What Businesses Might Be Missing In Their First Corporate Tax Return

(MENAFN- Khaleej Times)

The first Corporate Tax (CT) returns in the UAE are due on September 30, 2025. Every entity licensed in the UAE-whether mainland or free zone, large or small, active or dormant-is required to file a return, irrespective of turnover, benefits, or whether there is any tax payable. This universal filing obligation means that compliance is mandatory across the board, and no business can assume that it falls outside the scope of the new regime.

While most companies are focused on simply filing on time, experts warn that several critical aspects are being overlooked. Missing these could expose businesses to risks far greater than late penalties.

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Drawing from recurring themes observed across industries, here are the areas businesses need to pay closer attention to before submitting their first CT return.

1. Small Business Relief (SBR): A Double-Edged Sword

Many businesses are opting for Small Business Relief, but its use requires deeper consideration. Even if an entity qualifies for SBR, IFRS-compliant books must still be maintained, and companies should not ignore the long-term implications:

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Loss carry-forward – Businesses claiming SBR must assess whether they are losing the opportunity to carry forward losses for future years.

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Revenue recognition – Revenue must still be properly derived under IFRS, and in cases involving related-party transactions, adjustments for transfer pricing (TP) must be considered.

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Audit readiness – Even when no CT liability is payable, the underlying records may still be scrutinised by the FTA.

Treating SBR as a shortcut without robust documentation can create lasting complications.

2. Transfer Pricing: Beyond Simple Disclosure

Transfer pricing remains one of the most underestimated areas. Businesses often assume that compliance is limited to attaching a disclosure form. In reality, the FTA expects clear alignment between intercompany dealings, financial statements, and the CT return.

Critical aspects include:

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Adjustments – Upward vs. downward adjustments do not carry equal risk. Downward adjustments that reduce taxable income can invite greater scrutiny.

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Documentation – A Master File or Local File may not always be mandatory, but businesses must still have support for related-party pricing.

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Shareholder salaries – Payments to shareholders must be carefully structured and documented to avoid reclassification as disguised distributions.

3. Tax Grouping: Efficiency with Hidden Complexities

Forming a tax group may appear efficient, but the practical challenges are frequently underestimated.

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Single thresholds – All limits for disclosures, TP applicability, and elections apply at the group level, not individually.

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Joining and leaving – Entities that enter or exit require standalone reconciliations, which often create mismatches.

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Consolidation misalignments – Inadequate consolidation processes may result in differences between group financials and CT return reporting.

Grouping decisions should therefore be made not only for convenience but with long-term compliance in mind.

4. Elections and Special Treatments: Underused Opportunities

The CT framework allows businesses to make elections that significantly alter tax outcomes, but many companies fail to analyse them properly. These include:

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Unrealised gains – Options to defer recognition or reset asset bases.

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Group relief – Utilising losses across entities.

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Tax loss planning – Making deliberate decisions on how and when to apply losses.

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Foreign tax credits – Relief from double taxation is available, but only with proper documentation.

In some cases, businesses may also need to consider private clarifications from the FTA to secure certainty on complex or uncertain issues.

5. Time Adoption: Preparing Systems and Processes

Medium-sized entities, in particular, underestimate the lead time needed to ensure readiness. Some practical but often missed steps include:

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Aligning the Chart of Accounts to CT return requirements.

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Establishing opening balances and ensuring related-party data is complete.

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Designing a return sign-off process that involves not just accountants but senior management.

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Maintaining a clear bridge working from financial statements to the CT return for audit defence.

Without these, companies risk last-minute reconciliations that may not stand up to regulatory scrutiny.

Conclusion

The September 30 filing deadline is not just about meeting a date. It is about demonstrating substance, readiness, and accuracy in the UAE's new tax framework.

The writer is Founding Partner of Ecovis JRB Chartered Accountants.

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