Since Corporate Tax took effect on 1 June 2023 under Federal Decree-Law No. 47 of 2022, taxable income above AED 375,000 is taxed at 9 percent, with 0 percent below that threshold. For decades, businesses in the UAE had no federal income tax reason to keep formal, structured records — invoices sat in filing cabinets, statements went unreconciled, and nobody was asking. That era is over.
In August 2025, the Federal Tax Authority issued a direct reminder to businesses: maintaining accurate records and documentation to support a filed return is not optional, it is a legal obligation. That applies whether your business pays 9 percent, sits under Small Business Relief, or qualifies as an exempt person. Everyone is expected to be able to justify what they filed.
A filed return is a declared position. What sits behind it is what the FTA can actually test.
The return itself is a summary. The FTA’s real interest is in the evidence that supports every number on it.
Customer and supplier contracts, lease agreements, and the other legal documents that establish why revenue or a cost was recognised the way it was. These don’t just support a number, they explain the terms under which it arose which matters the moment a figure gets questioned.
The underlying invoices, general ledgers, bank statements, and credit notes that connect each line in your financial statements back to an actual transaction. This is the layer most businesses already have in some form. The gap is usually organisation, not existence.
Financial statements alone aren’t sufficient. The FTA expects the calculation workings showing how you moved from accounting profit to taxable income — documented adjustments for non-deductible expenses, exempt income, reliefs claimed, and elections made. Where related-party transactions are involved, this extends to transfer pricing documentation demonstrating arm’s length terms. This is the layer that separates a return the FTA can simply accept from one that invites questions.
For most of the UAE’s history as a zero federal income tax jurisdiction, there was no regulatory reason to run a structured records function. Corporate Tax changed the underlying logic entirely: it’s no longer enough for a number to be correct, it has to be demonstrably correct, on request, with documentation that existed before the FTA ever asked for it.
That’s the real shift. Evidence-first compliance means the paperwork is built as the business operates, not reconstructed retroactively when a notice arrives. Businesses still treating documentation as a year-end task are, in effect, filing first and hoping the evidence catches up later. It usually doesn’t catch up cleanly.
The single most common way businesses get caught out isn’t a wrong deduction it’s a correct deduction they can’t prove, because the supporting paperwork was never captured at the time.
As each transaction happens, not months later: the underlying contract or invoice, clear evidence of business purpose behind the cost, and payroll documentation contracts, salary records, and management approval for anything discretionary like bonuses. For mainland entities, this should reconcile cleanly against Wages Protection System records.
On a recurring basis: financial statements prepared to a consistent standard, the documented workings behind every tax adjustment, transfer pricing files where related-party dealings exist, and management or board approval for material positions taken. Free zone and exempt entities carry an added burden here documentation has to support why that status genuinely applies, not simply assert that it does.
If a business is selected for review, the FTA can request records in digital or physical form, within the deadline stated in the audit notice. The expectation is that documents clearly trace a number in the filed return back to its source, not merely exist somewhere in the business. Records must be produced in Arabic when required. Some reviews involve on-site or remote access for auditors, and businesses with related-party transactions face additional scrutiny through transfer pricing documentation requirements. Even before the FTA reaches a conclusion on the return itself, a slow response to the request is its own compliance problem.
This is where a documentation gap stops being a paperwork issue and becomes an actual cost:
None of this requires deliberate wrongdoing. Most of it comes down to documentation that existed informally, somewhere, but couldn’t be produced cleanly and quickly when it mattered.
Our Global Tax Architecture practice builds documentation systems around this reality from the outset, not as something assembled under deadline pressure. We work with finance teams to define what gets captured at the transaction level, structure the entity-level file the FTA actually expects to see, and build a process that holds up under review — not just at filing time.
If your current record-keeping was built for a business that didn’t yet have Corporate Tax to answer to, it’s worth a conversation before the FTA asks the question first.
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