As the UAE launches its corporate tax regime, understanding your financial year for corporate tax is becoming essential for every business. A company’s financial year determines its corporate tax period in the UAE, impacting its compliance schedule, reporting obligations, and tax planning for the tax year. However, what if you want to change your financial year for corporate tax?  

In this blog, we will explain changing your financial year for corporate tax in the UAE, how this will impact your tax year, and what steps you need to take for compliance with corporate tax registration. 

 When does the UAE Financial Year Start? 

Generally, for most businesses in the UAE, the default financial year starts from January 1 and ends on December 31 of the calendar year. However, businesses are able to choose a different financial year depending on the financial year of the parent company and their operational and business needs. Your financial year determines the first and subsequent corporate tax period in the UAE as it will set the due date for your tax return. 

Changing Your Financial Year: Key Implications 

If your business wants to change its financial year after registering for corporate tax UAE, you must apply for approval from the Federal Tax Authority (FTA). Changing your financial year can shift your first corporate tax periods, potentially extending or shortening them. 

For example: 

•  If your current financial year ends December 31, 2024, your first tax period runs from June 1, 2023 (when corporate tax takes effect) to December 31, 2024. 

• If you change your year-end to March 31,2024 your first tax period could run from June 1, 2023, to March 31, 2024 — giving you a longer first reporting period. 

While this may appear to be beneficial regarding cash flow or for administrative purposes (less paperwork) in a business, one must evaluate the regulatory compliance burden, as a longer period to account for tax may delay a business from taking deductions or create complexity for compliance with financial statements. 

Why Would You Change Your Financial Year for Corporate Tax? 

Typically, your corporate tax year is established in your Memorandum of Association (MOA) or defined in a resolution of the company’s Board of Directors, but there can be instances when a company might want to change the financial year, or when a company may have to change the financial year for tax purposes.  

Here are some of the most common situations: 

• Aligning with a parent company: 

For multinational/subsidiary style businesses, streamlining financial reporting and tax compliance can be much simpler if the UAE financial year aligns to that of the parent company. 

• Tax Grouping: 

 If your business is a member of a tax group in the UAE, it’s hard to file a consolidated tax return if each member of the group has a different financial year.  

• Operational Efficiency: 

 Some industries have natural business cycles with periods of activity and inactivity that do not align with the calendar year. Therefore, sometimes it will be more operationally efficient to change your financial year to reflect your business flow instead of receiving irrelevant requests from auditors or complying with a calendar year when it does not accurately reflect the nature of the business. 

• Foreign Tax Relief Situations: 

 Sometimes a company’s financial year may need to be adjusted to allow a company to receive foreign income tax credits and avoid double taxation with respect to the same taxable income that may be included in the consolidated income tax return of the foreign tax jurisdiction. 

• Liquidation Purposes: 

 With respect to the liquidation of a company, it is sometimes necessary to change the financial year to ensure the commencement of the process that brings together financial statements and tax matters to conclude the liquidation or the wind up of the company. 

Steps for Changing the Financial Year 

To align your financial year for corporate tax with your business strategy, you should:
 1) Assess the operational and tax implications with your finance team or tax advisor.
 2) Submit an application to the FTA explaining the reasons for the change.
 3) Update your corporate tax registration details accordingly.
 4) Maintain clear documentation of board resolutions or shareholder approvals for the change. 

How can CBM Consultants Assist You? 

CBM Consultants helps you in changing your financial year for UAE corporate tax by first assessing whether your business meets FTA requirements for a year-end change. We also provide advice on the best timing to align with corporate tax periods, prepare necessary documents (like revised financial statements and board resolutions), and submit the application to the FTA. To ensure timely compliance and submission, we help you in coordination with the FTA to resolve queries, ensuring your books comply with IFRS and UAE tax laws, and help you avoid mistakes that could lead to penalties. Additionally, by integrating tax planning strategies, we make sure that the new financial year benefits your cash flow and tax obligations.  

Impact on Corporate Tax Registration 

When you adjust your financial year, the FTA will update your corporate tax registration records. This change affects when you must submit tax returns, make payments, and comply with transfer pricing documentation if applicable. It’s crucial to plan ahead so your tax team can meet new deadlines without risking penalties. 

Conclusion

Choosing or changing the right financial year for corporate tax is more than an administrative decision; it’s a strategic choice that influences your cash flow, compliance, and operational efficiency. Whether you stick with the calendar year (January–December) or opt for a customized period, make sure you understand how it affects your corporate tax period in UAE, your first corporate tax periods, and your obligations under corporate tax UAE laws.