UAE Modifies Corporate Tax Procedures: Mandatory Audited Financial Statements for Tax Consortia
UAE Introduces Amendments to Support Compliant and Competitive Tax Environment
The United Arab Emirates (UAE) has announced a series of amendments aimed at providing clarity and supporting a competitive tax environment. These changes are part of the country's ongoing efforts to ensure compliance with global standards and maintain a balanced and competitive tax environment.
The decision offers significant benefits for Qualifying Free Zone Persons (QFZPs) involved in the distribution of goods or materials within or from Designated Zones. The amendments are designed to help these entities confidently benefit from the Free Zone Corporate Tax regime. Furthermore, the decision provides further guidance for entities in the distribution sector, ensuring they can fully leverage the advantages of the Free Zone Corporate Tax regime.
In line with these changes, the UAE has mandated the preparation of audited special-purpose aggregated financial statements for Corporate Tax compliance. All tax groups registered for UAE Corporate Tax must prepare these statements, which must fully comply with the International Financial Reporting Standards (IFRS). This move is intended to achieve robust, transparent, and standardized financial data that form the basis for accurate Corporate Tax calculations and filings.
The Federal Tax Authority (FTA) is expected to issue further detailed guidance on the framework, methodologies, and acceptable practices for preparing these special-purpose aggregated financial statements. This is to ensure consistency and transparency in reporting and audit processes. Specific additional procedures apply to QFZPs engaged in distribution activities in or from Designated Zones. The FTA will provide further instructions to guarantee that these distribution businesses fully benefit from the Corporate Tax Free Zone regime while maintaining compliance.
All records supporting the audited statements must be retained and available for at least seven years and accessible for inspection by the FTA at any time. Businesses must complete audits and finalize their aggregated financial statements in time to meet filing deadlines, which include the Corporate Tax return and transfer pricing disclosures due by September 30, 2025, for the applicable financial year. Early preparation and engagement with auditors are essential to avoid penalties and filing delays.
In summary, the UAE requires aggregated financial statements audited specifically for Corporate Tax, adhering strictly to IFRS, with further procedural guidance forthcoming from the FTA. These rules are designed to balance transparency and compliance with the practical needs of tax groups and free zone businesses. As the FTA finalizes comprehensive guidance, companies should monitor official releases closely and work with professional auditors experienced in UAE Corporate Tax and IFRS compliance to ensure adherence to these evolving requirements.
The amendments also underscore the UAE's ongoing efforts to balance regulatory clarity with ease of doing business, making the country an attractive destination for businesses seeking a competitive and compliant tax environment.
[1] Federal Tax Authority (FTA) Regulations [2] Ministry of Finance (MOF) Regulations [3] International Financial Reporting Standards (IFRS) [4] Corporate Tax return and transfer pricing disclosures deadlines
- The amendments by the UAE in their tax environment involve the preparation of audited special-purpose financial statements, which abide by the International Financial Reporting Standards (IFRS), as part of their efforts to ensure a compliant and competitive business environment, particularly for entities involved in distribution activities within or from Designated Zones.
- In line with the ministry of finance (MOF) regulations and Federal Tax Authority (FTA) oversight, businesses in the UAE must adhere to the regulations outlined in the Corporate Tax return and transfer pricing disclosures, maintaining these records for at least seven years to demonstrate transparency and compliance within the finance sector of the environment.
