Tax & compliance
Bookkeeping and accounting requirements
Corporate tax made proper accounting compulsory rather than advisable. Taxable income starts from accounting profit under IFRS, which means the books are now the tax return's foundation.
The rule
What the law actually requires.
UAE companies must maintain accounting records sufficient to determine taxable income, prepared under International Financial Reporting Standards. IFRS for SMEs is available to smaller entities, and businesses below a revenue threshold may prepare accounts on a cash basis. The practical effect of corporate tax has been to convert bookkeeping from a commercial choice into a statutory requirement: taxable income is computed by starting from accounting profit and making prescribed adjustments, so a company without reliable accounts cannot produce a defensible return.
A great many UAE small businesses ran for years on a spreadsheet and a bank statement, which was sufficient when there was no tax and no audit. It is no longer sufficient, and the transition is harder than starting properly would have been — reconstructing two years of transactions to produce an opening balance sheet is expensive, slow and rarely complete. Beyond the tax return itself, proper books are what a bank reads for a credit facility, what a buyer reads in due diligence, and what an auditor needs before a free zone company can claim a qualifying position.
Thresholds and deadlines
- Standard
- IFRS; IFRS for SMEs available to smaller entities
- Cash basis
- Available below a revenue threshold
- Purpose
- Taxable income starts from accounting profit
- Retention
- Records must be kept for the prescribed period
- Audit
- Required for QFZP status and by many free zones
- Other uses
- Bank facilities, due diligence, shareholder reporting
The compliance calendar
Proportions indicative — they shift with visa count, premises and activity.
What to do
The filing, step by step.
- Set up proper bookkeeping from incorporationIt is far cheaper than reconstructing it later, and reconstruction is rarely complete.
- Choose the framework deliberatelyFull IFRS or IFRS for SMEs, and whether the cash basis is available and appropriate.
- Reconcile monthly, not annuallyA year of unreconciled transactions is where errors become permanent.
- Separate personal and business transactionsOwner drawings through the company account are the most common source of unusable records in small companies.
- Plan for audit if you need oneA qualifying free zone position requires audited accounts, and auditors need books that were maintained rather than assembled.
Related
Questions
IFRS, with IFRS for SMEs available to smaller entities and a cash basis available below a revenue threshold.
Yes. Taxable income is computed from accounting profit, so a corporate tax return cannot be prepared without them.
For the prescribed retention period, which extends beyond the tax year in question. Real estate records are kept longer.
For a simple company, yes, provided it is done properly and monthly. The point at which it stops being viable is usually audit or a bank facility.
One question
How are the books actually kept?
Then the question is whether the audit is scoped for what it is now carrying. If you rely on a qualifying free zone position, the audited accounts are a condition of the 0% rate rather than a renewal formality — and that is a different engagement.
What the audit has to supportOr just ask usThat was sufficient when there was no tax. Taxable income is now computed from accounting profit under IFRS, so the work has to happen anyway — and reconstructing two years after the fact costs more and produces worse numbers than doing it monthly.
What is actually requiredOr just ask usThen start before the year end rather than at the filing deadline. The return cannot be prepared without accounts, audit capacity here is seasonal, and a late audit delays the licence renewal as well as the tax return.
Getting the year end rightOr just ask us