This blog unpacks two vital areas of the UAE’s Corporate Tax Law:
- General Anti-Abuse Rules (GAAR) – which target tax-driven arrangements lacking commercial purpose.
- Corporate Tax Compliances – covering everything from registration to filings, disclosures, and documentation.
Whether you’re a CFO, consultant, or business owner, this guide gives you the practical clarity you need to stay compliant and steer clear of penalties.
Preface
With the UAE’s corporate tax regime in effect, the message is clear: businesses must not only pay taxes — they must do so in the right spirit. This doesn’t just mean filing returns or doing the math right. It’s about intent and transparency.
The law wants businesses to avoid artificial setups created purely for tax benefits. At the same time, it outlines a clear roadmap for every taxpayer to follow. That’s where GAAR and compliance rules come in.
Let’s explore them in a way that makes real-world sense.
General Anti-Abuse Rules (GAAR)
Think of GAAR as the UAE tax system’s way of saying: “We’re watching for smart tricks — but we value honesty more.”
Under this rule, if a company enters into a transaction or structure primarily to reduce its tax burden — and that move doesn’t make commercial sense — the Federal Tax Authority (FTA) has the legal right to intervene.
They can disregard that setup entirely and recalculate the taxable income as if the arrangement never happened.
So what triggers GAAR?
Two key elements:
- The main purpose of the arrangement is to gain a corporate tax advantage
- The transaction lacks a genuine commercial rationale
When both boxes are ticked, GAAR comes into play. It lets the FTA look beyond what’s on paper and assess the true purpose behind the move.
Application of GAAR
GAAR doesn’t apply to routine operations or accidental benefits. It applies where there’s deliberate abuse — and only to arrangements entered into on or after 1 June 2023.
Let’s say a business creates an entity just to shift profits and avoid tax. If that entity doesn’t offer any real function — like providing services, owning assets, or taking on risk — the tax authorities can:
- Ignore that company’s existence
- Combine or split the incomes differently
- Deny the tax benefit altogether
And if they do, no other provision of the law can override GAAR. That’s how powerful it is.
So, while tax planning is legal, crossing the line into artificiality can come back to haunt you.
Corporate Tax Compliances
While GAAR ensures fairness, the compliance rules ensure that every taxpayer follows the correct process.
The UAE’s Corporate Tax Law outlines clear steps for registration, filing, correcting errors, record maintenance, and more. These aren’t optional—they’re legal duties.
Let’s walk through them one by one.
Registration and De-registration
The first step is formalizing your tax identity.
Every taxable person must register with the FTA and obtain a Tax Registration Number (TRN). This applies even if your income is zero, or if you fall under an exemption.
Similarly, if your business closes or you’re no longer taxable, you’re expected to apply for de-registration through the FTA portal.
Failure to register or de-register at the right time can lead to penalties — and potentially larger issues if the delay looks intentional.
Corporate Tax Return
Every taxable person is required to file a corporate tax return for each financial year.
Key rules:
- One return per tax period — no quarterly returns
- Due within 9 months after the end of the tax period
- You must disclose:
- Your taxable income
- Any exempt income or deductions
- Foreign tax credits, if any
- Related-party transactions, if applicable
Late filing? You risk penalties and interest — even if you eventually pay.
So, timely and correct filing is essential. It’s not just about numbers — it’s about trust.
Voluntary Disclosure
Mistakes happen. The law acknowledges that.
If you file a return and later realise there’s a mistake — maybe an income item was left out, or you overclaimed deductions — you can submit a voluntary disclosure.
But it’s crucial to act before the FTA finds it on their own.
Voluntary disclosures:
- Must be filed proactively
- Reduce your risk of harsh penalties
- Show that you’re acting in good faith
In short, correct your error before they come knocking.
Record Keeping
Good records are your best defence.
Under UAE tax law, businesses must retain all records for 7 years after the end of the tax period.
What kind of records?
- Invoices, contracts, and payment proofs
- Ledgers, bank statements, and audit trails
- Any documentation supporting:
- Income declared
- Deductions claimed
- Tax credits used
This rule applies whether you’re a multinational or a small consultancy. No business is exempt from keeping its books in order.
And if you can’t produce them when asked? The FTA can reassess your tax — or reject your return altogether.
Language and Currency of Records
Records must be maintained in:
- Arabic, unless special approval is granted
- AED, unless the FTA permits otherwise
If you deal in foreign currencies, all values must be converted to AED using the official exchange rate issued by the UAE Central Bank, based on the recognition date of the transaction—not the payment date.
Why does this matter? It ensures consistency in reporting and simplifies auditing.
If you keep records in another language or convert using unofficial rates, you may face compliance issues—even if the numbers are right.
Final Thoughts
Corporate tax compliance in the UAE isn’t just about making calculations — it’s about conducting business with clarity, honesty, and purpose.
On one hand, GAAR acts like a safety valve, keeping the system fair. It ensures that businesses don’t take unfair shortcuts under the guise of “smart planning.” If an arrangement doesn’t make sense commercially, the tax benefit may simply be taken away.
On the other hand, corporate tax compliance is the ground you walk on. It’s the checklist that keeps your business operations in sync with the law.
Here’s what every business should walk away with:
- Don’t build structures that don’t serve a real commercial purpose
- Register and de-register on time — delays can cost you
- File accurate, timely returns
- If you spot a mistake, own it before someone else does
- Keep clean records — and make sure they’re in the right format
- Follow currency and language rules — even if they seem minor
The new tax era in the UAE is designed for clarity, fairness, and discipline. If your business is structured honestly and run responsibly, there’s nothing to fear.
But if shortcuts are part of your strategy, now’s the time to rethink.
