Preparation and Documentation for Corporate Tax in UAE

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UAE corporate tax has been implemented and most of the business are already within the tax regime. At entity level there are certain documentation requirements which would help to survive in UAE corporate tax regime. The litmus test we have considered is the assumption of how FTA will consider adequacy of an entity’s documentation in case of a tax audit. The discussion below is for informational purposes and may not be entirely applicable to the circumstances of all entities, hence a qualified opinion is required

Preparation for Tax

Below is the list of documents and preparatory material which we believe would be important to prepare while in the tax regime:

1. Prepare annual financial statements – audited or unaudited. Prepare an audit file with supporting evidence (like invoices, bank statements) to substantiate the figures reported in annual financial statements.
2. Keep key records like bank statements, bank loan agreements, legal or shareholding papers, copies of key contracts, invoices travel logs and tickets available, sales and purchase invoices, entertainment expenses invoices, loans and interests paid bank evidence etcetera.
3. Have your books reviewed annually from a qualified accountant for compliance to Corporate Tax and VAT laws.
4. Prepare reconciliations for key differences i.e. bank statement balance to reported bank balance in financial statements, receivables and payables balances, revenue and cost of revenue, VAT return reconciliations with financial statements figures like sales and purchases. This is specifically more important where the financial statements line items include estimates and assumptions i.e. provisions, construction revenue and cost etcetera.
5. If your business is making losses, the supporting data for carried forward losses i.e. financial statements of all the years in which loss occurred and in which it was absorbed and /or amount still carried forward. Further any detail of loss transferred to connected resident judicial persons (in such cases the ownership interest of residential judicial person also needs to be proved)
6. Interest expenses not allowed and carried forwarded to subsequent years.
7. Evidence of any tax already deducted from outside UAE or inside UAE
8. Copies of approved elections made, and any applications made which have been approved by FTA.
9. Details of unrealised and realised gains (subject to elections made)
10. Details of any exempt income
11. Details and supporting documents for any reliefs for specific transactions.
12. Transfer pricing analysis to be able to substantiate the fair market price of goods/services exchanged.
13. Values and supporting of transfers of goods/services within a group (if entities have formed a tax group)
14. A master file and local file for related parties/connected persons if revenue exceeds AED 200 million
15. Details of any domestic and foreign dividends received and details of the holding percentage in such entity specifically if it’s a foreign entity.
16. Supporting evidence that all expenses claimed are wholly for business.
17. Copies of current and prior VAT and Corporate Tax returns
18. Opening balance sheet of first tax period in sufficient details specifically with respect to valuation of fixed assets

Your IT System

In addition, the Information technology system should be configured to show details of:

1. Specific for Freezone entitles, IT System should be able to show the sales to natural persons and also sale by activity/nature of goods/services.
2. Transactions of a freezone entity with non freezone persons in respect of commercial property located in freezone.
3. Transactions with any person in respect of immovable property that is not commercial property located in freezone.

Exempt Funds

Some additional documentation which may be required by exempt funds are:

-Evidence that assets are solely used to finance pension plan benefits or end of service benefit

– Evidence that investments do not constitute a business so operated by fund

– Income is either underwriting commission charged for the fund or rebates given to fund manager which are not considered consideration for the payment of services or income is from investments or deposits held for benefit of fund members or beneficiaries

How we can Help

At Ask Management consultants we can help by:

1. Analyzing your specific circumstances to advise on reliefs and applications that may help reduce tax burden.
2. Provide review of your current documentation for tax audit/compliance purposes
3. Provide accounting services that comply with requirements of UAE corporate tax regime.
4. Tax training for staff.
5. Internal controls and internal audit to remain compliant and reduce incidences of risk.
6. Support in preparation of corporate and Value added tax returns.