Prioritizing Bookkeeping in Sole Firms: Purview of Corporate Tax & VAT in UAE

Prioritizing Bookkeeping in Sole Firms: Purview of Corporate Tax & VAT in UAE

Owners of multiple “sole firms” in the UAE must prioritize bookkeeping to minimize risks related to the UAE Corporate Tax. A comprehensive analysis should drive the bookkeeping process to ensure that all financial records are accurate and up-to-date. This includes keeping track of all income, expenses, and receipts, as well as maintaining proper documentation for all transactions. By doing so, business owners can ensure that they are in compliance with the UAE Corporate Tax regulations and avoid any penalties or fines that may be imposed for non-compliance. It is also important to note that employee bonuses and commissions do not come under UAE Corporate Tax rules.

Not prioritizing bookkeeping for owners of multiple “sole firms” in the UAE can lead to several risks, including:

1. Non-compliance with UAE Corporate Tax regulations, which can result in penalties and fines.
2. Inaccurate financial records, which can lead to incorrect tax filings and potential legal issues.
3. Difficulty in tracking income, expenses, and receipts, which can make it challenging to manage cash flow and make informed business decisions.
4. Lack of transparency in financial reporting, which can negatively impact the business’s reputation and relationships with stakeholders.
5. Inability to access financing or investment opportunities due to poor financial management.

It is crucial for business owners to prioritize bookkeeping to minimize these risks and ensure the long-term success of their businesses.

According to Article 71 of the Executive Regulation of VAT, businesses in the UAE are required to keep records of their transactions for a minimum period of five years. These records should include sales invoices, purchase invoices, tax invoices, credit and debit notes, import and export records, and any other relevant documents.  In the UAE, Corporate Tax records must be kept for a minimum of 7 years from the end of the tax period. This means that if your company’s tax period ends on December 31, 2022, you must keep records until at least December 31, 2029. It is important to keep accurate and detailed records to ensure compliance with tax laws and regulations.

It is important for businesses to maintain accurate and organized records as they may be required for Tax audits or in the event of disputes. Failure to keep proper records can result in penalties. Therefore, it is crucial for businesses to be aware of and comply with the record-keeping requirements under UAE Tax regulations.

The requirement for record keeping related to real estate according to Article 71 of the Executive Regulation of VAT, taxable persons owning real estate must retain necessary records for 15 years after the relevant tax period.

Ministerial Decision 114 of 2023 on the Accounting Standards and Methods for the Purpose of Federal Decree –Law No. 47 of 2022 on the Taxation of Corporations and Business states the following:

1. Cash basis of accounting – only when the revenue doesn’t exceed AED 3 Million.
2. IFRS for SME’s – for revenue of AED 3 Million to AED 50 Million.
3. IFRS – for revenue of above AED 50 Million.

Contact Flying Colour Tax Consultant LLC now for a comprehensive advisory on your Accounting, Taxation, Audit and Compliance requirements.

We are a group of companies with 19+ years of experience in the UAE region. Our group of professional experts are highly trained to give you nothing but the best advisory and consultancy.

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