5 things that

can help with your tax return filing in the UAE

For every business, tax compliance is a major requirement to ensure that they are able to sustain seamless operations in the UAE. To help them meet their tax obligations, most enterprises have in-house teams or decide to outsource tax firms to assist them with tax return advice and tax return filing. The requirements and provisions of the UAE tax law are

complex and the need to maintain accurate financial records often leads to either the deadline being missed or incomplete filings. The expertise and regulatory knowledge of tax experts provides businesses with the strategic edge making the tax return filing in the UAE efficient and easily manageable.

The UAE’s tax landscape encourages a tax ecosystem that is built on transparency and regulatory compliance. Through this blog, we share the insights from our tax experts on how businesses, irrespective of their structure, can maintain their records and how they can help them with their tax return filings.

For every business, tax compliance is a major requirement to ensure that it is able to sustain seamless operations in the UAE. To help them meet their tax obligations, most enterprises have in-house teams or decide to outsource to tax firms to assist them with tax return advice and tax return filing.

The requirements and provisions of the UAE tax law are complex, and the need to maintain accurate financial records often leads to either the deadline being missed or incomplete filings. The expertise and regulatory knowledge of tax experts provide businesses with a strategic edge, making tax return filing in the UAE efficient and easily manageable.

The UAE’s tax landscape encourages a tax ecosystem that is built on transparency and regulatory compliance. Through this blog, we share the insights from our tax experts on how businesses, irrespective of their structure, can maintain their records and how we can help them with their tax return filings.

Understanding the tax obligations and rates in the UAE

The UAE’s economic growth is often linked with its favourable geopolitical location and business-friendly regulations. In its efforts to sustain its economic standing and regulatory framework, the implementation of Corporate Tax and VAT in the UAE is rapidly becoming a part of its fiscal strategies.

For businesses that operate within the UAE’s economic ecosystem, the first step to meet their tax obligations is to understand the tax rates and their frameworks. Here’s what you need to know about the taxes that businesses in the UAE are obliged to adhere to:

1) Corporate Tax

Whenever businesses are collating the documents and financial records to file their corporate tax, they need to assess critical information ranging from their structure to the size of their operations.

The free zones and mainland have their own sets of regulations and requirements that business leaders need to be aware of. The requirements factor in the structure and the size of their operations. This distinction becomes crucial. Corporate Tax is calculated on the overall taxable income of a business. However, for companies that operate in the free zones in the UAE, understanding their financial position becomes fundamental.

Here are some the Corporate Tax obligations that businesses in the UAE need to keep track of:

• Companies earning up to AED 375,000 are subject to a Corporate Tax rate of 0%.
• Companies earning more than AED 375,000 are obligated to pay the tax rate of 9%.
• Companies operating in the free zones in UAE and meet the QFZP requirements enjoy a 0% Corporate Tax rate.
• If they are unable to meet the QFZP conditions, the tax rate of 9% will be applicable.

2) Excise Tax

Excise Tax is an indirect tax that is designed to influence consumer and business behaviour. This tax provides a roadmap to the broader vision of building a healthier and ecologically aware society. Applied to both locally produced and imported products, the highest rates are imposed on goods that pose a greater societal and ecological threat, such as tobacco products and high-sugar beverages. For businesses dealing in excisable goods, excise tax has become an integral part of their operational rhythm.

The current excise rates in the UAE are as follows:

• 100% on tobacco products, electronic smoking devices, and related liquids
• 100% on energy drinks and concentrates
• 50% on carbonated beverages
• 50% on sweetened beverage

3) VAT

Introduced in the UAE in 2018, VAT is becoming a major requirement for businesses to maintain operational continuity. Applied at a standard rate of 5 % on most of the taxable supplies of goods and services, VAT requires enterprises to maintain their records, report these transactions and meet their VAT obligations.

Here are the VAT rates that are applicable in the UAE:

• Standard-rated supplies: For goods and services that fall under this category, a VAT rate of 5% is applied.
• Zero-rated supplies: For goods and services that fall under this category, a VAT Tax rate of 0% is charged. Even if there is no tax applied, businesses are free to recover the input VAT.
  Some of these services are:
  • Exports and services outside the GCC
  • International transportation services
  • Certain means of transport, educational and healthcare services.
  • Investment-grade precious metals
  • First supply of newly constructed residential properties within three years of their completion.
• Exempted Supplies: Some goods and services are beyond the scope of VAT and businesses cannot claim or file for input VAT refund related to these services.
  Some of the goods and services that are exempted from VAT in the UAE are:
  • Particular financial services
  • Bare Land
  • Local passenger transport
  • Residential property leasing and sales. With leases of more than six months and sales after the first supply.
• Out-of-scope supplies: There are some transactions that do not fall under the ambit of VAT mainly due to their nature or place of supply.

Understanding the applicable rates, registration thresholds, and filing requirements helps businesses manage their VAT obligations and maintain compliance.

Understanding the applicable rates, registration thresholds, and filing requirements helps businesses manage their VAT obligations and maintain compliance. By engaging with a reliable and trusted tax firm in the UAE, companies can limit any potential compliance breaches that can affect the business operations. Some of the penalties for these breaches and potential risks include:

• Penalties for any late or incomplete or incorrect submissions.
• Legal proceedings against the first that can adversely affect business continuity.
• A loss of market credibility
• Operational disruptions due to any regulator-led audits and investigations into their reporting and compliance mechanisms.

Five Tips to Help With Your UAE Tax Filing

By implementing these taxes, the UAE is paving the route of its shared vision of a diversified economic system limiting its dependency on oil-based revenue. To help enterprises understand and navigate their way through the myriad of tax obligations and regulations, business leaders and stakeholders engage the services of seasoned tax firms. Boasting a decade long experience and expertise in the UAE tax landscape, tax professionals at Excellence have identified these five tips that can help streamline the tax filing process.

1. Know Your Tax Obligations

Whenever businesses begin their filing process, the first thing that every tax professional will advise businesses is to understand their tax obligations. In the UAE, separate taxes have separate tax provisions and frameworks. With each tax having its own set of requirements and compliance needs, knowing the applicable stipulations can help businesses to collate the relevant information and avoid duplication of efforts.

While the standard VAT rate of 5% is applied in the UAE, businesses have to identify the eligible exemptions on the relevant sales and supplies. They also need to calculate the input VAT that they can reclaim on the relevant and eligible business purchases. Corporate Tax, on the other hand, is a whole different story. In line with the UAE’s Corporate Tax rules, the tax is calculated on the taxable income of an enterprise. Even though there are certain exemptions that require different treatment, the business structure and activities also play a determining role. Businesses that operate in the free zone may enjoy a 0% Corporate Tax rate, while in the mainland they may have to pay a 9% Corporate Tax.

However, not all free zone companies enjoy the Qualifying Free Zone Person status. If they fail to meet any QFZP conditions, the corporate tax rate will be applicable.

So before a company files its tax return, business owners need to check the registration status and review the financial statements of the relevant tax periods. Once done, they need to also carefully assess the nature of the business activities and transactions. If there is a shift in operational status or activities, they might have a significant impact on the tax position. A clear understanding of your obligations gives you a stronger starting point for accurate tax reporting.

2. Keeping The Financial Records Up-To-Date

Keeping track of a company’s tax obligations is just the beginning. The tax landscape is under constant evolution, businesses have to ensure that the regulators have access to accurate and updated financial information that is the basis of the records.

Well-maintained records are able to assist the businesses to save time by avoiding a major delay, especially when their deadline is right around the corner. Be it VAT or Corporate Tax or Excise Tax, each requires a specific set of documents. For instance, VAT will require documents that maintain the sales and purchase invoices, input VAT recovery and other relevant documentation that supports its VAT position.

On the other hand, Corporate Tax would require an inspection into the broader set of documents to help understand the financial position of an enterprise. The regulators would require companies to submit their revenue records, assets, liabilities and other transactions that can help them to calculate the taxable income.

Organised accounts and meticulously maintained financial records throughout the year help avoid unnecessary delays when a filing deadline approaches. Conducting periodic reviews will help them to keep updated records related to their transactions and operations, making it easier for the business to file accurate returns and respond to regulatory queries with clarity and consistency.

3. Track of UAE Tax Deadlines

Business owners have a lot on their plate when it comes to maintaining their operational continuity. Right from taking key strategic decisions to liaising with relevant stakeholders and regulators. Meeting the tax obligations requires knowing when each tax return is required to be filed and when the outstanding dues, if any, are to be cleared.

Missing a deadline not only exposes the enterprise to regulatory scrutiny but also to unnecessary administrative issues. While VAT is generally required to be paid by registered businesses within 28 days of the end of the tax period, most opt to file their VAT returns quarterly. Before going further, businesses need to check the FTA guidelines and check the period assigned on their registration. Corporate Tax is usually due within nine months after the end of the relevant tax period.

To help maintain the timeline, businesses can create a tax compliance calendar, which gives businesses the necessary framework. Through this, business owners and relevant stakeholders will be able to keep track of the tax due and the deadline for any outstanding dues.

4. Review before submitting

One tax advice that businesses often hear from tax consultants and firms is,” A close look at the books before submission keeps the FTA security out of the door.”

Financial information once collated and organised needs to be reviewed thoroughly before it is submitted to the FTA. Businesses have a wide range of transactions and calculations that have to be correctly recorded. Financial records and statements may have an incorrect classification or a transaction that wasn’t reported.

Enterprises are recommended to compare the final draft against the invoices and supporting records to identify any gaps. A thorough review will enable businesses to submit accurate returns and a reliable explanation behind the figures.

5. Seek Professional Help When Needed

The FTA requirements might be pretty straightforward but often have a hidden caveat that requires the help of a professional to translate. Businesses would require the assistance of tax firms in the tax return filing process.

Through their expertise, businesses can ensure that an independent review of their financial records and all the applicable positions and exemptions are correctly applied and recorded. However, when employing the services of a tax advisor, businesses need to clarify the scope of their engagement and provide the relevant documents required for preparing and submitting the returns. Their insights will help the business leaders and stakeholders make data-driven decisions that can help them meet their obligations.