With the first financial year under  UAE Corporate Tax Law (CT Law) coming to an end, businesses operating in the UAE have critical deadlines. To make the most of available tax benefits and bypass penalties, it is crucial to remain compliant with the Federal Tax Authority (FTA) regulations. The key tasks that businesses need to complete by the year’s end or shortly thereafter are outlined in this article.

Important Actions Before the 2024 Ends for UAE Corporate Tax

1. Corporate Tax Registration

All eligible businesses are required to register for corporate tax. Ensure you:

• Make sure to register before the deadline set by the FTA.
• Check to ensure you got the right details and so nothing will hold you back in the future.
• Monitor updates from the FTA for changes in timelines or procedures.

2. Forming a Tax Group

If you intend to file taxes jointly with related companies under a Tax Group, you must submit your application to the FTA before the end of your tax year. Benefits of forming a Tax Group include:

• Streamlined tax reporting.
• Potential tax liability reductions.
• Easier management of intercompany transactions.

3. Foreign Company Tax Assessment

Foreign businesses must determine whether they have a Place of Effective Management (POEM) or a Permanent Establishment (PE) in the UAE. This evaluation determines:

• Whether the foreign entity is subject to the UAE corporate tax.
• Any tax liabilities arising from its operations within the UAE.

Key Compliance for Related-Party Transactions

The FTA’s guidelines set out thresholds for reporting transactions with related parties and connected persons. Businesses must:

• Report in relation to reporting of transactions by related parties with a market or financial value of AED 40 million or over.
• If aggregate related party transactions exceed AED 4 million, disclose related party transactions per category (sale of goods, services, intellectual property, or interest).
• If the aggregate value is more than AED 500,000 or benefits are more than AED 500,000, complete the schedule for connected persons.
• For these thresholds, do not count any dividends paid to related parties.

Foreign Tax Payments and Credits

Business that have paid taxes in other countries will be allowed to claim a Foreign Tax Credit (FTC) in the UAE. Ensure that:

• Documentation for all foreign tax payments is complete and accurate.
• Claims are prepared in compliance with FTA guidelines.
• FTC is accounted for while calculating your UAE tax liability.

Finalizing Accounts and Audits for UAE Corporate Tax

Recording that financial part right is essential for calculating the taxable income. Before the 2024 ends:

• Finalize your financial accounts to ensure accuracy.
• If required, appoint a UAE-registered auditor and complete the audit process.
• Retain records for future tax assessments and audits.

Exploring Tax Relief Options

Your tax liabilities can be reduced by several tax relief options. Assess eligibility for the following:

• Small Business Relief: Applicable to businesses with low income.
• Group Transfers: Allows transfer of assets within a group without tax liabilities.
• Qualifying Free Zone Entity: For businesses operating in free zones that meet specific conditions.

Making Tax Decisions (Elections)

Certain tax decisions must be made during the first financial year and are often irreversible. 

Key decisions include:

• Applying transitional rules for tax adjustments.
• Electing specific methods for income reporting.
• Making informed choices about tax grouping and exemptions.

Summary of Year-End Priorities When Filing Corporate Tax for the First Time

To ensure compliance and leverage tax benefits, businesses should:

1. Register before FTA’s deadline.
2. Evaluate eligibility for tax relief options.
3. Finalize financial accounts and conduct audits.
4. Plan and submit applications for Tax Groups.
5. Make informed and timely tax elections.
6. Seek professional advice to address complex tax issues.

Conclusion

Businesses wishing to stay compliant and take advantage of tax advantages must adhere to CT law requirements and proactively plan. Companies can achieve financial efficiency in 2024 with clear deadlines and relief options available to them. All this can be accomplished by partnering with experienced tax professionals like AB Capital Services, they are FTA Certified and offer a free consultation.

FAQs

1. What is the UAE Corporate Tax Law?
   The UAE Corporate Tax Law introduces corporate taxation on businesses operating in the UAE, aiming to align with global tax standards.

2. What is the deadline for corporate tax setup?
   Deadlines vary by business; consult the FTA for specific timelines relevant to your operations.

3. What are the benefits of forming a Tax Group?
   Tax Groups simplify tax reporting and can reduce overall tax liabilities by consolidating group profits and losses.

4. How do foreign businesses determine tax applicability?
   Foreign entities must assess their POEM or PE status to determine UAE tax obligations.

5. What documentation is needed for claiming a Foreign Tax Credit?
   Businesses must provide evidence of foreign tax payments, including receipts and detailed statements, to claim an FTC.