What it is for
UAE corporate tax is worked out from the profit in your books, adjusted for what the law does not let you deduct or does not tax. Set-up records what the calculation needs to know: what kind of taxpayer the company is, and how each income and expense account counts. Calculation works each financial year out as a draft return, posts its tax, records its filing and amends it. Posting the tax is the only thing on the page that writes to the ledger.
Registration and status
- Open Tax › Corporate Tax › Set-up.
- Switch on Registered for corporate tax once the FTA has registered the company, and enter the Corporate tax TRN: 15 digits, and its own number, not the VAT one.
- Enter the Registration date and when the First tax period starts. A tax period is the financial year, and corporate tax applies only to tax periods starting on or after 1 June 2023, so an earlier date is refused.
- Choose the Kind of taxpayer (below). For a free zone company, name the Free zone.
- Tick Part of a multinational enterprise group if it is. Small Business Relief is not available to such a company.
- Enter any Losses brought forward: unused tax losses from before you kept your books here, and the date they are Stated as of. Only losses from corporate tax periods can be carried forward, so a date before 1 June 2023, or before the first tax period, is refused.
- Press Save profile.
| Kind of taxpayer | How it is taxed |
|---|---|
| Mainland company | 0% on taxable income up to AED 375,000, and 9% above it. |
| Free zone company, standard rates | A free zone company that does not qualify, or chose the standard rates. Taxed like a mainland company. |
| Qualifying Free Zone Person | 0% on qualifying income and 9% on the rest, while it meets every condition. |
| Sole establishment (natural person) | Taxed as its owner. The profile can be saved, but the calculation does not cover natural persons yet. |
A Qualifying Free Zone Person
A free zone company qualifies for 0% on its qualifying income only while it meets every condition. Three of them are your declaration, ticked on the profile:
- Keeps adequate substance in the free zone: the people, assets and spending its activities need.
- Prepares audited financial statements.
- Deals with related parties at arm's length and keeps the transfer pricing records.
The fourth, the de minimis test, is checked when the year is calculated: non-qualifying revenue may be no more than 5% of total revenue or AED 5,000,000, whichever is lower.
Each income and expense account also needs its Qualifying side (see below). If one account holds both qualifying and non-qualifying income, split it into two accounts in the chart, for example Sales — free zone customers and Sales — mainland, so each can be placed.
The accounts corporate tax posts to
Corporate tax owed is recorded in Corporate tax payable (a liability) and the year's tax charge in Corporate tax expense (an expense). A new company has them on 2400 and 7000. If yours were renamed or used for something else, the page says no account is marked; choose one and press Save accounts. An account that already has a role of its own, such as Accounts Payable, cannot be chosen.
How each account counts
- Under How each account counts, Not reviewed lists the income and expense accounts nobody has decided yet. All accounts lists every one.
- Press Accept on the suggestions to take the few the law leaves no doubt about: corporate tax itself is never deductible; the cost of goods sold, card fees and rounding are ordinary costs; exchange differences count in full.
- For each other account press Review, choose the Treatment, and press Save. For a part-deductible cost, enter the Share that is deductible (%).
- To undo a decision, open the account with Change and press Mark not reviewed.
| Treatment | When |
|---|---|
| Taxable in full | Ordinary income: sales, fees, exchange gains. |
| Exempt income | Dividends from UAE companies, and income under the participation exemption. |
| Deductible in full | Ordinary costs of earning the income: rent, salaries, utilities. |
| Partly deductible | Entertaining customers, suppliers, shareholders and other business partners: 50%. |
| Not deductible | Corporate tax itself; fines and penalties (other than compensation for damages or breach of contract); donations to bodies that do not qualify; bribes; dividends paid; recoverable input VAT; tax on income paid abroad. |
Calculating a year
- Open Tax › Corporate Tax › Calculation. Financial years lists each year, whether its books are still open, and its return.
- Press Calculate on a year. A draft return is made from the year's Profit & Loss and the treatments under Set-up. Nothing is filed or posted.
- If an income or expense account the year used is not reviewed, the calculation stops and names it. Review it under Set-up and press Calculate again.
- Press any line to see what is behind it: each account opens its statement for the year, an asset shows its book and tax depreciation, and an adjustment shows its reason.
- After changing the books or the treatments, press Recalculate. The same draft is refreshed; your adjustments and choices are kept.
A year whose periods are not all closed can still be calculated. The return says how many periods are open, and its figures will move until the year is closed.
| Line | What it is |
|---|---|
| L01 Accounting profit | The net profit on the Profit & Loss for the year, to the fil. |
| L10, L11 | Add back expenses that are not deductible, and the non-deductible part of partly deductible ones (for example half of entertaining). |
| L20 | Take out exempt income, such as dividends from UAE companies. |
| L30 | Book depreciation less tax depreciation, on assets that have a separate tax book. |
| L40 onwards | Your own adjustments. |
| L50 | Taxable income before losses. |
| L60 | Losses used: at most 75% of L50. |
| L70 | Small Business Relief. |
| L80 | Taxable income. |
| L91, L99 | The amount taxed at 9% (above the first AED 375,000) and the corporate tax due. |
The return and the payment are due nine months after the year ends; the return shows the date. The AED 375,000 band is never reduced for a first year that is shorter or longer than twelve months.
Losses from one year to the next
A loss year adds to the losses carried forward, and a later year can use them against at most 75% of its taxable income. Each return takes what the return before it carried forward, or, for the first one, the Losses brought forward on the profile.
Small Business Relief
A year qualifies when revenue (all income in the year) is AED 3,000,000 or less, in that year and every earlier tax period, and the year ends on or before 31 December 2029. It is not available to a Qualifying Free Zone Person or a company in a multinational enterprise group.
A qualifying year has the relief elected automatically: the company is treated as having no taxable income, so the tax is nil. Untick Elect Small Business Relief to decline it. Revenue in earlier years kept outside Accmerio must also have been AED 3,000,000 or less; decline the relief if it was not.
A Qualifying Free Zone Person's year
- The return first runs the de minimis test (lines D01 to D03): non-qualifying revenue may be no more than 5% of total revenue or AED 5,000,000, whichever is lower.
- Line L02 takes out the profit on qualifying income, which is taxed at 0%. A cost marked Shared between both is split by revenue unless you enter another share under Costs shared between qualifying and taxable income and press Use this share. A revenue split is often reasonable, but not always.
- The rest is taxed at 9%, with no AED 375,000 band and no Small Business Relief.
Your adjustments
Under Your adjustments, add anything the books and treatments do not capture: give it a name, an Amount (positive adds to taxable income, negative takes away) and the Reason, then press Add adjustment. The return is recalculated at once. Remove takes one off. A return holds up to ten.
Posting the tax
- Open the year's return under Calculation. Filing and posting shows its status, the due date, and whether it is filed and posted.
- Press Post the tax. The Journal date starts on the year's last day while that period is open.
- Press Post the tax in the box. A journal debits Corporate tax expense and credits Corporate tax payable with the tax due, and the return reads Posted, ready to file.
A posted return is frozen: it cannot be recalculated or adjusted. To change it before it is filed, press Undo posting. The journal is reversed and the return is a draft again.
When no tax is due, for example in a Small Business Relief year, there is nothing to post. In the ledger the journal reads Corporate tax return, and opening it brings you back to the return.
Paying the FTA is a separate entry: on Journals, debit Corporate tax payable and credit the bank account the money left from.
Marking a return filed
- Close every period of the year under Accounting › Periods.
- Submit the return on the FTA portal.
- Back on the return, press Mark filed, enter the FTA reference and the date it was Filed on, and confirm.
Nothing is recalculated when you mark a return filed: it records the figures you checked. It refuses while any period of the year is open, and while the figures may be out of date: an entry posted in the year after the calculation, or a treatment or the profile changed since. Recalculate first, or for a posted return Undo posting, recalculate and post again.
A filed return is never recalculated or changed again. If it was wrong, amend it.
Amending a filed return
- On the filed return, press Amend and say What it corrects.
- A new draft for the same year is made. It keeps the filed return's adjustments and its Small Business Relief choice, and is recalculated from the books. The filed return now reads Replaced by an amendment, and still says what was filed.
- Change the draft as needed: add an adjustment, or Recalculate after correcting the books.
- Press Post the change. Only the difference against the tax already posted for that year is posted, on a date in an open period: more tax debits the expense and credits the payable, less tax does the reverse.
- Submit the correction on the FTA portal and press Mark filed on the amendment with its own reference.
The return pack
On any return, press Download and choose PDF (on your letterhead) or Excel (amounts as numbers). The pack holds:
- the return: its status, the kind of taxpayer, the rates applied, Small Business Relief, the due date, and when it was filed and posted;
- the calculation line by line, with how each line is worked out;
- each of your adjustments with its reason;
- how each account the year used counted;
- book against tax depreciation, when there is any;
- the losses brought forward, used and carried forward;
- for an amendment, the filed and amended figures side by side;
- the warnings.
The pack reads the return as it was saved and recalculates nothing, so a filed return's pack always says what was filed.