Due Diligence and corporate tax in dubai | Buyer Checklist

Buying a company in Dubai now means buying its tax history as well. The UAE corporate tax regime applies a 0 percent rate up to AED 375,000 of taxable income and 9 percent above that, for financial years that started on or after 1 June 2023.

More than 640,000 businesses have already registered, which shows how deep the net runs across mainland and free zone entities.

In that setting, buyers need tax due diligence that looks beyond simple VAT checks. It has to cover corporate tax in Dubai, legacy risks and how the target will behave under the new rules once the deal closes.

Why Tax Due Diligence in Dubai Now Looks Different?

Old style reviews often focused on VAT, customs and payroll. Now most UAE businesses are “Taxable Persons” for corporate tax, with new filing and payment duties.

The Federal Tax Authority runs these rules through its EmaraTax platform, which records registrations, returns and notices in one place.

For a buyer, weak registration or poor EmaraTax records can signal deeper problems. That is why serious investors now expect structured Dubai Tax Due Diligence before they sign.

Step 1: Mapping The Target’s Tax Footprint

A good UAE Tax Risk Assessment starts with a clear map of the target’s footprint.

Key questions include:

• Which legal entities are in scope of UAE corporate tax and which are exempt?
• Does each entity hold a corporate tax registration on EmaraTax with correct trade licences and dates?
• Is the business based in a free zone that claims Qualifying Free Zone Person status, or is it a normal mainland entity?

UAE guidance explains that free zone entities can access a 0 percent rate on qualifying income and 9 percent on non-qualifying income, if substance and activity tests are met.

A buyer must test those claims. If qualifying status fails later, profits that management expected to sit at 0 percent may fall into the 9 percent band or even a 15 percent minimum top up for large groups.

Step 2: Checking Corporate Tax Filings and Relief Claims

Once the footprint is clear, the next step in Dubai Tax Due Diligence is to test filings and reliefs.

Registration and returns

EmaraTax manuals set out a three-step path for corporate tax registration: create an account, create the taxable person profile, then use the corporate tax tile to register.

Guides on the FTA site also describe penalty waivers for late registration only when specific conditions are met.

Due diligence should check:

• That registration happened before deadlines.
• That the target filed returns for all open periods.
• Those computations match financial statements and local adjustments.

Losses, exemptions and restructuring relief

The law allows tax neutral transfers inside a qualifying group and during some restructurings under Article 26 and 27, supported by detailed Business Restructuring Relief guidance.

These rules let companies move businesses or merge entities without triggering gains in taxable income, if conditions hold and elections are filed.

A buyer must test:

• Which transfers relied on these reliefs.
• Whether clawback triggers could revive deferred gains, for example when ownership changes or businesses are sold within the clawback period.

VAT Compliance Due Diligence Still Matters

Strong VAT Compliance Due Diligence remains essential because VAT penalties can be steep and often point to wider control problems.

Cabinet Decisions on penalties set fixed and percentage charges for errors such as not showing VAT inclusive prices or failing to notify changes, while later revisions adjusted how some penalties accrue over time.

A buyer should review:

• Registration history for VAT.
• Consistency between VAT returns, trial balances and sales reports.
• Any voluntary disclosures, payment plans or FTA letters.

Weak VAT controls often mean the same finance team will struggle with corporate tax computations and future audits. Many buyers now hire expert accounting and bookkeeping services in the UAE from Arnifi to stabilize routine bookkeeping in the UAE so VAT returns and corporate tax filings both sit on the same reconciled numbers.

Understanding Audit and Penalty Risk

The Tax Procedures Law gives the FTA powers to audit taxpayers, obtain records and notify findings, with taxpayers allowed to see documents used for assessments.

Recent commentary on penalties explains that unpaid tax can attract upfront charges plus monthly percentages until payment, and voluntary disclosures after audit notices can trigger extra fixed penalties.

For a buyer, risk review should cover:

• Any completed audits and their outcomes.
• Open queries or desk reviews.
• Internal evidence that reconciles returns to ledgers.

A good UAE Tax Risk Assessment does not stop at numbers. It tests how the company responds when the FTA asks for support and how quickly it can supply reconciled data.

How Dubai Tax Due Diligence Specialist Firm Can Help?

Many investors now bring in a Dubai Tax Due Diligence Firm that understands both corporate tax and VAT, along with EmaraTax processes.

Such a firm can:

• Read complex FTA guides on restructuring relief, group relief and natural person rules, then translate them into simple findings.
• Compare the target’s practices with current public clarifications, especially on registration waivers and corrected returns.
• Build an integrated view that links corporate tax, VAT and procedures law, not three isolated reports.

Arnifi works in this role for buyers that treat Dubai tax risk as part of their overall deal model. The team reviews registrations, filings and relief elections, then ranks issues by cost and fixability so decision makers see a clear picture before they sign.

Handled this way, corporate tax in Dubai becomes a measured variable inside the deal, not an unpleasant surprise after closing.

FAQs

Why is tax due diligence in Dubai more important after corporate tax started?

Corporate tax now applies to most UAE businesses, with new filings, penalties and reliefs. Buyers inherit that history, so they must test registrations, returns and elections before buying.

What corporate tax documents should buyers always ask for during due diligence?

Key items include EmaraTax registration letters, submitted tax returns, detailed computations, elections for group or restructuring relief and any FTA audit correspondence or penalty notices.

How does VAT due diligence support a corporate tax review in Dubai?

VAT records show how disciplined the finance team is. Repeated VAT errors or penalties often signal weak controls, which can spill into corporate tax and raise future audit risk.

What makes free zone entities higher risk during acquisitions now?

Free zone companies may rely on qualifying status for low tax. If substance or activity tests fail later, profits can move into the 9 percent band or face top up tax under global rules.

How can Arnifi help buyers manage UAE tax risk in deals?

Arnifi performs focused UAE Tax Risk Assessment work, testing EmaraTax records, relief claims and VAT controls, then quantifying exposures so buyers can price, structure or negotiate protections confidently.