UAE - Tax Return Guide
Introduction
The United Arab Emirates (UAE) introduced the UAE Corporate Tax (CT) Law on 9 December 2022. A person subject to CT law (Taxable Person) must submit a UAE CT Tax Return (Tax Return / Return) and pay any CT due to the Federal Tax Authority (FTA) within nine months after the end of their tax period.
To assist Taxable Persons, a detailed Tax Returns Guide (Guide) has been issued by the FTA offering step-by-step instructions for completing up the tax return.
The Tax Return must be completed and submitted online using EmaraTax Portal. Furthermore, the Tax Return can be submitted by the Taxable Person, or someone authorized on their behalf, such as a Tax Agent or Legal Representative. For Unincorporated Partnerships treated as separate Taxable Persons, the responsible partner must file the Tax Return. If the Taxable Person is part of a Tax Group, the Parent Company must file on behalf of the group.
Below is a summary of the aspects covered in the aforementioned Guide:
The CT return consists of nine parts as listed below:
Part A: Taxable Person Information
Part B: Elections
Part C: Accounting Schedule
Part D: Accounting Adjustments and Exempt Income
Part E: Reliefs
Part F: Other Adjustments
Part G: Tax Liability and Tax Credits
Part H: Review and Declaration
Part I: Schedules
A. Taxable Person details:
This section captures the basic details of a taxable person. Details covered will depend on the status of the taxable person such as natural / juridical / free zone person, partnerships, tax group etc.
Below is a summary of the key information that taxable persons are required to provide in their tax return based on their entity type:
- Natural Persons must disclose relevant details such as turnover from UAE business activities, the basis for financial statement preparation (cash or accrual), and tax residency status for UAE CT purposes (resident or non-resident persons), etc.
- Juridical Persons must indicate whether the entity is part of a Multinational Enterprise Group, confirm whether it conducts taxable business activities in the UAE, specify the accounting method used for financial statement preparation, and provide grounds for non-resident person tax filings, such as having a Permanent Establishment or deriving income from a nexus in the UAE.
- Free Zone Persons are required to state whether the entity is registered in a Free Zone (FZ), whether an election has been made for not being subject to CT at the rate applicable to Qualifying Free Zone Persons (QFZP) and confirm that the entity satisfies the requirements to be considered a Qualifying Free Zone Person.
Certain fields in this section will be pre-filled based on the information available with the FTA. If any pre-filled data is incorrect, the Taxable Person must correct it before completing the Tax Return.
The information provided in this part of the Tax Return will tailor the rest of the Tax Return by omitting fields which are not relevant.
B. Elections:
This part of the Tax Return deals with elections to be made by the Taxable Person. Elections that are not available or which have previously been made in a prior Tax Period, may not appear in the Tax Return. In addition, where certain elections are made, this will mean that additional fields and schedules in relation to those elections must be completed further along the Tax Return. The guide clarifies that once the relevant election is made in the Tax Return, it will apply, and there will be no further action or confirmation from the FTA.
The Tax Return provides for the following elections:
- Realisation Basis
- Transitional Rules
- Small Business Relief
- Transfers within Qualifying Group
- Business Restructuring Relief
- Foreign Permanent Establishment
C. Accounting Schedule
This schedule is part of the Tax Return and is for disclosure purposes only and does not result in any inputs into the computation of Taxable Income.
This schedule captures the accounting data from the financial statement of the Taxable Persons and include details about the audit opinion and name of auditor.
D. Accounting adjustments and Exempt Income
This section of the Tax Return involves adjustments to Accounting Income to determine Taxable Income, which may be positive or negative. These adjustments should be understood in the context of Article 20 of the CT Law along with the relevant Decisions. Certain figures will be pre-populated, while others must be entered manually. Except for Accounting Income, all figures in the tax computation should be included as positive figures. If a figure can be an addition or a deduction, separate boxes will be provided for correctly inputting these values.
There will be various fields or figures under this section which will be coming from relevant schedules (included as part of return form) for adjustments such as the equity method of accounting, income of partners in unincorporated partnerships, income or loss not subsequently reported to income statement, exempt incomes, etc.
E. Reliefs
- Transfers within a Qualifying Group: This section applies to certain juridical persons in the UAE, Unincorporated Partnerships, and Tax Groups. Relief for transfers within a Qualifying Group allows transfers without tax gain or loss. If relief is clawed back, adjustments to Taxable Income are required. There are questions on adjustments and clawbacks which would need to be filled depending on previous answers provided while filling the tax return.
- Business Restructuring Relief: This section applies to natural persons, certain juridical persons, and Tax Groups in the UAE. Business Restructuring Relief allows transferring an entire business or independent part of a business without tax gain or loss if certain conditions are met. If the relief is clawed back, adjustments to Taxable Income are required by both Transferor and Transferee. Questions on adjustments and clawbacks will depend on previous answers provided while filling the tax return.
F. Other adjustments:
This section seeks details with respect to adjustments that needs to be considered for computing Taxable Income as summarized below:
- Adjustments for non-deductible expenditure: Accounting Income is calculated by subtracting everyday business expenses from Revenue in the same Tax Period. Not all recognized expenses are deductible for CT. This part is applicable to all Taxable Persons and provides fields for adding back the expenses / deductions which are not allowable.
- Adjustments for Interest expenditure; The deductibility of Interest may be limited, either in terms of the General Interest Deduction Limitation Rule or the Specific Interest Deduction Limitation Rule, which may require adjustments to Taxable Income. Furthermore, if the taxable person is a natural person or a bank/insurance provider, the General Interest Deduction Limitation Rule questions do not apply, except if you are part of a Tax Group where no members are banks or insurance providers. Related questions are accordingly included in this section which must be answered.
- Transactions with Related Parties and Connected Persons: This section applies to all Taxable Persons. Transactions between Related Parties must be at arm's length; otherwise, a transfer pricing adjustment is needed. The questions under this section are in respect of adjustments for transactions with Related Party and Connected persons alongwith certain thresholds.
- Adjustments for income and expenditure derived from a Qualifying Investment Fund: A Qualifying Investment Fund is an Exempt Person. If a Taxable Person has investments in a Qualifying Investment Fund, they must include their share of the net income available for distribution from the fund in their income. The net income is to be allocated among Exempt Income, Interest income, income from Immovable Property in the UAE, and other income. The fund will provide the necessary information for the Taxable Person to determine their Taxable Income and fill in the respective fields under this section.
- Other adjustments: This part is applicable to all Taxable Persons. If a Taxable Person finds that a submitted Tax Return or Tax Assessment issued by the FTA is incorrect and the CT Payable is understated by AED 10,000 or less, they should correct this error in the Tax Return for the previous Tax Period if it has not become due or in the Tax Return for the Tax Period when the error was discovered, whichever comes first. Other errors for prior Tax Periods must be amended via a Voluntary Disclosure. Answer ‘Yes’ if you want to report an error affecting CT Payable of AED 10,000 or less for a prior Tax Period. Multiple errors must aggregate to AED 10,000 or less.
G. Tax Liability and Tax Credits
- Taxable Income: This part is applicable to all Taxable Persons. The Taxable Income (positive or negative) for a Tax Period is the Accounting Income for that period after making adjustments as required under the CT Law. This is calculated automatically in the return based on inputs provided previously.
- Tax Losses: This section applies to both natural and juridical persons, whether they are resident or non-resident including, unincorporated partnerships treated as taxable persons and qualifying free zone persons. If the taxable person has any brought forward losses, the Tax Losses schedule should reflect this with a 'Yes'. This information will be pre-populated at this step. Additional questions should be answered as applicable.
- Tax Group Tax Losses: This section applies to Tax Groups. There are specific rules for the utilization of tax losses within Tax Groups. Further questions must be answered when applicable, including those regarding any brought forward losses, the surrender or claim of losses within the group, or tax losses claimed from other group entities, among other relevant questions.
- Tax Calculation and Tax Credits: This section applies to all Taxable Persons. Most of the fields will be automatically populated (basis relevant questions / schedules answered or filled-in), including information such as the Taxable Income after Tax Loss adjustments and CT liability, among other fields.
H. Review and Declaration
Once the Tax Return is completed, the person responsible for filing the Tax Return is required to make a declaration in the ‘Declaration’ part of the Tax Return confirming that the information provided in the Tax Return is correct.
I. Schedules
Various schedules included in the return form assist with calculations and populating figures in the Tax Return. As the Taxable Person completes the Tax Return, they may be redirected to relevant schedules. After completing a schedule, figures are auto populated in the Tax Return, and any necessary changes can be made before submission. Only relevant schedules are shown to each Taxable Person depending on the information furnished. The Tax Return has the following schedules:
Free Zone |
This schedule needs to be filled by Free Zone Persons and requires detailed information for determining whether the Taxable Person is a Qualifying Free Zone Person such as:
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UAE Dividends |
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Foreign Permanent Establishment |
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Tax Credit |
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Related Party transactions and Connected Person |
The schedule’s requires disclosure of high value transactions with Related Parties and connected Persons: Related party transactions:
Connected Persons:
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Tax Losses |
Tax Losses in relation to Persons other than Tax Groups - This schedule is required to be completed if the taxable person have:
Tax Losses in relation to Tax Groups - This schedule should be completed by a Tax Group. The purpose of the Schedule is to disclose the following:
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Participation Exemption |
Taxable Person must complete this schedule if they have derived income or losses from a Participation interest during the Tax Period. Details required in the schedule includes – country of tax residency of the participation, percentage of ownership in the participation, reason for meeting the subject to tax rule etc. |
Interest capping |
This schedule is used to determine the Net Interest Expenditure deductible from the Taxable Income. Key points include:
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Tax Relief |
a. Transfers within Qualifying Group A Taxable Person must complete this schedule if, in the current Tax Period, taxpayer was a Transferor or Transferee in a transfer within a Qualifying Group and an election for relief under Article 26 of the CT Law was made. Also complete it if taxpayer was involved in such a transfer in a prior Tax Period but the relief is clawed back in the current Tax Period. Information for each transfer needs to be provided separately. b. Business Restructuring Relief This schedule is to be completed if, during the current Tax Period, the taxable person was a Transferor or Transferee in a Business restructuring transaction where Business Restructuring Relief was elected. Also, to be completed if taxpayer was part of such a transaction in a previous Tax Period and the relief is clawed back in the current Tax Period. |
Transitional Rules |
The Transitional Rules Schedules apply only if a Taxable Person (or in certain cases, another person) meets all conditions and has made an election to apply the transitional rules for Qualifying assets / liabilities i.e., for Qualifying Immovable Property, Qualifying Intangible Assets, Qualifying Financial Assets or Liabilities. |
Other schedules |
This includes schedules like Income/Losses which will not subsequently be reported in the income statement Schedule, Unrealised gains/losses Schedule, Deferred gains or losses Schedule, Additional attachments Schedule. Except for Financial Statements, it is optional to attach the other documents listed in the Attachment Schedule. |
J. Exempt Person
Government Entity, Government Controlled Entity, Extractive Business and Non-Extractive Natural Resource Business
If the aforementioned Taxable Persons conduct taxable business, they will be considered as Taxable Persons insofar as it relates to such taxable business and will need to submit a Tax Return in respect of that taxable business.
Separate Tax Return needs to be filed for each taxable business carried on by the abovementioned Taxable Persons. However, Government Entity and Government Controlled Entity can file a single Tax Return consolidating all the taxable business carried on by them.
Adjustments to taxable income are generally the same as for other taxable persons, with exceptions such as no relief for transfers within a Qualifying Group and Business Restructuring, no transfer of tax losses, and ineligibility for tax group membership.
Qualifying Public Benefit Entities, public and private pension or social security funds, Qualifying Investment Funds and juridical persons incorporated in the UAE that are wholly owned and controlled by a specific Exempt Person and conduct some specific activities of the Exempt Person.
The aforementioned Exempt Persons are not obligated to submit a Tax Return; instead, they are required to file an annual declaration. This declaration is pre-populated with relevant information from EmaraTax. In the declaration, Exempt Persons must confirm that they satisfy the conditions for exemption from CT for the applicable Tax Period.
Should an entity transition from Exempt Person status to Taxable Person status during a Tax Period, it will be required to submit a Tax Return for that period.
Conclusion
In summary, this guide has been prepared to offer field-wise guidance on the process of filling and completing UAE CT Return. It provides a clear and organized overview, addressing the necessary information to be included in each field of the Tax Return.
Nonetheless, it is crucial to note that this guide does not aim to impart detailed technical guidance on the nuances and specific implementation procedures related to the UAE CT Law. The complexities inherent in corporate taxation may require more exhaustive and detailed insights and analysis. Therefore, for more specific and in-depth technical assistance, it is recommended that users refer to topic-specific guides, which are designed to address aspects of the UAE CT Law comprehensively. These specialized resources will provide the necessary details and context for handling complex tax issues and compliance requirements.
The detailed guide also indicates the significant level of efforts and time that will be involved in analyzing and capturing all the data and information for return purposes. In view of the same and time being an essence, the Taxpayers should consider starting their tax analysis and data collation process soon to avoid any last-minute challenges.
Contacts
We have a dedicated Business Tax team based in the UAE who have in-depth experience and can support you throughout your readiness journey. Please get in touch with one of our tax experts listed on the following page.
You can also contact us and submit all your queries on this email cituae@deloitte.com.
