Preparation of Accounting Records for Corporate Tax in UAE

According to the UAE Federal Law on Commercial Companies, businesses must keep their books of accounts for at least five years following the conclusion of each fiscal year. A corporation operating in the UAE that is found to have erroneous books or that does not keep books for the required amount of time is subject to legal action.

A crucial component of the new corporate tax in UAE is the demand for accounting and bookkeeping.

The Necessity to Keep Financial Statements in Accordance with the UAE Corporate Tax

Companies in the UAE that must file financial statements must do so in accordance with international reporting standards or local regulations if they are subject to corporate tax rates. For instance, a mainland company is allowed to use the GAAP and IFRS, two internationally recognized accounting standards (International Financial Reporting Standards).

However, for the purposes of corporation taxation, free zone entities are expected to adhere to the requirements established by the pertinent free zone authority. To give one example, businesses registered in the DMCC (Dubai Multi Commodities Centre) free zone are only permitted to prepare their financial accounts in compliance with the designated free zone authorities.

Mainland businesses such as limited liability corporations or public or private joint stock firms must conduct financial audits in the case of auditing financial statements for corporate income tax purposes. Businesses in the UAE require the aid of certified and accredited public accountants to maintain trustworthy financial records in accordance with IFRS (International Financial Reporting Standards) and other legal requirements in the UAE.

Also, Find Out: Why Accounting is Important for a Business in Accordance with the UAE Corporate Tax?

Accounting and Bookkeeping in Support of the CCL for the UAE Corporate Tax

Any business must maintain correct accounting and bookkeeping for the UAE corporate tax in accordance with the CCL (Commercial Companies Law). Firms can stabilize cash flows, avoid insolvency, and enable long-term profitable financial plans and projections if this approach is followed.

The partners or shareholders should have access to critical information to ensure that the business is maintaining its accounts in accordance with the requirements of the statutory regulations.

Financial Registers

Business registers and books of accounts must be kept at the business’s UAE headquarters for at least five years after the fiscal year’s conclusion. Companies adhere to constraints set by authoritative organizations by using electronic storage for data and documents.

The annual and quarterly reports of a firm must be prepared in accordance with International Accounting Standards and Practices to guarantee that shareholders always get a complete and accurate view of the financial health of the organization.

Financial Statements Compilation is a Duty of the Accountant

A manager has a responsibility to develop an appropriate loss and profit budget for each year. Additionally, three months after the fiscal year ends, management is required to report on the company’s financial situation and offer suggestions to the General Assembly for how to distribute profits.

If the manager doesn’t carry out his mandated responsibilities, he may be forced to make up for losses or even fired.

Also Read: What is MIS Report?

The Penalties for Illegal Financial Statements for the Corporate Tax in UAE

Any illegal activity results in the following types of penalties, whether one is compiling financial statements and accounting books for value-added tax or corporate tax purposes:

A Lack of Accurate Accounting Records Regarding the Distribution of Profits

All businesses are required to establish and maintain books of accounts in accordance with applicable federal laws, according to experts in corporate taxation. The emphasis here is mostly on the equitable distribution of profits among the many shareholders and partners.

A penalty of AED 50,000 to AED 500,000, as well as a maximum of 3 years in jail for illegal behavior, will be unavoidable if the required records on legal distribution are not kept or if any illicit distribution is discovered.

Giving False Financial Information

Businesses are required to keep complete, accurate books of account at their relevant headquarters, including balance sheets, losses, and profits. A prison sentence of up to three years may be issued if liquidators, auditors, or any other firm manager provides any misleading information or assertions.

Companies who don’t keep up-to-date, correct financial records for VAT or the corporate tax in UAE risk fines ranging from 100,000 to 500,000 AED. This is where the corporate tax advisors in UAE come into the picture and thus save you from penalties.

Selecting Corporate Tax Advisors in UAE

In order to fully comprehend the applicability and effects of corporate tax on businesses, it is imperative to seek the advice of trusted and approved corporate tax firms. Top-notch services are offered by our corporate tax advisors in UAE.

Therefore, don’t be afraid to get in touch with us today; we’ll be pleased to help.

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