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UAE Corporate Tax: From deadlines to opportunities

Insights from the first tax period and the road ahead

As the first corporate tax (CT) period in the UAE comes to a close, businesses have navigated a transformative year filled with regulatory updates, clarifications, and compliance milestones. This period has not only introduced businesses to a new tax regime but also underscored the importance of proactive planning and adaptability in a changing landscape. The journey, while challenging, has set a solid foundation for the UAE’s tax framework, aligning it with global standards and ensuring sustainable economic growth.

The UAE Ministry of Finance has been instrumental in guiding businesses through this transition. Over the past year, the government has issued a wealth of resources to clarify the CT framework. These include 10 comprehensive guides that delve into specific provisions of the law, six public clarifications addressing complex scenarios, and several ministerial and cabinet decisions that have strengthened the legal and procedural aspects of the tax system. These efforts reflect the government’s commitment to fostering a transparent and robust tax environment.

One of the prominent challenges faced by businesses this year was the staggered corporate tax registration deadlines. The phased approach, while aimed at easing the registration process, led to confusion among many taxpayers. As a result, several businesses missed their deadlines and incurred penalties. This highlighted the need for greater awareness and timely action regarding tax obligations.

In response to the challenges faced by taxpayers, the government took a significant step by extending the deadline for filing corporate tax returns from September 2024 to December 2024. While this extension offered much-needed relief, further extensions are unlikely, emphasising the importance of meeting the December 31 deadline to avoid penalties.

As businesses prepare to close their financial year, they face several critical decisions under the corporate tax law. Key considerations include whether to form a tax group, elect to be treated as a qualifying free zone person (QFZP), or opt for small business relief. Additionally, businesses must decide on the realisation basis for accounting gains. Each of these options comes with its own advantages and implications, requiring careful evaluation based on the specific circumstances of each entity.

Proper preparation of books and accounts has emerged as a cornerstone of compliance. Accurate financial records not only ensure precise tax computation but also help businesses identify potential adjustments required under the law. Moreover, financial statements being the only document which is mandatorily required to be submitted along with financial statements emphasises the approach. A common recommendation has been to conduct a mock tax computation before the financial year ends. This exercise allows businesses to estimate their tax liability, identify discrepancies, and ensure compliance with the applicable provisions.

Looking ahead, 2025 will bring significant changes to the global taxation landscape, particularly for multinational enterprises (MNEs). Under the OECD’s Pillar 2 framework, MNEs will be required to pay a minimum tax rate of 15 per cent. This initiative aims to combat profit shifting and ensure fair taxation, presenting new challenges and opportunities for businesses operating in multiple jurisdictions, including the UAE. For UAE businesses that fall within the scope of this framework, early preparation will be key to addressing the operational and financial implications.

As the UAE continues its journey toward a more structured tax framework, the emphasis on proactive compliance cannot be overstated. Businesses are encouraged to not only meet the minimum requirements but also to embrace the changes as an opportunity to refine their operations, enhance financial transparency, and align with global best practices.

The writer is Partner — MICS.