Managing finances in the UAE is not just about paying tax or filing returns. It is about keeping the right financial records, in the right way, so your business stays compliant, credible, and ready to grow.
Many business owners assume financial documentation is only needed once a year, when accounts are prepared or tax returns are due. In reality, UAE regulations expect businesses to maintain continuous, well-organised financial and tax records. These records support audits, bank reviews, investor discussions, and inspections by authorities.
Accounting Policy Manual: Your Financial Rulebook
An Accounting Policy Manual is an internal document that explains how your company records its finances. Choosing the right accounting policies is crucial to a quality financial reporting that meets your business requirements and provides quality and timely information for a better decision making.
According to Article 27 and 239 Federal Law No. 32 of 2021 on Commercial Companies UAE businesses are expected to prepare their accounts and policies using International Accounting Standards and Practices such as the Association of Chartered Certified Accountants (ACCA) International Financial Reporting Standards (IFRS). The policy manual ensures everyone follows these same rules, year after year.
FRS 18 states that entities should adopt accounting policies that enable the financial statements to give a true and fair view. It also says that accounting policies should normally be consistent with the requirements of accounting standards and companies legislation
The Basic Principles of Accounting Policy
The basic principles of accounting have been developed over many years of working with accounts. They define the basic aspects of how you record a transaction properly and should be the pillars of your manual.
- Revenue Recognition Principle – Revenue is recorded either when the service or product is delivered (accrual basis) or when cash is received (cash basis). Companies choose one method and apply it consistently in their accounting policy.
- Cost Principle – Assets and liabilities are recorded at their original purchase cost. Although fair value is sometimes used, historical cost remains the basic accounting rule.
- Business-Entity Principle – The business is treated as separate from its owner. Personal and business transactions must be recorded independently.
- Full Disclosure Principle – Financial statements must include all important information that could affect decisions. This prevents accounts from being misleading to stakeholders.
- Going Concern Principle – Accounts are prepared on the assumption that the business will continue operating.This means the business is not expected to shut down or liquidate in the near future.
Why this matters:
A clear accounting policy reduces mistakes, speeds up audits, and gives tax authorities confidence in your numbers.
Chart of Accounts:OrganisingEvery Transaction
If your accounting system is a filing cabinet, the Chart of Accounts (COA) is the label on every drawer. A COA is the complete list of all the categories your business uses to record financial transactions. Each category, called an account, has a unique code or number. This structure makes it easier to record, track, and report on your company’s finances.
A well-designed COA is usually grouped into five main categories:
- Assets – cash, accounts receivable, equipment
- Liabilities – loans, accounts payable
- Equity – The owner’s stake in the business.
- Income – Income from sales or services.
- Expenses – Costs incurred to run the business.
Steps to Create a Chart of Accounts (COA)
- Understand the Core Account Categories – Identify the main categories: Assets, Liabilities, Equity, Income, and Expenses.
- Assign Account Numbers – Use a clear numbering system for easy tracking (e.g., 1000–Assets, 2000–Liabilities, 3000–Equity, 4000–Income, 5000–Expenses).
- Customise for Your Business Needs- Adjust accounts based on your industry, revenue streams, and expense structure.
- Keep it Simple and Scalable – Start with a basic structure and add accounts only as the business grows.
Integrate with Accounting Software – Set up and manage the COA using accounting software to improve accuracy and efficiency.
Why this matters:
A clear COA makes it easy to prepare financial statements, VAT returns, and corporate tax calculations. Poor account structure often leads to errors, misreporting, and confusion during audits.
Financial Statements: The Annual Check
CBUAE Rulebook says that Every UAE business must prepare annual financial statements in accordance with IFRS standards. These are the official reports showing how your business performed during the year.
The Core Financial Statements
A complete set includes:
- Closed Books for the Period – All income, expenses, VAT, payroll, loans, and taxes accurately recorded for the reporting period.
- Bank and Cash Reconciliations – Bank balances matched with accounting records and differences corrected.
- Trial Balance – A summary of all accounts confirming total debits equal total credits.
- Accruals, Prepayments, and Adjustments – Expenses and income recorded in the correct period, including depreciation and amortisation.
- Income Statement (Profit & Loss) – Shows revenue, expenses, and profit or loss for the period.
- Balance Sheet – Snapshot of assets, liabilities, and equity as of the reporting date.
- Statement of Changes in Equity – Records movements in share capital, profits, reserves, and dividends.
- Cash Flow Statement – Tracks cash from operating, investing, and financing activities.
Under Article 20 of Federal Law No. 47 of 2022 for businesses earning more than AED 3 million annually, accrual accounting must be used. This means income and expenses are recorded when earned or incurred not when cash is received or paid.
Business benefit:
Accurate financial statements help with bank financing, investor confidence, and tax compliance.
Corporate Tax Records: From Registration to Filing
The UAE has introduced a federal Corporate Tax (CT) regime that applies to most businesses. Corporate tax is a form of direct tax levied on the net income or profit of corporations and other entities from their business.
- all businesses and individuals conducting business activities under a commercial licence in the UAE
- free zone businesses (The UAE CT regime will continue to honour the CT incentives currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business set up in the UAE’s mainland.)
- Foreign entities and individuals only if they conduct a trade or business in the UAE in an ongoing or regular manner
- Businesses engaged in real estate management, construction, development, agency and brokerage activities.
Taxable Income for Corporate Tax Purposes
Corporate Tax in the UAE is charged on the Taxable Income earned by a business during a Tax Period. Taxable Income is calculated annually by the business itself under a self-assessment system and reported to the Federal Tax Authority through a Corporate Tax Return. 0% on taxable income up to AED 375,000; 9% on income above that
The calculation starts with the business’s accounting profit or loss before tax, as shown in its financial statements. Certain adjustments are then made, such as removing income that is exempt from Corporate Tax and adding back expenses that are not fully deductible under tax law. The final adjusted figure is the Taxable Income on which Corporate Tax is applied.
Registering, Filing, and Paying Corporate Tax
All Taxable Persons, including businesses operating in free zones, must register for Corporate Tax and obtain a Corporate Tax Registration Number. In some cases, the Federal Tax Authority may also require exempt entities to register.
Why this matters:
Missing or inaccurate records can lead to penalties, even if tax payable is low or zero.
VAT Documentation: Building a Clear Audit Trail
Value Added Tax (VAT) continues to be a major part of daily compliance. VAT record keeping in the UAE involves systematically recording, tracking, and maintaining documents related to VAT transactions.
Key VAT Records to Maintain
VAT-registered businesses are required to retain specific documents to comply with FTA regulations. Key records include:
- Tax Invoices – Issued for every taxable sale and must include the supplier’s TRN, transaction date, description of goods or services, VAT charged, and total amount payable.
- Purchase Invoices and Receipts – VAT-compliant supplier invoices showing the supplier’s TRN and VAT amount, required for claiming input VAT.
- Credit and Debit Notes – Used to record VAT adjustments such as refunds, discounts, or corrections to previously issued invoices.
- VAT Returns – Copies of all VAT returns filed with the FTA, along with supporting working papers and calculations.
Businesses must retain VAT records for up to seven years. Even small gaps, such as missing invoices, can result in penalties. Your VAT records should clearly link back to your accounting system. Disconnected spreadsheets and folders increase risk.
Transfer Pricing Documents: For Cross-Border Groups
If your business deals with related parties outside the UAE—such as a parent company, sister company, or common owner—you need transfer pricing documentation.It deals with how prices are set for transactions between related companies or connected persons within the same group. These transactions can include services, goods, intellectual property, loans, or dealings with a permanent establishment. Transfer Pricing Documentation guidelines and rules are specifically mentioned in FTA’s Transfer Pricing Guide.
Transfer Pricing in the UAE is governed by Article 55 of Federal Law No. 47 of 2022 and is aligned with OECD Transfer Pricing Guidelines. The purpose of these provisions is to allow the Federal Tax Authority (FTA) to assess whether profits reported in the UAE reflect fair market outcomes.
Certain Taxable Persons must prepare Transfer Pricing documentation for each Tax Period. The level of documentation depends on the size and structure of the business.
- Transfer Pricing Disclosure Form (TPDF) – A summary disclosure of all related-party and connected-person transactions during the tax period.
- Master File (MF) – A high-level overview of the group’s global business, structure, and allocation of income. Applicable only to large businesses as defined under Ministerial Decision No. 97 of 2023.
- Local File (LF) – Detailed information about the UAE entity, its related-party transactions, and arm’s length analysis. Also applicable only to large businesses.
- Country-by-Country Report (CbCR) – A report showing income, taxes, and business activities across jurisdictions for large multinational groups (above AED 3.15 billion in consolidated revenue).
- Additional Supporting Information
Any further documents requested by the FTA to verify Transfer Pricing compliance.
Transfer Pricing Methods
To determine whether related-party transactions are priced fairly, UAE law recognises five internationally accepted methods:
Traditional Transaction Methods
- Comparable Uncontrolled Price (CUP) – Compares prices charged between related parties with prices charged between independent parties.
- Resale Price Method (RPM) – Examines resale margins earned by distributors.
- Cost Plus Method (CPM) – Adds an appropriate profit margin to the supplier’s costs.
These are preferred where reliable market price data is available.
- Transactional Net Margin Method (TNMM) – Compares net profit margins with those of similar independent businesses.
- Profit Split Method (PSM) – Allocates profits between parties based on their relative contributions.
These methods are used where transactions are highly integrated or involve unique and valuable contributions by both parties.
Final Thoughts: Financial Records as a Business Advantage
Many business owners view financial documentation as a regulatory burden. In reality, it is a business advantage.
Strong financial and tax documentation:
- Reduces compliance risk
- Makes audits smoother
- Builds trust with banks and investors
- Supports better decision-making
In the UAE’s increasingly transparent and regulated environment, good documentation is not optional—it is part of running a professional business.
By setting up the right financial systems early, and keeping them updated, business owners can focus less on compliance stress and more on growth.
