The introduction of corporate tax in the United Arab Emirates has yielded an unforeseen positive impact on family-run businesses, according to tax experts.
As the Federal Tax Authority (FTA) extends the filing deadline, many smaller enterprises are discovering newfound benefits in financial transparency and discipline.
“For many smaller family-run businesses, the introduction of corporate tax is the first time these companies have been legally required to prepare accounting and financial statements up to a recognised financial standard,” to John Casey, Managing Director of Taxready.ae, a Virtuzone company, told Arabian Business.
Although this represents an additional administrative burden, it also benefits these businesses by giving them more visibility into their financial performance and increasing their financial discipline.
“Businesses will now need to regularly review their financials for tax filings, ensuring better tracking of revenues, expenses, and profits. The need for tax compliance and accurate accounting creates opportunities for strategic financial planning and forecasting, ultimately giving family businesses a clearer view of how their operations are performing,” he explained.
Corporate tax deadline extended
This development comes as the FTA on Sunday announced an extension for filing Corporate Tax Returns and settling Corporate Tax Payable. The new deadline, set for December 31, 2024, applies to short Tax Periods ending on or before February 29, 2024, providing relief to businesses still adapting to the new tax landscape.
“We are deeply committed to taking proactive measures that benefit taxpayers. Recognising the potential challenges faced by businesses with a first Corporate Tax period shorter than a year, we have postponed the deadline… to assist taxpayers in meeting their Corporate Tax obligations,” FTA Director-General Khaled Ali Al Bustani said.
The extension, formalised through Decision No. 7 of 2024, is particularly relevant for taxable entities incorporated, established, or recognised on or after June 1, 2023, whose first tax period is shorter than 12 months.
FTA issued Decision No. 7 of 2024 on the Postponement of the Deadline to File a Tax Return and Settle the Corporate Tax Payable for Certain Tax Periods for the Purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses and its amendments. pic.twitter.com/6UEBmjkhfS
— Federal Tax Authority – الهيئة الاتحادية للضرائب (@uaetax) September 30, 2024
While larger corporations are generally well-prepared for the new tax regime, many small and medium-sized enterprises (SMEs) are still navigating challenges. Common concerns include managing expenses effectively, maintaining accurate financial records, and utilising tax exemptions.
“From our experience working with over 5,000 companies, the readiness for corporate tax implementation varies considerably,” said Casey.
“Many SMEs, especially those without internal accounting teams, are still facing challenges, particularly in understanding the deadlines and how corporate tax applies to their specific business models.”
The deadline extension is expected to be particularly beneficial for companies like those incorporated on June 10, 2023, with a financial year from January 1 to December 31. Such businesses now have until December 31, 2024, to submit their Tax Return and settle the Corporate Tax Payable, instead of the previous September 30, 2024 deadline.
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