How to Stay Compliant with Accounting and Tax Laws in the UAE?

The UAE has over the years emerged as an international business destination with more and more people setting up business in the country. Supported by the business-friendly environment to taxation, geographic position, and business legislation, the UAE gives numerous opportunities. However, the concept of accounting and tax remains paramount for companies that run in this dynamic market. Failure to follow these rules can lead to serious consequences, legal troubles, and harm to your business’s reputation. Here are 5 important strategies that help you and your business in following the accounting and tax laws of the UAE:

1. Stay Updated with Tax Policies in the UAE

UAE has a relatively simple tax system in comparison to many other countries but still, some aspects should be taken into consideration. There is usually no income tax levied on resident individuals or businesses who want to set up a company in the UAE. However, Value Added Tax (VAT) was made effective from January 2018 with a standard rate of 5%. The UAE also has recently introduced corporate tax at a low rate of 9%. If you wish to stay on top of your tax obligations, it is necessary to stay updated with the policies related to these taxes.

2. Maintain Accurate and Updated Financial Records

Proper accounting and bookkeeping in the UAE is the key to tax compliance. The UAE has fairly stringent record-keeping requirements too where companies are expected to retain the records for at least five years. It is recommended to maintain records of all invoices, receipts, contracts, and all financial statements. Compliance with document requirements puts the entity in a position to show proof of the financial activities that were carried out in case there is a necessity.

To remain compliant, consider utilizing accounting software that will help with filing, tracking every expense, and preparing the financial reports. Additionally, it is useful to maintain the accuracy of calculations which is beneficial for audits and for the assessment of taxes.

3. Adopt International Financial Reporting Standards (IFRS)

The UAE requires the application of IFRS in preparing a company’s financial statements. They help in ascertaining that the information disclosed and presented in the firms’ financial reports is transparent and harmonized. Make sure that, periodically, your accounting staff is updated with the IFRS standards or outsource the financial reporting to third parties that specialize in the IFRS standards. Failure to adhere to IFRS might result in companies suffering penalties.

4. Frequently Audit Financial Statements

Another way to prevent non-compliance is doing internal auditing on a regular basis. Internal audits assist in the early detection of fraud and other irregularities before they transform into other complications. They also lead your business towards external scrutiny that may be done by the FTA or other authorities.
It is suggested to seek an independent auditor to verify your financial statements at least once a year. An external audit is beneficial in giving you an impartial view of your state of financial standing and will dictate your records to be on par with what the UAE allows.

5. Stay on Top of Corporate Tax Obligations

As mentioned earlier, the implementation of the federal corporate tax in Dubai recently took place. This is a tax on business profits, and businesses would have to shape themselves for this particular tax.
Be aware of the current trends in the corporate taxation system of the UAE. It involves knowing which enterprises will be taxed, the rates, and when and how the returns have to be filed. This way, you will not run into any late-stage complications and thus be compliant.

Conclusion

Compliance with the accounting and tax regulations in the UAE contributes to the success and sustainability of every enterprise. This means it is important to always update your records on taxes, follow IFRS, do an audit frequently, and seek help from professionals to ensure our business never falls on the wrong side of the law. To register a business in the UAE and to ensure that you are aware of the legal accounting and tax requirements, you must consult professionals like InZone for the seamless operation of the business.