UAE's FTA Extends Tax Filing Deadline for New Businesses

The Federal Tax Authority (FTA) in the UAE has announced an extension for tax filing deadlines for businesses that are newly incorporated. The move, which applies primarily to companies that were registered under the corporate tax regime after the introduction of the law in June 2023, provides relief for entities still navigating the formalities of tax compliance.

The corporate tax regime, introduced in 2023, initially mandated that businesses incorporated from June of that year should begin filing their tax returns by the end of September 2024. This early deadline was aligned with the financial year schedules of these businesses, making the submission of their first tax returns due just over a year from incorporation. The deadline was set as September 30, 2024, for businesses incorporated in June 2023, providing a limited period for these businesses to prepare their financial statements, spanning approximately six months and 24 days.

Under the extended filing deadline, companies that were incorporated in mid-2023 are now given more leeway to file their tax returns without being subjected to penalties. Companies whose financial year began on the date of incorporation, such as June 7, 2023, are expected to file their first tax returns by the end of September 2024. However, the FTA has provided flexibility for late submissions, with a nominal fine of AED 500 for each month of delay within the first year. Failure to comply beyond 12 months, however, incurs a steeper penalty of AED 1,000 per month.

This extension reflects the FTA’s recognition of the challenges that new businesses face in adopting corporate tax regulations. Many companies, particularly small and medium-sized enterprises (SMEs), have voiced concerns regarding the relatively short time frame provided for filing, especially considering the financial and operational complexities of a new business.

In the broader landscape, UAE's implementation of corporate tax is part of its strategy to align with global standards, particularly the OECD's Base Erosion and Profit Shifting (BEPS) initiatives. The corporate tax regime places a standard 9% tax rate on net profits exceeding AED 375,000 for all UAE-based companies, though entities in free zones and qualifying SMEs remain eligible for exemptions, depending on their specific conditions.

The FTA has also urged businesses to ensure accurate financial record-keeping in line with UAE's Commercial Companies Law. This involves the preparation of financial statements that will coincide with the company’s tax period. Businesses have been advised to work closely with tax advisors to ensure full compliance and avoid any risks of non-compliance, which could lead to further complications down the line.