Keeping accurate tax records is no longer optional for businesses in the UAE. With corporate tax now in effect, many companies are searching for clarity on the UAE corporate tax records grace period and what it actually allows them to update without penalties. This grace period is especially relevant for businesses that registered quickly, changed business details, or failed to update information in their Federal Tax Authority records on time. Understanding the real scope of the grace period helps businesses avoid administrative penalties and future compliance issues.

If you want to know what the UAE corporate tax records grace period really covers, what records must still be maintained, and how long documents should be kept, read on to ensure your business stays compliant and protected.

What Is the UAE Corporate Tax Records Grace Period?

The UAE corporate tax records grace period refers to a specific relief period announced by the Federal Tax Authority that allows businesses to update or correct their tax record information registered with the FTA without incurring administrative penalties. This relief applies only to penalties related to late updates of tax registration details.

The grace period applies to updates made between 1 January 2024 and 31 March 2025, during which penalties for failing to notify the FTA within the required timeframe may be waived or reversed.

Who Must Follow UAE Corporate Tax Record Requirements?

Corporate tax record obligations apply broadly, regardless of whether a business ultimately pays corporate tax. Registration status does not remove record-keeping responsibilities.

Mainland Companies

Mainland companies must maintain accurate financial and accounting records that support their taxable income calculations, even if taxable income falls below the corporate tax threshold.

Free Zone Companies

Free zone businesses, including those that qualify for the 0 percent corporate tax rate, must still maintain proper records. Qualifying status does not remove the obligation to keep supporting documentation.

Exempt Entities

Government-related and exempt entities must retain records that support their exempt status. These records may be requested by the FTA for verification.

What Corporate Tax Records Must Be Maintained in the UAE?

Proper documentation remains the foundation of corporate tax compliance. While the grace period applies to updating registered information, it does not remove the requirement to maintain accurate records.

Businesses must retain records that explain how taxable income was calculated, including:

• Financial statements and trial balances
• General ledgers and journal entries
• Sales and purchase invoices
• Bank statements and payment confirmations
• Expense receipts and contractual agreements
• Supporting documents used in corporate tax calculations

Related Party and Transfer Pricing Records

Businesses that enter into related party transactions must also maintain transfer pricing documentation. These records demonstrate that transactions are priced in line with UAE corporate tax requirements.

UAE Corporate Tax Records Retention Period Explained

Understanding how long records must be retained is essential for compliance. Retention obligations apply even if no corporate tax is payable.

Under UAE corporate tax rules, businesses must retain all relevant corporate tax records for at least seven years following the end of the relevant Tax Period. This includes all documents used to prepare financial statements and corporate tax returns.

How the UAE Corporate Tax Records Grace Period Applies

The UAE corporate tax records grace period applies only to updating information in the FTA tax records. It does not apply to correcting accounting errors or revising filed tax returns.

Information that can be updated during the grace period includes:

• Legal or trade name
• Business activities
• Registered address
• Contact details
• Legal form or ownership structure

Businesses should ensure that all registered information accurately reflects their current operations.

Difference Between Corporate Tax Records and VAT Records

Corporate tax and VAT are governed by different laws and serve different purposes. Confusing their documentation requirements is a common compliance mistake.

Corporate tax records focus on income, expenses, and profit calculations. VAT records focus on taxable supplies, input VAT, and output VAT. Both must be maintained separately.

VAT Record Retention Rules in the UAE

VAT record-keeping requirements continue to apply alongside corporate tax obligations. Businesses must comply with VAT retention rules regardless of corporate tax registration.

VAT record retention periods include:

• Five years for standard VAT records
• Ten years for records relating to capital assets
• Fifteen years for records related to real estate transactions

📚 Also read: VAT Registration Process in UAE | 2025 Step-by-Step Guide

Limitation Periods for VAT and Tax Adjustments

UAE tax laws include limitation periods that define how long the FTA can assess or audit tax matters. These periods are governed by the UAE Tax Procedures Law.

Key points include:

• The standard limitation period is generally five years
• The period may extend to fifteen years in cases of tax evasion or failure to register
• These limits apply to audits and assessments, not automatic refund rights

UAE Corporate Tax Periods and Filing Timelines

Corporate tax is calculated for a defined Tax Period, which typically follows a business’s financial year. The chosen Tax Period determines filing deadlines and record retention timelines.

Most businesses use a 12 month Tax Period unless otherwise approved. All records supporting a corporate tax return must be retained for the full retention period.

📚 Also read: How to Avoid Penalties for FTA Corporate Tax Filing?

Penalties for Non-Compliance With Corporate Tax Records

Failure to maintain proper records or update tax record information can result in administrative penalties, even if no corporate tax is payable.

Penalties for Missing or Incorrect Records

If records are incomplete, inaccurate, or unavailable during an FTA review, businesses may face fines. Repeated non-compliance increases enforcement risk.

Penalties for Late Corporate Tax Filings

Late submission of corporate tax returns can lead to fixed penalties and additional fines depending on the duration of the delay.

📚 Also read: How to Waive the Penalty for Late Corporate Tax Registration in the UAE

Common Corporate Tax Record Keeping Mistakes

Many compliance issues arise from avoidable administrative errors rather than complex tax rules.

Common mistakes include:

• Failing to update business information in the FTA system
• Poor bookkeeping and missing invoices
• Mixing personal and business expenses
• Using outdated financial data
• Confusing VAT requirements with corporate tax obligations

📚 Also read: Bookkeeping vs. Accounting UAE: Which Service Do You Need?

How to Use the UAE Corporate Tax Records Grace Period Properly

The grace period should be used strategically to reduce compliance risk. Businesses should focus on aligning their registered tax information with actual business operations.

Recommended steps include:

• Reviewing details registered with the FTA
• Updating outdated or incorrect information
• Confirming alignment between trade licenses and tax records
• Ensuring accounting systems support accurate reporting

What Happens After the Grace Period Ends?

Once the grace period expires, the FTA applies standard enforcement measures. Penalties for failing to update tax record information on time may apply in full.

Businesses that ensure accuracy now reduce the risk of audits, penalties, and compliance disputes later.

Conclusion

The UAE corporate tax records grace period provides a valuable opportunity for businesses to update their registered tax information without facing immediate penalties. Using this period correctly helps prevent compliance issues and supports long-term tax certainty.

If you need expert support for setting up accounting software or ensuring smooth compliance with tax and accounting requirements, consider reaching out to Outsource Prime Accountants and Bookkeepers (OPAB). OPAB works with businesses across Dubai and the UAE to implement and optimize software like Odoo, Zoho Books, and QuickBooks, ensuring clarity and compliance. Contact OPAB today for tailored guidance that fits your business.

FAQs About UAE Corporate Tax Records Grace Period

Is there a grace period for tax record updates in the UAE?

Yes. The FTA has provided a grace period allowing businesses to update tax record information registered with the FTA without administrative penalties, provided updates are made between 1 January 2024 and 31 March 2025.

What is the tax period for corporate tax in the UAE?

The Tax Period typically follows the business’s financial year and is usually 12 months unless otherwise approved.

What is the penalty for filing corporate tax returns late in the UAE?

Late filings can result in fixed penalties and additional fines depending on the length of the delay and compliance history.

How long must VAT records be retained in the UAE?

VAT records are generally retained for five years, with longer periods required for capital assets and real estate transactions.

How far back can a company claim VAT or invoices?

VAT adjustments and claims depend on limitation periods under UAE tax law and must be supported by valid documentation.