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Guide to Tax Period under Corporate Tax in UAE

To ensure compliance with the corporate tax procedures and regulations, businesses are required to fully comprehend their tax period, for purposes of filing corporate income tax returns. This article explains the general tax period applicable to most businesses as well as possible variations. Thus, businesses are advised to seek the expert services of reputable Tax Consultants in UAE to effectively determine their tax period in compliance with the corporate tax law.

Change in Tax Period

If a business entity deems to make any changes to the start and end dates of its tax period, it can submit a request to the FTA to this effect. This can be relevant for companies that fall under the scope of a multinational group, to seamlessly file tax returns.  Decision No. 5 of 2023 on Conditions for Change in Tax Period stipulates various conditions under which a business can be eligible to change its tax period.

Reasons for Change of Tax Period 

 A business can only submit an application to the FTA for tax period change if one of the following criteria is met. 

  • Liquidation – If the business entity is being liquidated and the tax period change aims to facilitate the same. 
  • Aligning the tax period with another tax group/ business – When a company falls under a multinational group with a consolidated presence whether within or outside the nation, the business paying corporate tax in UAE, can request a change in the tax period for ease of financial reporting. 
  • Valid Reason Clause – The business entity can also request for a tax period change supported by any other valid economic, legal, or commercial reasons not mentioned above. 

Eligibility to Request Tax Period Change 

In addition to having a valid reason to support the business’s application for tax period change, the business must also fulfil the following conditions:

  • The business entity requesting a tax period change must not have filed the tax return for the tax period that is proposed to change. 
  • The change thus proposed must either extend the current tax period to a maximum of 18 months or reduce it to between 6 months – 12 months. 
  • The application for business tax period change needs to be filed within 6 months from the end of the original tax period. 
  • Corporate income tax period change requests are only applicable in the cases of the current or the previous tax period. 

You should also know: Requirement for Filing Corporate Tax Returns in UAE

Other Rules & Regulations Concerning Tax Period 

  • Taxable business entities are required to submit their tax returns to the FTA within 9 months from the end of the tax period for which they are filing the business tax returns. 
  • When two partners in an Unincorporated Partnership apply to be taxed at the partnership level, the application comes into effect from the beginning of the tax period during which the tax application was made or from a future tax period. 
  • For tax groups, the tax period can either commence from the formation date of the group, or from the beginning of the tax period during which the application was made. 
  • If a business prepares its financial Statement using the Accrual Basis of Accounting, it can elect to consider both gains and losses on a realisation basis. The election to apply the realisation basis should be done before the end of its first tax period. 
  • When a business incurs tax loss i.e., when its income exceeds deductible expenditure in any given tax period, it can use the Tax Loss to gain deductions in Taxable Income calculated for future Tax Periods. This can reduce up to 75% of a person’s Taxable Income for future tax periods. 
  • If the tax loss-related deductions applicable to a tax period are less than 75% of the taxable income, then the business must utilize all their corporate income tax losses in that tax period and it cannot be carried forward. However, if the tax loss from the previous periods exceeds 75%, then the business can carry it forward to the next tax period. 
  • Tax loss-related deductions cannot be utilized for the previous tax period, and are only applicable in the case of future tax periods. 

Read more: Corporate tax penalty for failure to submit a tax return within the due date 

Seek the Services of Top Tax Consultants in UAE 

Businesses are advised to seek the expert services of reputable Tax Consultants in Dubai to effectively determine their tax period and ensure compliance with the corporate tax law. Therefore, contact us today and we shall be glad to assist you. 

Mostafa is a qualified Corporate Tax Consultant with over 5 years of experience gained in diverse intricate tax matters, he has high expertise in conducting tax negotiations and investigations with the Federal Tax Authority and other external Tax Bodies. He has vast experience in reviewing and drafting tax documents. Mostafa has also advised on a plethora of tax matters, he draws much attention to tax filing procedures and to offering professional investigations to underlining tax complexities. Read more