Corporate tax filing 101: Essential Tips for First-Time Filers in Dubai

Preparing for your first corporate tax filing (CTF) in Dubai can feel like a big undertaking. With the Federal Tax Authority (FTA) having released its Corporate Tax (CT) return guide, businesses have a clearer understanding of what’s expected. This post breaks down key steps for your initial CTF experience.

1. Corporate tax filing Fundamentals

Dubai’s CT system applies a 0% tax rate on taxable income up to Dh375,000 and a 9% rate on income above that. The Corporate tax filing deadline is nine months after your financial year’s end. Qualifying Free Zone Persons (QFZPs) may be eligible for a 0% CT rate on qualifying income if they meet specific criteria. Understanding these core principles is vital for successful CTF.

2. Preparing for Your Corporate tax filing
The FTA’s guide shows the detailed nature of the CT return, requiring over 500 data points. Accurate tax records are essential. The FTA allows penalty-free tax record amendments until March 31, 2025. Thoroughly review and update your records before your first corporate tax filing to prevent future issues.

3. Key Decisions for Corporate tax filing
Your first corporate tax filing requires several important decisions. These include tax elections, such as those related to transitional rules and the realization basis. Some elections, like those for transitional rules, must be made in your initial tax period. If you plan to create a CT tax group for the FY24 calendar year, you must submit your application to the FTA by December 31, 2024.

4. Transfer Pricing and Corporate tax filing

Transfer pricing (TP) is a significant part of corporate tax filing. You must report transactions with related parties and payments/benefits to Connected Persons that
exceed certain limits. For related party transactions over Dh40 million, individual transactions within categories (services, goods, IP, etc.) above Dh4 million must be reported. For Connected Persons, reporting is required if payments/benefits exceed Dh500,000. Any differences between gross transaction value and arm’s length value must be disclosed, and downward TP adjustments require FTA approval. Completing a comprehensive TP assessment before your corporate tax filing is crucial, sometimes even before the financial year concludes.

5. Qualifying Free Zone Person Considerations for Corporate tax filing
If you’re a QFZP seeking the 0% CT rate, ensure you comply with all conditions (de-minimis test, substance requirements, audited financial statements, TP regulations, etc.) before your corporate tax filing. An early review of your QFZP status is highly recommended.

6. Operational Preparation for Corporate tax filing
Corporate tax filing requires substantial data gathering and analysis. Identify the necessary data points, understand the required analyses (tax elections, TP assessments, QFZP analysis, etc.), and explore how technology can improve compliance. Establish strong governance structures for CT return preparation, processing, and maintaining an audit trail. This applies equally to businesses subject to Pillar Two rules.

7. Starting Early for Corporate tax filing Success
Given the complexity and data requirements, some information may not be readily available. Begin collecting data well in advance to provide sufficient time and minimize the risk of errors or omissions in your corporate tax filing, as incorrect returns can lead to penalties. Bizilance Dubai can assist you in addressing these complexities and ensuring a smooth and compliant first corporate tax filing.