With the implementation of the UAE Corporate Tax regime through Federal Decree-Law No. 47 of 2022, businesses are now required to file annual corporate tax returns with the Federal Tax Authority (FTA). Filing accurate and timely returns is not only a regulatory obligation but also crucial for maintaining financial credibility and avoiding penalties.
This comprehensive blog outlines the most common mistakes businesses make when filing corporate tax returns in the UAE—and how to avoid them. Whether you’re a small enterprise or a large corporation, this guide will help you stay compliant and error-free.
Need expert support in preparing and filing your corporate tax returns? PEAK Business Consultancy Services offers specialized tax return services, including documentation review, tax planning, and compliance audits for businesses across the UAE.
1. Missing or Incomplete Tax Registration
One of the foundational steps before filing is to register with the FTA for corporate tax. Some businesses delay or forget to complete the registration process, resulting in non-compliance penalties and ineligibility for submitting returns.
Solution: Ensure that your business is registered with the FTA and you have received a Corporate Tax Registration Number (TRN).
2. Late Filing of Tax Returns
The deadline for filing corporate tax returns is typically within 9 months after the end of the financial year. Filing even a day late can result in fines and interest charges on any taxes owed.
Solution: Use calendar reminders, engage a tax consultant, or leverage accounting software to track deadlines.
3. Incorrect Calculation of Taxable Income
Many businesses miscalculate taxable income by failing to adjust accounting profits for non-deductible expenses, exempt income, or capital allowances. This leads to underreporting or overreporting income.
Solution: Reconcile your accounting profit with tax adjustments using FTA guidelines and cross-verify with financial statements.
4. Not Claiming Allowable Deductions
Some businesses overlook allowable deductions such as depreciation, interest expense limits, R&D costs, and bad debts. This leads to paying more tax than necessary.
Solution: Work with a professional consultant to claim every eligible deduction as per UAE Corporate Tax Law.
5. Mixing Exempt and Taxable Income
Income from certain activities—such as qualifying Free Zone operations or dividends from foreign subsidiaries—may be exempt from corporate tax. Confusing these with taxable income can result in overpayment or inaccurate filing.
Solution: Segregate income streams clearly and apply exemptions properly as per Article 22 and 23 of the UAE Corporate Tax Law.
Need clarification on what counts as exempt income? PEAK Business Consultancy Services helps identify eligible exemptions and structures your income for maximum tax efficiency.
6. Incorrect Treatment of Related Party Transactions
Transactions between group companies, related parties, or shareholders must follow the Arm’s Length Principle. Many businesses ignore transfer pricing rules, which can lead to penalties and audit risks.
Solution: Maintain documentation of pricing policies, intercompany agreements, and ensure all related transactions are priced at market value.
7. Errors in Carrying Forward Tax Losses
The law permits losses to be carried forward indefinitely, but only up to 75% of taxable income in future years. Failing to track and apply losses correctly can reduce potential tax savings.
Solution: Maintain detailed loss records, calculate carry forwards accurately, and track usage across tax periods.
8. Not Applying for Small Business Relief (If Eligible)
Businesses with revenue below AED 3 million per year (until 2026) may be eligible for Small Business Relief and pay zero corporate tax. Missing this relief can lead to unnecessary payments.
Solution: Assess your eligibility for small business relief before finalizing your return.
9. Errors in Exchange Rate Conversion
Foreign income or expenses must be converted to AED using the FTA-prescribed exchange rates. Using average or unofficial rates can distort the tax base.
Solution: Refer to the official FTA exchange rate list for the relevant period before conversion.
10. Poor Recordkeeping
Inadequate documentation is a leading cause of tax penalties. Businesses must retain invoices, receipts, bank statements, contracts, and ledgers for at least 7 years.
Solution: Use digital accounting software to store and organize tax records securely.
11. Ignoring Free Zone Conditions
Free Zone entities can benefit from a 0% tax rate on qualifying income, but only if they meet specific conditions, including maintaining adequate substance, preparing audited accounts, and not conducting business with the mainland.
Solution: Review your Free Zone compliance to avoid disqualification from 0% corporate tax benefits.
Unsure if you meet Free Zone conditions? PEAK Business Consultancy Services can review your structure and ensure your Free Zone status is compliant with UAE tax rules.
12. Omitting Mandatory Disclosures
Certain businesses are required to disclose related party transactions, ownership structure, and financial information during tax filing. Missing or incorrect disclosures can trigger audits.
Solution: Carefully complete all tax return fields, and attach supplementary forms like transfer pricing disclosures when applicable.
13. Failing to Appoint a Tax Agent or Consultant
Corporate tax is a relatively new system in the UAE. Relying solely on in-house teams without proper tax expertise can lead to unintentional non-compliance.
Solution: Engage certified tax professionals like PEAK Business Consultancy Services to ensure your returns are filed correctly, supported by the right documentation, and optimized for tax savings.
Conclusion
As corporate tax becomes a fixture in the UAE’s business environment, avoiding common filing errors is essential for minimizing legal risks, maintaining your financial reputation, and optimizing your tax liability.
Most mistakes can be prevented through careful planning, proper documentation, and professional guidance.
Need help with your UAE corporate tax return? Let PEAK Business Consultancy Services guide you through every step—from registration and accounting adjustments to final filing and compliance support.
