Are you required to maintain Audited Financial Statements for your Business?

UAE Corporate Tax Update: Are you required to maintain Audited Financial Statements for your Business?

In yet another UAE Corporate Tax Update, the Ministry of Finance (MoF) in UAE has published Ministerial Decision No. 82 of 2023 on the Determination of Categories of Taxable Persons Required to Prepare and Maintain Audited Financial Statements for the Purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses.

In accordance with the Decision, the following category of Taxable Person are mandatorily required to prepare and maintain audited financial statements: for UAE Corporate Tax purposes:

1.      A Taxable person deriving Revenue exceeding AED 50 million during a relevant Tax Period; and

2.      A Qualifying Free Zone Person.

This is definitely a welcome move from the Ministry as the high threshold of AED 50 million act as a support mechanism for SME’s to reduce their compliance costs. The decision to include a Qualifying Free Zone Person (QFZP) in the above list is in line with the Public Consultation Document released last year as it mandated that a QFZP should submitted audited financial statements to avail 0% CT benefit.

Important points to note on this subject are:

a.      The exclusion from Audited Financial Statements is solely for Corporate Tax submission purposes. The Businesses will still have to complying with the requirements of its licensing authorities and Implementing Regulations as many Free Zones Authorities already mandate submission of audited financial statements as part of the FZ Regulations.

b.      This does not take away the authority of the FTA to conduct Tax Audits on Businesses as this Decision only applies to annual financial audits.

c.      This exclusion does not take away the requirement for businesses to keep proper financial records and accounts as the exclusion is limited only to submission of an audited financial statements as part of annual CT returns. Preparing proper books of accounts is still a requirement and doing so will also benefit businesses from accurate CT return submissions.