2 min read
The UAE Federal Tax Authority (FTA) has released a Tax Guide on Corporate Tax Returns, offering important insights on the contents of the tax return. The earliest Corporate Tax Return is due on 31st December 2024 for Taxpayers having their first financial year starting on or after 1st June 2023 and ending on or before 31st March 2024.
The Guide covers Tax Return procedures along with transfer pricing thresholds for related party disclosures. Some important highlights are:
- The Tax Return has 20 schedules and the taxpayer will only be directed to those which are applicable in its case (e.g. based on the information filled in the tax registration process). Therefore, the accuracy of information input on the EmaraTax portal becomes critical to ensuring that all required fields are appearing and therefore can be completed while filing the Return.
- If the Taxpayer makes an election which applies to more than one Tax Period (e.g. opting out of 0% rate for free zone persons, realization basis of taxation, application of transitional rules), it will automatically reflect in the Taxpayer’s subsequent years’ Tax Return.
- The thresholds for reporting under transfer pricing schedule have been specified:
- Reporting is required only where related party transactions exceed AED 40 million in market value or as per the value in the financial statements.
- Once the above threshold is exceeded, only aggregate related party transactions per category (sale of goods, provision of services, IP, interest etc.) exceeding AED 4 million need to be disclosed.
- The schedule for transactions with connected persons should be completed only if the aggregate value exceeds AED 500,000 and for those connected persons where the aggregate benefits exceed AED 500,000.
Any dividends paid to related parties should be excluded while computing the above thresholds.
- Transfer Pricing adjustments that reduce taxable income will require a preapproval from the FTA.
- Any error in the previous Tax Return which has an impact of reducing the tax by AED 10,000 or less, can be corrected in the current period Tax Return by way of an adjustment.
- Free zone persons are required to report the average number of full time employees (i.e. average of FTE at beginning and end of year).
- It is mandatory to attach financial statements along with the Tax Return.
A detailed tax flash will be published soon. If you need further information, please reach out to your advisors at KPMG or the contacts mentioned below.