The first cycle of UAE Corporate Tax return filings has provided valuable insight into how the Federal Tax Authority is interpreting and enforcing the Corporate Tax Law. As businesses prepare for upcoming filings, the focus is shifting from registration and awareness to accuracy, documentation, and audit readiness.
The experience from 2024 filings highlights common risk areas and sets clear expectations for 2025 and beyond.
Key Observations from Initial Corporate Tax Filings
Early filings show that many challenges arise not from tax rates, but from classification, documentation, and data alignment. Areas such as participation exemption, transfer pricing, and financial statement compliance are drawing closer scrutiny.
Businesses are expected to clearly establish ownership interests, confirm minimum effective tax thresholds, and maintain supporting records for exempt income claims. Inconsistent documentation or unsupported positions are increasingly likely to trigger review.
Transfer Pricing and Related Party Transactions
Transfer pricing remains a key focus area. Businesses must identify all related party transactions, benchmark them appropriately, and disclose them accurately in the corporate tax return.
Long outstanding balances, cost recharges, guarantees, and intercompany services are being examined to assess whether deemed loans or non arm’s length pricing applies. Maintaining contracts, benchmarking studies, and transfer pricing documentation is no longer optional.
Financial Statements and Accounting Alignment
Financial statements must be prepared in accordance with IFRS or IFRS for SMEs. Where statutory audit thresholds are crossed or Free Zone entities claim the zero percent corporate tax benefit, audited financials are required.
Adjustments related to equity accounting, other comprehensive income, and unincorporated partnerships must be carefully assessed to ensure correct tax treatment.
Interest Deduction and Small Business Relief
Interest deduction limitations require careful analysis, particularly where financial assets or liabilities existed before 9 December 2022. Businesses must identify any disallowance and ensure correct treatment in the tax return.
Small Business Relief eligibility must also be evaluated carefully, especially where turnover is close to the threshold or where interactions with tax losses, exempt income, or Free Zone benefits apply.
Pillar Two and the Expanding Tax Landscape
The introduction of Pillar Two rules adds another layer of complexity for large multinational groups. From 1 January 2025, groups with global revenue exceeding EUR 750 million may be subject to a global minimum tax of 15 percent.
This introduces new data requirements, financial statement disclosures, and compliance obligations that extend beyond traditional corporate tax calculations.
FTA Focus Areas Going Forward
Based on current trends, the Federal Tax Authority is expected to focus on:
- Free Zone exemption claims
- High turnover entities
- Transfer pricing adjustments
- Revenue mismatches between financials and tax returns
- Significant related party transactions
- Claims of Small Business Relief near threshold limits
These focus areas underline the importance of accuracy, consistency, and robust documentation.
Preparing for Upcoming Filings
Businesses should now move toward structured compliance. This includes establishing systems for data collection, reviewing historical balances, maintaining supporting documentation, and aligning tax positions with financial reporting.
Corporate Tax compliance is no longer a one time exercise. It requires ongoing governance, coordination between teams, and readiness for review.
MCA Gulf Perspective
MCA Gulf works closely with businesses across the region to interpret Corporate Tax requirements and prepare for filing and assessment. Our focus is on technical accuracy, documentation readiness, and practical implementation aligned with evolving FTA expectations.
For further discussion or clarification on UAE Corporate Tax compliance and upcoming requirements, reach out to mcatax@mcagulf.com.
