Make an informed decision on Corporate Tax with TMSL

The UAE’s entry into the era of corporate taxation is no longer on the horizon — it’s here, and the countdown for adhering to the compliances under the corporate taxation regime has already begun. The introduction of Corporate Tax (CT) marked a pivotal moment in the UAE’s economic journey, aligning it more closely with tax regimes globally and signalling a commitment to transparency and sustainable growth.

A tax consultant plays a key role in guiding an organisation in its adherence to timely CT compliances, ensuring accuracy in reporting as well as in terms of maintaining robust documentation.

Sanket Shah, Partner at TMSL Management Consultancies Co., a boutique tax consultancy firm, shares his views in an exclusive interview. Excerpts below:

■ What is your first take on the Corporate Tax Return Form?

The Corporate Tax Return form has evolved over the past 7 months from its initial state back in December to the shape that it is in currently and the Federal Tax Authority has done a commendable job in devising the return form. Whilst the form is exhaustive; it is also very interactive in the sense that taxpayers shall be required to fill only the details which are applicable to them.

■ You alluded to certain critical elections that a taxpayer is required to be mindful of. Can you throw some light on the same?

The first tax return comes with a number of crucial decisions. There are 3 types of elections that businesses are required to make. Some are required to be made on a yearly basis (for instance, Foreign Permanent Establishment Exemption), some once in 5 years (for instance, election to avail the Free Zone Regime) and some elections are going to be irrevocable (for instance, adoption of realization basis of accounting for certain categories of asset and liabilities).

It’s the elections which are irrevocable that one needs to be mindful of. These include opting to offer income from certain category of assets / liabilities to tax a realisation or just opting out of the said election and electing to be taxed on unrealised basis only.

Similarly, the other elections which need to be made, do call for a conscious choice on the part of Taxpayers and would vary for different businesses as well their future revenue streams.

■ What’s your take on the 0% Free Zone Corporate Tax Regime (FZCTR)?

The FZCTR is certainly available for taking, but only for those that meet the qualifying criteria, which includes ensuring that they earn Qualifying Income and are able to demonstrate adequate substance.

Having stated the above, the fine print of the FZCTR should be read very carefully. There are clarifications provided under the same which can aid Free Zone persons to avail this beneficial regime, subject to compliance with the conditions, which hitherto they may not have been able to.

For instance, a taxpayer engaged in holding shares and securities with the intent to hold them for a period of more than twelve months, but had to dispose of the shares and securities for valid commercial reasons, may still be eligible under the FZCTR to avail the relief.

Similarly, even Free Zone Persons selling goods to other Free Zone persons, who are not beneficial recipients, may still make a claim to avail the preferential tax regime, subject to conditions.

■ Any key pointers that our readers should factor in their readiness to file CT Returns?

First and foremost, all taxable entities must register, if they have not already done so. Next steps would include accurately drawing up Financial Statements in compliance with IFRS, get them audited, wherever they cross the revenue threshold of Dh50 million.

Remember to provide for tax provisions, recognize Deferred Tax Asset/Liability, ensure Transfer Pricing compliances, wherever applicable. Lastly, maintain robust documentation and ensure to file a CT return within nine months from the end of their financial year.