FTA warns small firms to file tax returns despite zero-rated status

The Federal Tax Authority (FTA) issued a formal notification on Monday, 3 August, reminding small business owners and startups in the UAE that they must submit corporate tax returns, even if they are eligible for zero-tax relief. Under the current tax framework, companies with revenues below a specific threshold are not exempt from the filing process itself. Compliance for Small Business Relief Businesses with a turnover of Dh3 million or less in a relevant tax period can claim Small Business Relief, which results in a zero per cent tax rate. However, the FTA clarified that this relief is not automatic. To benefit, eligible taxable persons must actively elect for the relief in their tax return submission. Failure to file by the prescribed deadline could result in administrative penalties, regardless of the final tax liability. The UAE corporate tax regime, which came into effect for financial years starting on or after 1 June 2023, requires all registered entities to maintain accurate financial records for at least seven years. This administrative requirement applies to Free Zone entities and mainland businesses alike, ensuring the FTA can verify eligibility for exemptions or relief schemes during future audits. Deadlines and Documentation The urgency for this reminder stems from the approaching filing deadlines for the first set of tax periods. Most companies are required to file their return and pay any due tax within nine months of the end of the relevant tax period. For…