Menu
The introduction of Corporate Income Tax (CIT) under Federal Decree-Law No. (47) of 2022 marks a significant change in the UAE’s fiscal and regulatory framework. As the country takes a significant step toward aligning with global tax practices, businesses operating in the UAE must now adapt to a more structured taxation environment.
With the first CIT return filing deadlines approaching, it is imperative for companies to understand the specific compliance requirements that apply to them. These obligations vary based on several factors, including the company’s annual turnover, legal structure, and whether the entity operates in a Mainland or Free Zone jurisdiction.
| Category | Who is Affected? | What is Required? |
| Large mainland Businesses or large disqualified Free Zone Businesses | Businesses with annual turnover > AED 50 million | A key component of the CIT compliance framework is the requirement for a mandatory statutory audit for businesses with substantial revenues. According to Ministerial Decision No. 82 of 2023, any business with an annual turnover exceeding AED 50 million must have its financial statements audited. This audit must be completed prior to submitting the corporate tax return to the Federal Tax Authority (FTA). The objective is to promote accuracy and integrity in financial reporting, thereby ensuring the reliability of the financial information upon which the taxable income is calculated. Non-compliance with this requirement may lead to administrative penalties and delays in processing tax filings. |
| Qualifying Free Zone Businesses | Businesses in UAE Free Zones seeking 0% corporate tax rate | For entities operating within the UAE’s Free Zones, additional compliance requirements have been introduced. Businesses that seek to benefit from the 0% corporate tax rate under the Qualifying Free Zone Person (QFZP) regime must adhere to specific conditions outlined in Ministerial Decision No. 139 of 2023. One of these core requirements is the submission of audited financial statements, regardless of turnover. In addition to audited financials, Free Zone entities must also satisfy other criteria, including earning qualifying income, maintaining adequate economic substance in the UAE, and complying with transfer pricing and arm’s length principles, where applicable. |
| Small or Non-Qualified Free Zone Businesses | Mainland Businesses or Non-Qualified Free Zone Businesses with annual turnover of ≤ AED 50 million | In contrast, mainland businesses or non-QFZP Free Zone entities with an annual turnover of AED 50 million or less are not required to conduct a statutory audit. However, this does not exempt them from financial reporting responsibilities. Under Article 54 of Federal Decree-Law No. 47 of 2022, all taxable persons must prepare and maintain financial statements in accordance with applicable accounting standards, typically International Financial Reporting Standards (IFRS). However, Businesses with a turnover of AED 50 million or below in a tax period may use IFRS for SMEs. These financial records must be retained as part of the company’s documentation and submitted along with the CIT return. Though the audit may not be mandatory, the quality, accuracy, and consistency of these financial statements remain critical, especially as they underpin the computation of taxable income. Further, businesses with a turnover of AED 3 million or below annually may use cash basis of accounting. |
Developed By Volga Tigris Digital Marketing Agency
