Why UAE businesses must not waste any time in updating tax records
Any change to a business's status, it must reflect in tax records
Dubai: It’s not enough that businesses in the UAE must register for corporate tax before their assigned deadlines – any changes within their structures after registration must immediately be uploaded to the tax authorities.
It could be an arcane detail such as changes to the business’s office address, or something more specific such as a ‘change in company secretary or compliance officer or changes to the audit cycle’, said a tax consultant.
“If such a change happens, it must immediately be updated in the EmaraTax portal even if the TIN (taxpayer identification number) has been issued.
“Any failure to do so will attract penalties in the future.”
For the vast majority of UAE-based businesses, their first tax returns need to be filed by September 2025 corresponding to their performance in 2024. But before that, all businesses coming under the tax net need to complete their process of registering with the FTA. And updating their records where needed.
In recent weeks, the Federal Tax Authority has come out with a series of announcements that would help businesses acquit themselves better on tax registration.
Last week, the FTA confirmed there will be a grace period for those tax registrants who had fallen behind on updating their records for the period from January 1, 2024 until March 31, 2025.
“The initiative allows violators to make the necessary adjustments and avoid incurring the administrative penalties associated with failure to inform the FTA of any cases that require modifying their tax records,” said FTA in a statement.
Still a lot to learn about tax registrations
Jeet Gianchandani, Managing Partner at the business consultancy JCA, says that a dearth of tax advisors and qualified tax agents makes it challenging for businesses to file accurate returns.
Some of the issues are with the businesses themselves. “Many free zone companies are not able to claim 0% as they had violated key requirements by selling directly to local customers,” said Gianchandani.
“There’s no way that by attending a couple of webinars and presentations on corporate tax, anyone can master all details on tax planning.”
Some tax consultants are worried that many businesses could end up doing a rush job in submitting their tax registration and then the actual returns. This is why the FTA’s move to offer grace period has been much welcomed in the industry.
If taxpayers file a return with errors of up to Dh10k, then there will not be any fine. The taxpayer can correct this mistake in the subsequent tax return filing.
The expectation is that this will focus minds among businesses to get things right. (Once a business starts the registration process, the FTA already provides extra time for any sundry details it requires to be submitted. It is also not mandatory that businesses need to apply for TIN using the UAE Pass, tax consultants add.)
On its part, the FTA is trying to make the process as smooth as possible, and it’s up to the businesses to meet those deadlines and requirements.
“Even if a taxpayer files a return with errors of up to Dh10,000, there will not be any fine,” said Gianchandani. “The taxpayer just needs to correct this mistake in the subsequent return.”
What needs to be done to update tax records
Businesses must notify within 20 working days of any change in the information already registered with the FTA, This includes the name, address, email, activity listed in the commercial license, legal form, partnership agreement for joint ventures, and articles of association, 'along with any changes in the nature of the registrant’s business or address from which they conduct any of their business activities', said the FTA.
“The Cabinet Decision provides an opportunity for registrants who have fallen behind on their obligations to update their tax records to do so during the specified grace period,” said Khalid Ali Al Bustani, Director-General of FTA. “This allows them to avoid administrative penalties associated with failure to notify the Federal Tax Authority of any cases that call for an update of their tax records submitted to the Authority’s system.”
The FTA has said it - now it's for the businesses to speed up updating their tax records.
What makes corporate tax registrations much more complex:
- The business maintains establishments outside of the UAE.
- Provide documentation to prove that foreign permanent establishments are managed from outside or within the UAE.
- Have group entities dealing with each other. Then transfer pricing will be applicable and that will require inter-company agreements and working paper to prove fair market prices.
- Losses get carried forward.
- Foreign tax credits.
"If a tax payer is subject to all these, then computation requires expert advice and training to staff," said Gianchandani. "For example, foreign tax credits will be deducted at the end, from the final figure of tax payable."