The Corporate Tax for Businesses Law (Federal Decree-Law No. 47 of 2022) is a recent law established in the UAE on the business landscape. Most businesses (especially

new ones) don’t understand it well, and so make mistakes when filing for Corporate Tax. This article will discuss the most common mistakes businesses make, and how to avoid them.

• Common Mistakes Businesses make when filing for Corporate Tax in the UAE:
• Consequences of making Corporate Tax Filing Mistakes:
• Practices businesses should implement to avoid these mistakes when Filing a business for Corporate Tax:
• How can Mubarak Al Ketbi Chartered Accountants help you regarding Corporate Tax?

Common Mistakes Businesses make when filing for Corporate Tax in the UAE:

1. Inaccurate Expense Classification

Inaccurate expenditure classification is a common error. Business owners may misclassify expenses, such as entertainment or interest costs, which are subject to deduction limitations under UAE tax legislation, or they neglect to keep

personal and business expenses separate.Calculations of taxable income may be inaccurate as a result of these issues.

Ways to Prevent:

1. Recognize Deductible costs: The only costs that may be written off are those that are directly and solely incurred during company operations. Make sure you classify them appropriately.
   1. Keep Up to Date: There are restrictions on some costs, such as interest or entertainment. Penalties may result from misclassifying them.

• Inaccurate Bookkeeping:

Ineffective accounting is one of the biggest mistakes businesses make. Incomplete or inaccurate financial records sometimes lead to incorrect taxable income computations, which can result in either an overpayment or an underpayment of taxes. This may also result in fines or pointless audits.

Additionally, companies risk missing out on valid tax savings if they don’t have the right paperwork for the claimed deductions.

The main ways to prevent:

1. Keep Thorough Records: Verify that all financial transactions, including bank statements, invoices, and receipts, are appropriately recorded.
2. Classify Transactions Precisely: Make a distinction between personal and corporate spending and appropriately allocate each in the accounting system.
3. Retention Period: To guarantee that records are accessible in the case of an audit, keep them for the legally required amount of time, usually five years.
4. Hire a qualified accounting business (like MAKCA) to make your bookkeeping records.

• Not meeting the deadlines for registration and filing:

Missing filing deadlines or not registering for corporation tax is a typical mistake, particularly for startups. Late filings are subject to severe fines under the FTA, and noncompliance increases the possibility of a tax audit.

Ways to Prevent:

1. Register on Time: As soon as a business satisfies the necessary requirements, it must register for corporation tax.
   1. Create Reminders: To create reminders for filing deadlines, utilize tax management software.

• Misjudging Tax Liabilities:

It is common for businesses to underestimate or overestimate their tax obligations. This may happen as a result of miscalculating taxable income, misinterpreting deductions, or not using the appropriate tax rate.

Ways to Prevent:

1. Seek Expert Assistance: For precise tax liability calculations, consult with company tax specialists or consultants.
   1. Frequent Evaluations: To guarantee accuracy, examine tax liabilities on a quarterly or annual basis.

• Not Taking Advantage of Tax Incentives

Firms can benefit from a number of tax benefits provided by the UAE, including tax credits for eligible costs, exemptions for free zone organizations, and reliefs for small firms. Regretfully, a lot of businesses miss out on these chances and end up paying more taxes than they need to.

Ways to Prevent:

1. Keep Up to Date: Examine the exemptions and incentives that are available to your company on a regular basis.
   1. Create a Tax Plan: To include possible incentives in your tax plan, speak with a tax expert.

Consequences of making Corporate Tax Filing Mistakes:

Companies who violate the corporate tax regulations of the United Arab Emirates risk a variety of sanctions. Inaccurate filings, underpayment of taxes, or late registration may result in sanctions from the FTA. These fines might vary from set penalties to percentages of the unpaid tax, depending on how serious the infraction was.

Furthermore, non-compliance can harm a business’s reputation, especially if it results in an audit or legal action. If a business overpays taxes as a result of inadequate planning or record-keeping, cash flow problems may also arise.

Practices that businesses should implement to avoid these mistakes when Filing for Corporate Tax:

Companies should take a proactive approach to tax compliance in order to steer clear of the typical difficulties associated with corporate tax filings:

1. Review Financial Records Frequently: To identify any possible mistakes early, audit financial records on a frequent basis.
2. Keep Up with Changes to the Tax Law: The tax regulations in the UAE are always changing. To prevent losing out on new tax-saving possibilities or compliance obligations, businesses need to remain up to speed.
3. Employ Tax Software and Get Expert Help: Using tax software can help you stay on top of deadlines and guarantee correctness. Speaking with a tax professional (eg. Mubarak Al Ketbi Chartered Accountants) might also help you avoid expensive errors.
4. Prepare for Tax Audits: Make sure that all tax-related papers are readily available and well-organized, and conduct internal audits on a regular basis.

How can Mubarak Al Ketbi Chartered Accountants help you regarding Filing for Corporate Tax:

As you have read, it is essential to avoid mistakes when filing for Corporate Tax in the UAE, in order to avoid facing penalties and fines. The best way to do this is by consulting a tax agent/company. One of the leading auditing & tax businesses in the

UAE is Mubarak Al Ketbi Chartered Accountants. We have over 2000 happy customers by serving in the UAE for 10+ years. We provide services in Accounting, Auditing, Corporate Tax, VAT, and more! Contact us today, and we guarantee you an excellent experience.