Understanding UAE Corporate Tax Returns First Filings & Compliance
For businesses in the UAE, the process of UAE corporate tax returns first filings is a critical step. The United Arab Emirates (UAE) Corporate Tax Law has introduced a new era of taxation for businesses operating within the country. A crucial aspect of this law is the concept of the first tax period. This period serves as the foundation for future tax calculations and compliance obligations. The tax return under Corporate Tax law is required to be filed within 9 months from the end of the tax period. Thus, the first tax return under Corporate tax law is required to be complied within 9 months from the end of the first tax period applicable to the taxable persons.
Corporate Tax Law applies to Tax Periods commencing on or after 1 June 2023. It is significant for one to understand the meaning of Tax Period & Financial year to understand the concept of First Tax Period.
Meaning of Tax Period: Tax Period is the Financial Year or part thereof for which a Tax Return is required to be filed.
Meaning of Financial Year: The Financial Year of a Taxable Person shall be the Gregorian calendar year, or the 12-month period for which the Taxable Person prepares financial statements.
As the term tax period is vague, public clarification was issued on 30th July 2024 on the first tax period applicable for a taxable person. Through this clarification, the first tax period of the following taxable persons was explained:
| Sl No. | Nature of Taxable Person | First Tax Period |
| a. | Resident juridical person subject to Commercial Companies Law | The Financial Year followed by the Taxable Person under the Commercial Companies Law shall be accepted as the Financial Year and, therefore, will be the Tax Period for the Corporate Tax Law.
The first Financial Year under the Commercial Companies Law may not necessarily be a 12-month period, but instead can be a period between 6 months and 18 month. |
| b. | Non-Resident Person who is a juridical person who has a Permanent Establishment. | The first Tax Period will be the Financial Year or part thereof beginning from when the Permanent Establishment first began operations.
If activities began prior to 1 June 2023, the first tax period would be the first financial year commencing on or after 1 June 2023. |
| c. | Resident Person that is incorporated in a foreign jurisdiction that is effectively managed and controlled in the UAE. | The first Tax Period will be the Financial Year or part thereof commencing on or after 1 June 2023. |
Detailed Analysis:
Resident juridical person subject to Commercial Companies Law
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- As per Commercial Companies Law, the first Financial Year of a newly incorporated company starting from its date of incorporation must be not less than 6 months and not more than 18 months.
- The subsequent Financial Years shall consist of consecutive periods, each of 12 months commencing directly upon the expiry of the preceding Financial Year.
- The company shall prepare Financial statements for each Financial Year.
- The Tax Period depends on the Financial Year for which the Taxable Person prepares financial statements unless a different basis has been approved by the FTA.
- The first Tax Period of a newly incorporated company will depend on the first financial year under the Commercial Companies Law.
- Three scenarios that can arise for a newly incorporated company, are mentioned below:
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- First financial year is a period of 12 months
- First financial year is a period between 6 to 12 months
- First financial year is a period between 12 to 18 months
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Where the first Financial Year commences before 1 June 2023, the first Tax Period will be the subsequent 12-month Financial Year commencing on or after 1 June 2023.
First Tax period in the case of business incorporated prior to 1st June 2023 is illustrated in the below table:
| Incorporated on | Financial Year followed | First financial Year | In months | First Tax Period | Subsequent Tax Period | First Tax Return Due date |
| 01-Feb-23 | 1 Jan – 31 Dec | 1 Feb 2023 – 31 Dec 2023 | 11 months | 1 Jan 2024 – 31 Dec 2024 | 1 Jan 2025 – 31 Dec 2025 | 30-Sep-25 |
| 1 Apr – 31 Mar | 1 Feb 2023 – 31 Mar 2024 | 14 months | 1 Apr 2024 – 31 Mar 2025 | 1 Apr 2025 – 31 Mar 2026 | 31-Dec-25 | |
| 1 Sept – 31 Aug | 1 Feb 2023 – 31 Aug 2023 | 7 months | 1 Sept 2023 – 31 Aug 2024 | 1 Sept 2024 – 31 Aug 2025 | 31-May-25 |
First Tax period in the case of business incorporated on or after 1st June 2023 is illustrated in the below table:
| Incorporated on | Financial Year followed | First financial Year | In months | First Tax Period | Subsequent Tax Period | First Tax Return Due date |
| 01-Jun-23 | 1 Jan – 31 Dec | 1 June 2023 – 31 Dec 2023 | 7 months | 1 June 2023 – 31 Dec 2023 | 1 Jan 2024 – 31 Dec 2024 | 30-Sep-24 |
| 05-Jun-23 | 1 Jan – 31 Dec | 5 June 2023 – 31 Dec 2023 | 6 months 26 days | 5 June 2023 – 31 Dec 2023 | 1 Jan 2024 – 31 Dec 2024 | 30-Sep-24 |
| 01-Jul-23 | 1 Jan – 31 Dec | 1 July 2023 – 31 Dec 2023 | 6 months | 1 July 2023 – 31 Dec 2023 | 1 Jan 2024 – 31 Dec 2024 | 30-Sep-24 |
| 16-Aug-23 | 1 Jan – 31 Dec | 16 Aug 2023 – 31 Dec 2024 | 16 months 16 days | 16 Aug 2023 – 31 Dec 2024 | 1 Jan 2025 – 31 Dec 2025 | 30-Sep-25 |
| 11-Jun-23 | 1 Apr – 31 Mar | 11 Jun 2023 – 31 Mar 2024 | 9 months 20 days | 11 Jun 2023 – 31 Mar 2024 | 1 Apr 2024 – 31 Mar 2025 | 31-Dec-24 |
| 02-Jan-24 | 1 Apr – 31 Mar | 2 Jan 2024 – 31 Mar 2025 | 14 months 30 days | 2 Jan 2024 – 31 Mar 2025 | 1 Apr 2025 – 31 Mar 2026 | 31-Dec-25 |
| 06-Jul-23 | 1 Sept – 31 Aug | 6 July 2023 – 31 Aug 2024 | 13 months 26 days | 6 July 2023 – 31 Aug 2024 | 1 Sept 2024 – 31 Aug 2025 | 31-May-25 |
| 20-Dec-23 | 1 Sept – 31 Aug | 20 Dec 2023 – 31 Aug 2024 | 8 months 12 days | 20 Dec 2023 – 31 Aug 2024 | 1 Sept 2024 – 31 Aug 2025 | 31-May-25 |
- A pro rata approach should not be applied to the following thresholds where the first Tax Period of the Taxable person is more or less than 12 month:
- Threshold limit of AED 375000 for applicability of Corporate Tax Law
- In calculation of Threshold limit for Small Business Relief
- In calculation of threshold limit for applicability of audited financial statements.
- In calculation of threshold limit for preparation of financial statements using cash basis of accounting.
- In calculation of threshold limit for preparation of financial statements using IFRS for SMEs.
- Requirement to prepare master file and local file in case of constituent entity of multinational enterprise.
- De-minimis Requirement thresholds.
- Pro-rating of the threshold is applicable where the relevant Tax Period of a Taxable Person is more or less than 12 months, the de-minimis limit for applicability of General Interest Deduction Limitation Rule (i.e. AED 12 million) shall be adjusted in proportion to the length of the Tax Period.
A detailed analysis on the first tax period for Non-Resident Person who is a juridical person having a Permanent Establishment & Resident Person that is incorporated in a foreign jurisdiction that is effectively managed and controlled in the UAE would be discussed in the next blog.
Part – 1 Conclusion:
Understanding the concept of first tax period, can be challenging. It is highly recommended to seek professional advice from tax experts or accountants who are familiar with the local tax regulations. We at BCL Globiz, can provide valuable guidance on:
- Determining the appropriate tax period.
- Calculating taxable income and tax liabilities.
- Ensuring compliance with tax regulations.
- Addressing any tax-related queries or concerns.
By following the concept of the first tax period and complying with the associated obligations, businesses in the UAE can establish a solid foundation for their tax affairs and minimize potential risks.
Also read: Penalties Under UAE Corporate Tax Law
