UAE Corporate Tax Compliance: How to Prepare and File (Even If You’re a Small Business)
Watch Dexter Destajo, owner of LiveSync Accounting:
UAE Corporate Tax Compliance: How to Prepare and File (Even If You’re a Small Business)
With UAE Corporate Tax now in effect, many businesses—especially SMEs—are wondering: Do I need to file? What if I have little profit? How do I calculate my tax properly? This guide will walk you through what you need to know, whether you’re a startup or a growing company.
📌 1. Small Business Relief: Do You Qualify?
If your revenue is AED 3 million or less, you may qualify for Small Business Relief, which simplifies your tax filing.
✅ When filling your corporate tax return in the FTA portal, you’ll be asked:
“Do you want to claim Small Business Relief?”
✅ If yes, many sections will auto-close, making it easier for low-revenue businesses to comply.
🧾 2. Start With Your Profit & Loss Statement
Before you calculate any tax, you must first have a basic P&L statement:
- Sales – Expenses = Net Accounting Profit Before Tax
- This figure comes from your accounting system (Xero, QuickBooks, Zoho, etc.)
If you don’t have this yet, stop everything and generate your P&L first—no tax compliance is possible without it.
🔍 3. Make Corporate Tax Adjustments
To get from your net accounting profit to taxable profit, several adjustments must be made:
➕ Add back:
- Non-deductible expenses (e.g., excessive salaries to business owners not at market rates)
- Related party transactions not at arm’s length
➖ Subtract:
- Exempt income, such as:
- Dividends from UAE companies
- Qualifying capital gains from long-term investments
- Profits from certain foreign permanent establishments (under specific conditions)
- Losses carried forward (you can deduct 75% of previous year’s losses)
- Other corporate tax reliefs, depending on elections made (e.g., on unrealized gains/losses)
📊 4. Apply the Tax Rate
Once you calculate taxable profit, apply the following rates:
- 0% on first AED 375,000
- 9% on any amount exceeding AED 375,000
🧮 Example:
If your taxable profit is AED 500,000:
- First AED 375,000 → 0%
- Remaining AED 125,000 → 9% → Tax Due = AED 11,250
💡 5. Final Adjustments Before Filing
After applying the tax rate, you can deduct foreign tax credits or withholding taxes—but only after the main calculation is done.
Then you get your final tax due.
🌍 6. Be Aware of Taxable vs. Exempt Income
Most income earned inside or outside the UAE is taxable if your business is UAE-based.
Exempt income includes:
- Dividends from UAE companies (if your company is the investor)
- Capital gains from long-term investments in foreign companies (under conditions)
- Profits from foreign branches (if you elect exemption and meet requirements)
⚠️ Note: Dividends or gains received by the business, not the individual owner, are considered here.
🔐 7. Accounting Standards You Must Follow
To report taxable profit, you must follow approved standards:
- Full IFRS if your revenue is above AED 50 million
- IFRS for SMEs for revenue between AED 3–50 million
- Cash basis allowed for revenue below AED 3 million
✅ Final Thoughts
UAE Corporate Tax isn’t just about numbers—it’s about understanding the adjustments, reliefs, and standards that apply to your business.
Whether you’re a small startup eligible for relief or a growing company with cross-border operations, preparation starts with:
- Accurate books
- Proper tax treatment of income
- Awareness of reliefs and exemptions
Need help setting up your first return or reviewing your eligibility for Small Business Relief? LiveSync Accounting is here to help.
📞 Book a free consultation today to avoid penalties and stay compliant.
