Tax Consultant in Abu Dhabi and Across the UAE

The most expensive tax questions are usually the ones asked after the money has already moved. This engagement shows both halves of that: the call that arrived too late, and what structuring the transaction properly would have looked like.

The Call That Should Have Come Before, Not After

A professional services firm, sole owner-director, five years. My firm had been engaged eight months when the owner called on a Thursday. He had transferred AED 900,000 from the company account to his personal account the previous week, and wanted to know how to record it.

His reasoning was understandable, he had been the company’s primary capital source early on and felt he was taking back what he had put in. The problem: the withdrawal’s structure had not been discussed beforehand, and under Corporate Tax that matters enormously. A loan repayment, a dividend and a salary are taxed differently, each triggering different documentation.

The shareholder current account mixed capital injections, personal reimbursements and informal drawings, never formally categorised. No loan agreement, no documented interest rate. And the AED 900,000 sat above the AED 500,000 connected persons disclosure threshold, going on the CT return regardless of classification, needing to hold up.

Three weeks of reconstruction followed: rebuilding the shareholder current account from incorporation, separating capital injections from drawings, and establishing the loan balance at the prior year-end. Roughly AED 650,000 could be characterised as repayment of a documented shareholder loan, clean. The remaining AED 250,000 needed treatment as a dividend or drawing, so I prepared a retrospective board resolution and documented the connected person payment under Article 31.

What sits on the first CT return now is a properly structured transaction. Not an unstructured AED 900,000 connected-person transfer with no supporting analysis or board resolution, exactly the kind of first-period exposure that generates FTA post-filing queries.

Structured, Not Just Recorded

I told him I am not here to stop him taking money from a business he built. He earned it. I am here to make sure that when he takes it, it holds up to scrutiny. He calls before now.

The single biggest misunderstanding I see is the threshold confusion. Owners hear “transfer pricing” and picture multinationals: AED 200 million revenue, or a group at AED 3.15 billion consolidated turnover, the thresholds for formal Master File and Local File documentation. Because most SMBs sit below both, they assume TP does not apply to them. Wrong.

The arm’s length principle under Article 34 applies to every UAE taxable person transacting with related parties, regardless of size or whether formal documentation is required. The thresholds set what you must prepare; the obligation itself is universal, two different things.

The disclosure obligation is equally misunderstood. Related-party transactions above AED 40 million aggregate, or AED 4 million in one category, trigger the Related Party Transaction Schedule. Connected persons disclosure triggers above AED 500,000 to a single person. A business paying AED 600,000 in salary to an owner-director has a disclosure to make either way.

For a straightforward intercompany loan, proper documentation needs four things: a signed loan agreement predating it, a benchmarked interest rate, consistent treatment in both entities’ accounts, and genuine commercial purpose. That last point matters under Article 31’s SIDLR provisions, where dividend-funding interest may not be deductible without showing the purpose was not a tax advantage.

A missing loan agreement is the most consistent finding in my first TP review. None of this needs a two-hundred-page benchmarking study. A proper agreement, a benchmarked rate and a contemporaneous rationale is enough for most SMBs, at a fraction of the cost of defending an undocumented position later.

A missed deadline feels final and rarely is. Two assumptions send businesses in the wrong direction at exactly the moment options are still open, so it helps to take those first and then set out the mechanisms that genuinely remain available.

Two Wrong Assumptions

There is no general penalty amnesty for a good reason. And the CT late registration waiver does not extend to VAT: it covers only the AED 10,000 CT penalty. A late VAT filing or payment has no equivalent waiver, and I have had clients told otherwise. Costly misunderstanding.

The Mechanisms That Exist

• Late CT registration. The waiver is automatic, no application needed, if the first CT return is filed within seven months of the tax period end rather than the usual nine. The clock runs from your period end, not a national date, and miscalculating it is the most common way businesses miss a waiver they intended to claim.

• Late VAT filing. AED 1,000 first offence, AED 2,000 for a repeat within 24 months. A reconsideration request under Article 27 can be filed within 40 business days for genuine exceptional circumstances, a narrow list clarified under FTA Decision No. 1 of 2025.

• Late payment. 14% per annum, monthly, non-compounding, since 14 April 2026. Filing and payment are separate obligations. A business that files on time and pays a month late is in a far better position than one that does neither.

• Errors in a return. Voluntary disclosure costs 1% per month from the original due date. An AED 100,000 underpayment found eight months later costs AED 8,000, against 15% fixed plus 14% per annum if the FTA finds it first.

Reconsideration is a formal request for the FTA to review a decision already made, not a negotiation. It works only with a real factual basis: a miscalculated penalty, a wrong date, a portal failure, a reasonable excuse under Article 51. Compliance first, penalty minimisation second.

Most clients have not looked at their EmaraTax account properly since the day they registered. Log in to file, log back out.

• Outdated registration information. Trade licence, signatory and contact details entered at registration and never updated. FTA correspondence goes wherever the record says, and I have seen a query sit unanswered for weeks after going to a former bookkeeper’s inbox.

• Unread correspondence. The message centre logs every FTA communication. Most owners have never opened it, and occasionally something substantive sits there unacted on.

• Payment allocation. A transfer to the FTA’s GIBAN without first generating a payment reference can sit as an unallocated credit rather than applied to the return. It shows unpaid, and penalties start accruing on a business that believed it was compliant.

• VAT credit ageing. Under Federal Decree-Law No. 16 of 2025, credit balances now have expiry dates that are invisible unless someone has mapped the balance to its originating periods. Most owners have not.

• Filing history against accounting records. Mapping the return history against revenue for the same periods almost always turns up a discrepancy, whether the books sit in Zoho Books, Xero or QuickBooks. When the FTA runs its own cross-referencing, it is doing exactly this comparison from the other side.

Most businesses treat EmaraTax as a submission portal, not a compliance tool, so problems accumulate quietly while the business assumes it is fine because returns are being filed.

Three decisions compound across every future tax period, and each is effectively irreversible once the first return is filed.

The Realization Basis Election

The default is accrual taxation: gains recognised when they arise, not when cash changes hands. For a business holding investment property at IFRS fair value, that creates a tax liability on paper gains. The realization basis election lets you recognise gains only when an asset is sold, available only in the first tax period, and irrevocable.

A professional services firm that also held investment property filed its first return independently and never made the election, because nobody told them it existed. By the time I saw the file, the window had closed. The full gain since the date of purchase will now be taxable on sale, not just the appreciation since Corporate Tax began.

The Transitional Relief Election

Under Ministerial Decision No. 120 of 2023, a business can step up pre-CT assets to market value at the start of its first tax period, so only post-June-2023 appreciation is taxed, made in the first return or not at all.

A unit bought in 2018 for AED 3 million, worth AED 5 million at CT start, sold for AED 7 million: without the election the gain is AED 4 million, with it AED 2 million. At 9%, that is AED 360,000 against AED 180,000, a AED 180,000 tax difference from a single election.

Small Business Relief, Chosen Without Modelling It

SBR treats revenue under AED 3 million as zero taxable income, but electing it switches off loss carry-forward for that period, and a genuine loss in an SBR year is extinguished, not deferred.

A business with AED 500,000 of real losses that elects SBR gives up AED 45,000 of future relief for nothing, since no tax was due anyway. For a loss-making business, filing properly and carrying the loss forward is usually better; for a profitable one under AED 3 million, SBR is often right. It needs analysis, not assumption.

The general framework is the same for everyone. The mistakes cluster by sector.

• Trading. The reverse charge mechanism on imported services almost never gets handled. A subscription to overseas software or a payment to a foreign freight forwarder is a service import subject to 5% reverse charge VAT. Most trading businesses I review have never reported a dirham of it.

• Professional services. Cross-border supply misclassification: zero-rating services to overseas clients without meeting the conditions tightened under the November 2024 update to Article 31. Owner-director pay is also a connected person transaction most owners have never considered that way.

• Real estate. Mainland property income is an Excluded Activity under MD 229 of 2025, taxed at 9%. If it pushes a free zone entity’s non-qualifying revenue above the de minimis line, QFZP status is lost for five years, and I see this set up without anyone modelling it.

• Free zones. The gap between what the QFZP substance test requires and what actually happens on the ground. Audited statements are now mandatory for every QFZP from periods beginning January 2025, giving the FTA direct visibility into the entity’s real footprint.

Three things are coming that most SMBs have not priced in.

• The SBR sunset. Small Business Relief expires for periods ending after 31 December 2026, no extension announced. From 1 January 2027, every business relying on it moves to the standard 9% regime above AED 375,000. A firm on AED 2.5 million revenue and AED 800,000 profit will owe roughly AED 38,250 a year, which belongs in the pricing model now, since splitting into multiple entities to dodge the AED 3 million line risks avoidance treatment.
• The DMTT’s indirect reach. The Domestic Minimum Top-Up Tax targets MNE groups at EUR 750 million or more globally, and a standalone Abu Dhabi SMB is genuinely unaffected. But many local businesses are subsidiaries of larger groups that do meet the threshold, and a free zone entity on the 0% QFZP rate inside such a group can find that benefit clawed back at parent level. If your parent group might be in scope, have that conversation now.
• The R&D credit most assume doesn’t apply to them. Cabinet Decision No. 215 of 2025 introduced a non-refundable R&D credit from 1 January 2026, tiered up to 50% of qualifying expenditure and not limited to technology or pharma; a manufacturer refining its process can qualify too. Rate and required headcount scale with spend, and it needs pre-approval and documentation from the start.

Underneath all three sits the shift already reshaping VAT: the FTA’s first full CT data cycle closed September 2025 alongside seven years of VAT history, and the comparison sharpens further once e-invoicing brings transaction-level visibility from 2027.

The businesses I worry about most are not the ones with bad intentions. They are the ones with the most history. A business operating ten or fifteen years, built sensibly for the pre-Corporate-Tax environment, carries more latent complexity than one that had to think about CT from day one.

The most valuable thing I can do is rarely fixing the returns. It is the honest conversation about the business through a tax lens: structure, asset base, related-party arrangements, what needs addressing now versus later. That conversation, had once and had properly, saves more than ten years of correct returns on a wrong foundation.

Whatever state your structure, records or related-party arrangements are in, there is nothing you can show me that I have not seen in a worse state. My first meeting is a diagnostic, not a sales process. Book a free consultation with AH Chartered Accountants in Abu Dhabi before a gap like this costs you five years of QFZP status.