19 Mar 2025
To regulate and maintain business compliance with the UAE Corporate Tax Law, the Federal Tax Authority (FTA) has set strict deadlines and guidelines to ensure that companies maintain financial transparency and fulfil their tax obligations accurately. Failing to comply with these regulations can result in financial penalties, reputational damage, and even legal repercussions.
Audits are essential for verifying the accuracy of financial statements, identifying compliance risks, and streamlining the corporate tax filing process. Without a corporate tax assessment during the audit, companies may incorrectly choose their tax status, which could impact the availment of benefits and the calculation of tax payable. Additionally, lacking corporate tax planning may result in missed benefits and cause unnecessary complications during tax filing.
Corporate Tax Filing Requirements in the UAE
Taxable persons must adhere to the strict filing requirements of the UAE Corporate Tax Law:
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Taxable Persons must pay Corporate Tax and file their Corporate Tax Return within 9 months from the end of the relevant Tax Period.
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The tax return can be submitted by the taxable person or an authorised representative, such as a tax agent or legal representative. For tax groups, the parent company is responsible for filing on behalf of the entire group.
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Businesses must submit their financial statements along with any additional information required by the FTA to substantiate their taxable income calculations.
The Importance of Audits in Corporate Tax Compliance
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Verification of Taxable Income Computation
Audits ensure that a company’s financial records accurately reflect its taxable income, which is critical for proper corporate tax filing. The UAE’s corporate tax regime requires precise calculation of revenues, deductible expenses, and any tax exemptions. Auditors conduct a thorough examination of transactions to confirm compliance with International Financial Reporting Standards (IFRS) and FTA regulations. Any discrepancies in the computation of taxable income can result in underpayment or overpayment of taxes, leading to financial penalties or cash flow inefficiencies
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Reconciliation of Financial Statements with Tax Returns
A key component of corporate tax compliance is ensuring that the financial statements align with the tax return submissions. Auditors perform detailed reconciliations between financial statements and supporting documentation such as invoices and expense reports. This process minimises the risk of inconsistencies that could trigger tax audits or inquiries from the FTA.
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Evaluation of Transfer Pricing Compliance
Transfer Pricing Compliance in the UAE includes ensuring arm’s length pricing for intercompany transactions. For multinational corporations and entities engaged in intercompany transactions, compliance with transfer pricing regulations is crucial. Proper documentation must be maintained by businesses for compliance with these regulations. Auditors assess whether related-party transactions comply with these guidelines, thereby reducing the risk of penalties.
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Identification of Non-Deductible Expenses and Allowable Deductions
Auditors help businesses identify which expenses qualify as deductible under UAE corporate tax laws. Fines and penalties are certain expenses that are non-deductible. A well-conducted UAE audit ensures that deductions are maximised within the legal framework while avoiding disallowed expenses that could lead to tax adjustments.
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Ensuring Compliance with Tax Group Filing Regulations
Companies forming a tax group in the UAE must consolidate their financial statements and file a single corporate tax return. Auditors play a vital role in verifying intercompany eliminations and ensuring that tax group filings comply with the FTA’s requirements, preventing errors that could lead to penalties.
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Detection and Prevention of Financial Fraud and Misstatements
Audits serve as a crucial mechanism for detecting fraudulent activities, financial misstatements, and errors that could impact tax filings. By implementing robust audit procedures, businesses can identify discrepancies such as revenue manipulation and unauthorised expense claims, which could result in tax evasion allegations. Auditors employ internal control assessments and risk-based testing to mitigate such risks, and their detailed audit financial report help identify red flags before they turn into major issues.
Audit Requirements in UAE
Under the UAE Corporate Tax Law, audited Financial Statements must be maintained by the following persons:
• A Taxable Person deriving Revenue exceeding AED 50,000,000 during the relevant Tax Period; and
• A Qualifying Free Zone Person.
UAE Corporate Tax Penalties
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Failure to submit the Corporate Tax registration applications within the specified timelines by the Federal Tax Authority:
AED 10, 000.
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Failure of the Person conducting a Business or Business Activity or having a Tax obligation under the Tax law to keep the required records and other information as specified in the Tax Law:
One of the following penalties shall apply:
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AED 10,000 for each violation.
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AED 20,000 in each case of repeated violation within 24 months from the date of the last violation.
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Failure of the Registrant to submit a Tax Return within the UAE corporate tax filing deadlines specified in the Corporate Tax Law:
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AED 500 per month, or part thereof, for the first twelve months.
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From the thirteenth month onward, a penalty of AED 1,000 per month, or part thereof, will apply. This penalty will be imposed from the day following the deadline for submitting the Tax Return and on the same date monthly after that.
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Failure to inform the Authority of any necessary amendment of the information about his Tax record kept by the Authority:
One of the following penalties shall apply:
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AED 1,000 for each violation.
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AED 5,000 in each case of repeated violation within 24 months from the date of the last violation.
The Role of AMCA in Your Audit and Tax Compliance
At AMCA, we specialise in providing comprehensive audit and tax advisory services to help businesses in the UAE navigate corporate tax requirements with confidence. Our expert auditors ensure that your financial statements are accurate, compliant, and ready for seamless tax filing.
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