Tax returns in the UAE — VAT / corporate tax

There are two sets of returns and they are unconnected. The VAT return is filed regularly through the year — the frequency is set by the tax authority at registration. The corporate tax return is filed once per tax period.

The duty to file arises from the fact of registration, not from having tax to pay. A nil return is a return too, and failing to file one is penalised in the same way.

This mistake costs money in penalties. For corporate tax the 0% rate applies up to AED 375,000 of taxable profit and 9% above it. But everyone has to register, including free zone companies, loss-making ones and those that have not started trading yet.

VAT has different thresholds, and they are counted on taxable supplies and imports rather than on profit: AED 375,000 for mandatory registration, AED 187,500 for voluntary registration.

So a company may have not a dirham of tax to pay and still be obliged to register and file returns.

A return cannot be assembled at the end of the period from a bank statement. The tax authority requires a document behind every figure: an invoice, a contract, an acceptance certificate, proof of payment.

So the books are kept throughout the period rather than reconstructed before filing. Reconstructing after the event costs more and does not always settle the inspectors' questions.