

Tax is calculated based on the data present on the financial statements of a business. Analyse your accounting policies and review accounting entries and disclosures. Depreciation, amortization, provisioning, revaluation, etc., must be focused on to get accurate figures to determine the taxable income of your financial profile.

Another focus area under financial profile is expenditure. Having a clear view on the expenses can save you a chunk of money in the form of tax deductibles. Make sure you have read the tax rules thoroughly to understand permissible deductions under UAE corporate tax to avoid paying any extra money to the tax authorities.

• Operational profile

To comply to the UAE corporate tax regime, businesses should ensure effective finance and tax operations and IT systems. Responsibilities between tax operations and other teams must clearly defined and intimated to the necessary personnel.

You will need to adapt your IT systems to include tax computations for EBIDTA calculation and monitor annual tax liability. Your financial planning and budget should also take into consideration the tax liability before publishing financial projections.

• Transfer pricing model

UAE tax authority has made it mandatory to comply with transfer pricing rules. Transfer pricing model followed by a group of companies indicate how they allocate, account and document transactions between sister concerns. This affects taxable income calculation and therefore, all group companies must align their transfer pricing model to their operating model.

For companies getting ready to comply with the new tax regulation, ensure that you design Transfer Pricing policies that can be implemented throughout the financial year. This will make it easier to include these calculations before closing financial statements of the year.

• Free zone entity implications

As you already know businesses in the free zone are exempt from tax. But conditions that are to be met for identifying as a Free Zone company is complex. It is recommended that Free Zone companies read through the conditions and assess whether they meet all the criteria for being a Free Zone company.

It would also be wise to analyze the pros and cons of being a Free Zone entity keeping in mind the requirements to comply with the Free Zone criteria and maintain this status. A review of the operational profile in line with conditions mandated is necessary to evaluate the advantages of being a Free Zone company.

When you prepare for corporate tax filing make sure that you have read through the regulations thoroughly to align your accounting policies to the new laws. An important source of information that can help you take compute your tax liability are financial reports.

With an accounting software like TallyPrime you can easily maintain your books for Corporate Tax by scrutinizing financial reports and assessing exempt and non-exempt income. Data on depreciation, amortisation, revaluation, etc., are updated in real time on TallyPrime helping you compute your tax liability accurately.