Businesses Gear Up for Corporate Tax Compliance

THE UAE businesses are getting ready for 100 per cent compliance on corporate tax that will play significant role in economic diversification, revenue generation and contribution to gross domestic product (GDP) of the country, experts say.

Analysts, tax experts and top executives said the nine per cent levy, which was introduced last year as part of the government move to align its tax regime in line with best international standards, will help attract foreign direct investment (FDI) and give cushion to the authorities to invest tax revenue to boost the national economy.

They said the corporate tax awareness campaigns launched by the Federal Tax Authority (FTA) played a key role in preparing the businesses for effective compliance over the new levy. The FTA consistent efforts, which aims to provide continuous knowledge support to all relevant taxpayers and stakeholders, will yield positive results to ensure accurate and seamless implementation of corporate tax.

The first phase of the FTA campaign included 48 in-person and virtual workshops, which welcomed a total of approximately 13,600 participants, including taxpayers from various business sectors and tax sector stakeholders. As many as 39 virtual workshops were organised as part of the awareness campaign to introduce new tax and clarify the requirements and procedures for corporate tax registration in both Arabic and English.

The FTA Director-General Khalid Ali Al Bustani said the authority is committed to reaching out to all stakeholders involved in implementing the tax system through various channels.

“Since the introduction of corporate tax, the authority has intensified its activities to raise awareness about the tax and highlight its vital role, objectives, and compliance requirements. The positive results observed during the first phase of the campaign reflect the commitment among business sectors to implementing corporate tax law, which aims to advance the UAE’s position as a leading global business and investment hub,” Al Bustani said.

WHY CORPORATE TAX

Holger Schlechter, Chief Financial Officer at IFZA, said the UAE has a business-friendly environment, offers access to a large market, modern infrastructure, and a multicultural work force.

“Corporate tax is expected to have some far-reaching implications for the business environment in the region. Companies will now be compelled to maintain accuracy in financial records and file annual tax returns, which will lead to increased accountability,” Schlechter told BTR.

He said the introduction of the nine per cent corporate tax rate has opened the doors for businesses in the UAE to participate in international tax treaties and avoid double taxation. However, the free zone companies can benefit from a zero per cent tax rate on their qualifying income should they meet the requirements of a ‘Qualifying Free Zone Person’.

“Since the introduction of tax aligns with global best practices and international standards, corporate tax will help drive and increase FDI and allow the government to invest tax revenue to boost the national economy,” he said.

SIGN OF CREDIBLE ECONOMY

Mahar Afzal, Managing Partner at Kress Cooper Management Consultants, said corporate tax is a sign of a credible economy.

“Corporate tax would be helpful to meet international standards to bring transparency and prevent harmful tax practices. Eventually, it will enhance the trust of the investors; and play a pivotal role in nurturing and sustaining matured economy,” Afzal told BTR.

Farhat Ali Khan, Managing Partner, CMI & Co, said corporate tax will play a major role in the UAE economy.

“It is a significant move to diversify sources of revenue for the government and is likely to drive enhanced tax transparency and encourage responsible corporate behaviour,” he said.

A MAJOR FISCAL SHIFT

Vijay Valecha, Chief Investment Officer, Century Financial, said the nine per cent corporate tax introduction in the UAE signals a significant fiscal shift, presenting both opportunities and challenges.

On the positive side, he said it diversifies revenue, reducing reliance on diminishing hydrocarbon reserves. This financial boost can fund public services, infrastructure, and economic diversification, attracting foreign investment and nurturing a resilient, knowledge-based economy. A robust tax system also enhances transparency, reinforcing the UAE's global business reputation.

However, he said complexities arise as businesses adjust to this tax shift from a tax-free environment.

“Adapting to new accounting practices is resource-intensive for both established and startup firms. Free zones, traditionally tax-exempt, may need strategic reassessment. Balancing the attraction of new businesses with sustaining existing appeal is a critical government challenge. Inflationary risks loom, as businesses may transfer tax burdens to consumers, impacting affordability and exacerbating socio-economic disparities,” Valecha told BTR.

“Success depends on adept government navigation of these challenges. Transparent implementation and business support during the transition are pivotal. Simultaneously managing inflationary risks and ensuring equitable tax benefit distribution are vital for a positive economic future,” he said.

— muzaffarrizvi@khaleejtimes.com