UAE Corporate Tax: “Tax Returns” Guide

Key highlights

The Guide provides a step-by-step guidance on how to compile and file CT Returns accurately. We have summarised below our key observations.

Unlike many jurisdictions, the UAE CT return is not static, filing needs to be done online through the EmaraTax portal, with no option available for uploading an e-file that can automatically generate a downloadable version of the return on the portal. It is an active form whereby tailored questions and schedules will appear throughout the return completion process depending on the options selected by taxpayers. For a relatively simple taxation regime, the UAE CT return also requests a surprising level of detail, including some unexpected items. Taxpayers will have to digest and carefully plan the data required in order to ensure they can meet the return requirements.

For Juridical Taxable Persons and Tax Groups, the expected schedules are expected to cover:

1. Taxable Person Details: Ensuring that the registration details are accurate in EmaraTax, as these will tailor the Tax Return fields relevant to each Taxpayer.

2. Free Zone schedule: Relevant to Free Zone Persons only. This is used for Qualifying Free Zone Persons (QFZPs) to determine if the de minimis requirement is met and to disclose Qualifying and non-Qualifying Revenue. Certain extensive details are required in this schedule such as a breakdown of capital and operating expenses specifically related to Qualifying Income and breakdown of salaries and EBITDA per Emirate. A QFZP deriving income from the ownership or exploitation of Qualifying Intellectual Property must complete a detailed schedule covering this.

3. Elections: Various elections are available under the UAE CT regime. This includes election for realisation basis, transitional rules, Small Business Relief and others. The elections made will impact the form of the Tax Return. Interestingly, the Guide makes reference to the fact that the Foreign Permanent Establishment election is annual.

4. Accounting schedule: Financial Statements of the Taxable Person as well as Auditor name, CT registration number and audit opinion in case the Financial Statements are audited. The Guide confirms that filing financial statements along with the CT return is mandatory.

5. Reliefs: This schedule is not available for QFZPs. It includes relief provisions for transfers within a Qualifying Group and Business Restructuring Relief with specified conditions and potential clawback scenarios.

6. Adjustments and Exempt Income: Adjustments to Accounting Income are required to determine Taxable Income, including Exempt Income and related expenditure. This schedule is supported by a number of other relevant detailed schedules showing:

• Breakdown of unrealised gains and losses by item;
• Exhaustive data on the assets to be covered under the Transitional rule election irrespective of whether the asset is being disposed of that year;
• Dividends and Profit distributions received from UAE Resident Persons;
• Schedule showing the conditions and applicability of Participation Exemption to income or losses relevant to each Participation; 
• Taxable Income/Tax Loss from eligible Foreign Permanent Establishments.

7. Other Adjustments: Other non-deductible expenditure such as entertainment, donations to non-Qualifying Public Benefit entities, non-deductible interest and Transfer Pricing adjustments. Detailed supporting schedules are also available for interest capping rules, transactions with Related Parties and Connected Persons.

8. Tax Liability and Tax Credits: Taxable Income for the Period with the CT due including detailed supporting schedules where applicable for Tax Losses and Foreign Tax credits.

Transfer pricing (TP) 

1. Transaction thresholds

Snapshot of the the applicability and reporting requirements for transactions with “related parties” and “connected persons” are as follows:

*Category means transactions pertaining to Goods, Services, Intellectual property, Interest, Assets, Liabilities and Others

2. Adjustment required for Non-Market Value Transactions

The Guide requires the reporting of the market value of the covered transactions and provides for the upward or downward adjustment of the transaction value to reflect the arm’s length value. It further mandates disclosure of such adjustments (upward or downward) in the schedule. The Guide provides specific considerations in relation to the adjustment as outlined below:

• While the upward adjustment does not require any further action, a downward adjustment i.e., that reduces the taxable income of the Taxable Person needs prior approval from the FTA. In cases where the FTA does not approve the said downward adjustment, the Taxable Persons must disclose the adjustment amount as "Nil". It is therefore crucial for Taxable Persons to undertake a timely assessment and, where required, file an application to the FTA for the adjustment in order to avoid any double taxation.
• The details of upward and downward adjustment needs to be reported separately and no netting off is permitted.
• Payments made and / or benefits provided to connected persons need to be analysed from a market value perspective and necessary adjustment needs to be quantified and disclosed.

Given the specific requirement, the Taxable Persons will be required to assess the market value of all the  covered transactions, especially transactions entered on a free-of-cost / nominal basis.

3. Details of gains / losses made from related party assets/liabilities 

Taxable Persons are required to provide details of any gain or loss realized from an asset or liability previously received from a Related Party on a non-arm’s length price.

The above requirement in the related party transaction (RPT) schedule emphasizes the need for analyzing transactions pertaining to assets / liabilities with related parties (including the continuing balances from such transactions) to be evaluated from an arm’s length perspective. 

4. Free Zone - TP documentation 

The Guide mandates QFZPs to specify whether all the RPTs have been undertaken on an arm's length basis and that the mandatory TP documentation has been prepared.  It is interesting to observe that while the Guide has mandated the assessment  / reporting of the market value of all the relevant related party / connected party transactions, the requirement to confirm with TP documentation has been mandated only for the Free Zone entities.