Hafeez Basha Syed

The Federal Tax Authority emphasises the need to retain records and documentation to ensure accuracy of Tax Return information for Taxable Persons subject to Corporate Tax.

Submitting Tax Returns and settling the Corporate Tax payable within nine months from the end of the Tax Period to avoid incurring late payment penalties.

The Federal Tax Authority (FTA) emphasises the obligation for all Taxable Persons subject to UAE Corporate Tax to maintain all records and documents supporting the information provided in their Tax Returns or any other document required to be submitted to the FTA. These records enable the FTA to verify the Taxable Person's Taxable Income for Corporate Tax purposes.

Although the records and documents required to be submitted along with the Corporate Tax Returns may vary according to the nature of the business carried out, certain essential documentation must be maintained by Taxable Persons, including but not limited to documents pertaining to the Taxable Person's record of transactions in the Tax Period, a record of assets (including details of any purchases or disposals of assets), a record of liabilities, and a record of any shares held at the end of the tax period.

If a Taxable Person fails to keep the required records including all information specified in the Tax Procedures Law and the Corporate Tax Law, administrative penalties will be imposed in accordance with the relevant tax legislation.

Further, Exempt Persons are also required to maintain records to allow the FTA to verify their status of the Exempt Person, in accordance with the Corporate Tax Law. The required documents in this case depend based on the exemption. Both Taxable Persons and Exempt Persons must retain relevant records for a period of at least seven (7) years following the end of the Tax Period to which they relate.

The FTA has issued reminders encouraging all Taxable Persons to submit their Tax Returns and settle any Corporate Tax Payable due for the relevant Tax Period within the specified legal timeframe including a warning that failure to comply with these deadlines may result in late fines and penalties for tax non-compliance.

Taxable Persons subject to Corporate Tax obligations are required to submit their Tax Returns and remit the Corporate Tax payable to the FTA within a period of no more than nine months from the end of each Tax Period for each registrant. Exempt Persons that are required to register should submit their annual declarations within nine (9) months from the end of their financial year.

For example, a Taxable Person whose fiscal year ends on 31 December 2025 must file the Tax Return and pay the Corporate Tax due on or before 30 September 2026.

Corporate tax law (Article 34(3)) mentions that the arm's length result of the transaction between related parties must be determined by applying one or a combination of the five transfer pricing methods. These methods are consistent with the OECD Transfer pricing guidelines. There are 5 methods which consist of three traditional transaction methods and two transactional profit methods. Traditional transaction methods are regarded as the most direct means of establishing whether conditions in the commercial and financial relations between associated enterprises are at arm's length.

Comparable Uncontrolled Price Method (CUP Method): The CUP method compares the price charged for property or services transferred in a controlled transaction to the price charged for property or services transferred in a comparable uncontrolled transaction in similar circumstances. This method would generally be an appropriate transfer pricing method for establishing the arm's length price for the transfer of commodities between associated enterprises.

Resale Price Method: This method begins with the price at which a product that has been purchased from an Associated Enterprise is resold to an independent enterprise. The Resale Price is then reduced by an appropriate gross margin on this price representing the amount out of which the reseller would seek to cover its selling and other operating expenses and in the light of functions performed make an appropriate profit. What is left after subtracting the gross margin can be regarded, after adjustments for other costs associated with the purchase of the product, as an arm's length for the original transfer between the Associated Enterprise. This method is probably most useful to marketing operations such as those carried out by a distributor.

Cost Plus Method: This method begins with the costs incurred by the supplier of property in a controlled transaction for property transferred or services provided to an associated purchaser. An appropriate cost-plus markup is added to this cost, to make an appropriate profit in light of the functions performed and the market conditions. What is arrived at after adding the cost-plus mark up to the above costs may be regarded as an arm's length price of the original controlled transaction. This method probably is most useful where semi-finished goods are sold between Associated parties, where associated parties have concluded joint facility arrangements, or where the controlled transaction is the provision of services.

Transactional profit methods examine the profits that arise from particular transactions among associated enterprise. Profits arising from a controlled transaction can be a relevant indicator of whether the transaction was affected by conditions that differ from those that would have been made by independent enterprises in otherwise comparable circumstances.

Transactional Profit Split Method: This method first identifies the profits to be split from the controlled transactions – the relevant profits – and then split them between associated enterprises on an economically valid basis that approximates the division of profits that would have been agreed at arm's length. This method can be considered where each party makes unique and valuable contributions, or business operations are highly integrated such that the contributions of the parties cannot be evaluated in isolation.

Transactional Net Margin Method: This method examines the net profit relative to an appropriate base that a tax payer realizes from a controlled transaction with the net profit earned in comparable uncontrolled transactions. This is the most commonly used method for justifying the transfer pricing of a company.

The UAE Value Added Tax (VAT) law, introduced on January 1, 2018, imposes a 5% standard rate on most goods and services, with key exemptions for sectors like healthcare, education, and exports. Mandatory registration is required if taxable supplies exceed AED 375,000 annually, while voluntary registration is available at AED 187,500.

• Zero-Rated Supplies (0% VAT): Exports outside the GCC, international transport, certain healthcare/education services, and investment precious metals.
• Exempt Supplies: Certain financial services, residential real estate (sales/rent), and bare land.
• Compliance: Registered businesses must file periodic VAT returns, issue tax invoices, and maintain records for at least 5 years.

2026 Changes: From January 1, 2026, businesses should stop self-invoicing for Reverse Charge Mechanism (RCM) transactions and instead use supplier invoices for documentation.

The VAT treatment of real estate depends on whether it is a commercial or residential property. Supplies (including sales or leases) of commercial properties are taxable at the standard VAT rate (i.e. 5%).

On the other hand, supplies of residential properties are generally exempt from VAT. This ensures that VAT does not constitute an irrecoverable cost to those who buy their own properties. In order to ensure that real estate developers can recover VAT on construction of residential properties, the first supply of residential properties within three years of completion at the time of VAT introduction is zero-rated.

1. Exports of goods and services to outside the GCC
2. International transportation, and related supplies
3. Supplies of certain sea, air and land means of transportation (such as aircrafts and ships)
4. Certain investment in grade precious metals (e.g. gold, silver, of 99% purity)
5. Newly constructed residential properties, that are supplied for the first time within three years of their construction
6. Supply of essential/designated education services, and supply of relevant goods and services
7. Supply of essential/designated healthcare services, and supply of relevant goods and services

Where a VAT registered person incurs input tax on its business expenses, this input tax can be recovered in full if it relates to a taxable supply made, or intended to be made, by the registered person. In contrast, where the expense relates to a non-taxable supply (e.g. exempt supplies), the registered person may not recover the input tax paid. In certain situations, an expense may relate to both taxable and non-taxable supplies made by the registered person (such as activities of the banking sector). In these circumstances, the registered person would need to apportion input tax between the taxable and non-taxable (exempt) supplies. Businesses are expected to use input tax (ratio of recoverable to total) as a basis for apportionment in the first instance although there will be the facility to use other methods where they are fair and agreed with the Federal Tax Authority.

1. Every Company shall keep accounting records of its transactions to give a clear picture of its financial position at any specific point in time, and to enable the partners or shareholders to verify that the Company's accounts are being properly kept in accordance with the provisions of this Decree Law.
2. Every Company shall keep its accounting records at its headquarters for a period of at least five (5) years of the end of the fiscal year of the Company.
3. The Company may keep an electronic copy of the original documents and papers saved and maintained by the Company in accordance with the guidelines contained in a resolution of the Minister.

The Federal Tax Authority (FTA) emphasises the obligation for all Taxable Persons subject to UAE Corporate Tax to maintain all records and documents supporting the information provided in their Tax Returns or any other document required to be submitted to the FTA. These records enable the FTA to verify the Taxable Person's Taxable Income for Corporate Tax purposes.

Taxable Persons and Exempt Persons must retain relevant records for a period of at least seven (7) years following the end of the Tax Period to which they relate.

1. Every Company shall have a fiscal year to be specified in its Articles of Association, provided that the first fiscal year of the Company shall be between 6 (six) to 18 (eighteen) months, starting from the date on which the Company is registered in the commercial register maintained by the Competent Authority.
2. All fiscal years after the first one shall run for 12 months after the end of the preceding fiscal year.

UAE E-Invoicing is a government-mandated electronic invoicing framework that requires invoices and credit notes to be created, exchanged and reported digitally in a structured format, replacing unstructured formats like PDFs or paper.

• Structured: E-invoices must be in a machine-readable format like XML.
• Standardized: Include all mandatory fields as per the UAE E-Invoicing Data Dictionary (PINT-AE).
• Mandatory ASP Selection: Transmission must be done through pre-approved ASPs listed on the MOF portal.
• Real Time Reporting: All e-invoices require real-time electronic reporting to the FTA.

• July 1, 2026: Pilot Mode Activation — selected companies commence E-invoicing in pilot phase.
• October 30, 2026: Approved ASP appointment for Phase 1 entities (Revenue > AED 50mn).
• January 1, 2027: Mandatory E-invoicing for Phase 1 entities begins (Revenue > AED 50mn).
• March 31, 2027: ASP appointment for Phase 2 (Revenue < AED 50mn) and government entities.
• July 1, 2027: Mandatory E-invoicing for Phase 2 entities (Revenue < AED 50mn).
• October 1, 2027: E-invoicing becomes mandatory for government entities.

Mandatory e-invoicing fields in the UAE, based on the PINT-AE standard, require crucial seller/buyer data, tax breakdown, and document totals to pass validation by Accredited Service Providers (ASPs). Key fields include a unique Invoice Number, Issue Date (YYYY-MM-DD), Tax Registration Numbers (TRN), and precise line-level details (quantity, price).

As per the UAE e-invoicing regulations, a standard electronic tax invoice contains 51 mandatory fields, while a commercial e-invoice contains 49. Here is a breakdown of all the mandatory fields in an electronic invoice and their meanings.