Tax and Auditing in the UAE: A Comprehensive Overview

 1. Corporate Tax in the UAE

The UAE has historically been known for its business-friendly tax regime. However, with global economic shifts and the UAE’s alignment with international tax standards, the country has implemented a more structured tax framework.

 Key Highlights:

• Corporate Tax Law Introduced: Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses came into effect on 1 June 2023.
• Corporate Tax Rate:
  
  • 0% on taxable income up to AED 375,000
  • 9% on taxable income above AED 375,000
  • 15% for large multinational entities (as part of OECD BEPS Pillar Two rules)

 Corporate Tax Registration:

• All UAE-based businesses (Free Zone and Mainland) are required to register with the Federal Tax Authority (FTA), regardless of income thresholds.
• Free Zone entities can qualify for a 0% tax rate on qualifying income, provided they meet specific substance and regulatory requirements.

 Deadlines:

• Corporate tax return must be filed within 9 months from the end of the relevant financial year.
• Penalties for late registration or filing start from AED 10,000 and may increase based on non-compliance duration.

 2. VAT (Value Added Tax)

The UAE introduced VAT on 1 January 2018 at a standard rate of 5%.

 VAT Essentials:

• Mandatory for businesses with taxable turnover above AED 375,000/year
• Optional registration for turnover above AED 187,500/year
• VAT applies to most goods and services, including imports.

 Filing & Compliance:

• VAT returns are typically filed quarterly or monthly depending on the company’s size.
• Failure to comply with VAT regulations can lead to significant penalties, including administrative fines and suspension of trade licenses.

 3. Excise Tax

Introduced in 2017, excise tax targets products that are harmful to human health or the environment:

 Taxable Products:

• Tobacco products: 100%
• Carbonated drinks: 50%
• Energy drinks: 100%
• Electronic smoking devices: 100%

 4. External Auditing in the UAE

Auditing is not only a business best practice in the UAE—it is also a regulatory requirement, particularly for:

• Free Zone entities (for license renewal)
• Companies seeking ICV certification, bank facilities, or attracting investors
• Firms under economic substance regulations (ESR)

 Purpose of External Audit:

• To ensure transparency and accuracy in financial statements
• To assess compliance with IFRS (International Financial Reporting Standards)
• To identify potential risks, fraud, or discrepancies
• To provide assurance to stakeholders and regulatory authorities

 Audit Requirements:

• Maintain financial records for at least 5 years
• Submit audited financial statements to relevant Free Zone authorities (DMCC, DIFC, DAFZA, etc.)

 5. Importance of Tax and Audit Services in the UAE

With increased regulations and tax reforms, professional tax advisory and audit services have become essential for:

• Staying compliant with FTA and economic substance laws
• Optimizing tax liabilities and identifying restructuring opportunities
• Ensuring smooth corporate governance and financial health
• Preparing for potential tax audits or FTA investigations

 Why Choose Omnex for Tax & Audit Services?

At Omnex, we specialize in delivering end-to-end tax, accounting, and audit solutions aligned with UAE laws. Our services include:

• Corporate Tax Planning & Filing
• VAT & Excise Tax Registration and Advisory
• External & Internal Auditing
• Tax Residency Certificates
• Free Zone & Mainland Compliance

• Economic Substance Regulation (ESR) Advisory