Frequently Asked Questions
Here you can find quick answers to some of the most frequently asked questions – FAQ’s.
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VAT | FAQs
Audit & Assurance | FAQs
Accounting and Bookkeeping | FAQs
Corporate Tax | FAQs
Am I eligible for VAT registration?
A business must register for VAT if its taxable supplies and imports exceed the mandatory registration threshold of AED 375,000.
Furthermore, a business may choose to register for VAT voluntarily if its supplies and imports exceed the voluntary registration threshold of AED 187,500. Similarly, a business may register voluntarily if its expenses exceed the voluntary registration threshold.
When I have to file a vat return in UAE?
In the United Arab Emirates (UAE), businesses are required to file a Value Added Tax (VAT) return periodically, typically on a monthly or quarterly basis. The frequency of VAT returns is determined by the Federal Tax Authority (FTA) based on the business’s turnover and other factors.
The deadline for filing a VAT return in the UAE is usually within 28 days from the end of the reporting period, and businesses must submit their returns electronically through the FTA’s e-services portal.
In addition to filing VAT returns, businesses must also keep accurate records of their financial transactions and VAT-related information, including invoices, receipts, and other documentation, for at least five years.
It’s important for businesses operating in the UAE to be familiar with the VAT regulations and requirements, and to ensure that they comply with the filing deadlines and other requirements to avoid penalties and fines. Businesses can seek professional advice from local tax advisors or consult the FTA’s website for more information.
Why we need audit in UAE?
There are several reasons, Why we need audit in UAE, why auditing is important in the United Arab Emirates (UAE):
Compliance: Auditing helps ensure that a company’s financial records and operations comply with local laws and regulations, such as the Federal Decree-Law No. (5) of 2017 Concerning Value Added Tax (VAT) and its Executive Regulations.
Improved transparency: Auditing provides an independent and objective assessment of a company’s financial information, improving the transparency of its financial position and performance.
Detection of errors and fraud: Through the systematic examination of financial records and processes, auditing can detect errors, fraud, and other financial irregularities, helping to prevent financial losses and protect the reputation of the company.
Enhanced credibility: Audited financial statements are viewed as more credible and trustworthy than unaudited statements, which can improve the reputation of the company and increase investor confidence.
Better decision-making: Audited financial statements provide reliable and accurate information that can be used to make informed business decisions, such as securing funding, making investments, or expanding operations.
How many types of audit in UAE?
Several types of audits can be performed in the United Arab Emirates (UAE), including:
Financial Statement Audit: This type of audit focuses on the accuracy, completeness, and reliability of a company’s financial statements, including the balance sheet, income statement, and cash flow statement.
Internal Audit: This type of audit is performed by the company’s internal audit team and focuses on evaluating the efficiency and effectiveness of internal controls, processes, and procedures.
Tax Audit: This type of audit is performed by the Federal Tax Authority (FTA) and focuses on verifying the accuracy and completeness of a company’s VAT returns and tax payments.
Compliance Audit: This type of audit focuses on evaluating a company’s compliance with relevant laws, regulations, and standards, including the UAE Commercial Companies Law and International Financial Reporting Standards (IFRS).
Operational Audit: This type of audit focuses on evaluating the efficiency and effectiveness of a company’s operations and processes, including its use of resources, performance management, and risk management.
Information Systems Audit: This type of audit focuses on evaluating the security, reliability, and effectiveness of a company’s information systems and technology infrastructure.
These are some of the common types of audits performed in the UAE, and the specific type of audit performed may depend on the needs and requirements of the company, as well as regulatory requirements.
When we need Accounting and Bookkeeping?
Accounting and bookkeeping are essential activities for businesses of all sizes and types, as they provide a systematic and accurate record of the financial transactions and activities of a company.
Record Keeping: Accounting and bookkeeping in UAE are necessary for maintaining accurate and up-to-date records of a company’s financial transactions, including sales, purchases, and expenses, which are critical for making informed business decisions and evaluating the financial health of the company.
Compliance: Accounting and bookkeeping are also necessary for complying with local laws and regulations, such as the Federal Decree-Law No. (5) of 2017 Concerning Value Added Tax (VAT) and its Executive Regulations, which require businesses to keep accurate records of their financial transactions and submit periodic VAT returns.
Taxation: Accurate and up-to-date accounting records are also essential for preparing and submitting accurate tax returns and ensuring compliance with local tax laws and regulations.
Reporting: Accounting and bookkeeping provide the information necessary for generating financial statements, including the balance sheet, income statement, and cash flow statement, which are critical for managing the financial performance of a business and for communicating with stakeholders, such as investors, lenders, and customers.
In conclusion, accounting and bookkeeping are important activities that provide a company with the financial information and records necessary for effective financial management and compliance with local laws and regulations. Businesses should ensure that they have an efficient and effective system in place for accounting and bookkeeping and can seek professional advice from local accounting and bookkeeping services providers if necessary.
When will Corporate Tax Apply?
- According to the UAE Federal Decree-Law No. 47 of 2022 on Taxation of Corporations and Businesses (the “Corporate Tax Law”), businesses will become subject to UAE Corporate Tax from the beginning of their first financial year that starts on or after 1 June 2023.
- A company with an accounting date of 31 May will be brought into the CT regime with effect from 1 June 2023.
- A company with an accounting date of 31 December 2023 will be brought into the CT regime with effect from 1 January 2024.
- A company with an accounting date of 31 March 2023 will be brought into the CT regime with effect from 1 April 2024
Who is subject to Corporate Tax?
- All businesses and individuals conducting business activities under a commercial license in the UAE.
- Free zone persons – Free zone persons are within the scope of UAE CT.
- Foreign entities and individuals if they conduct a trade or business in the UAE on an ongoing or regular manner, or if they are effectively managed and controlled in the UAE
- Banking operations
- Businesses engaged in real estate management, construction, development, agency and brokerage activities
Who is Exempt from Corporate Tax
The following Persons shall be automatically exempt from Corporate Tax (without application) :
- A Government Entity.
- A Government Controlled Entity.
- A Person engaged in an Extractive Business, that meets the conditions of Article 7 of this Decree-Law.
- A Person engaged in a Non-Extractive Natural Resource Business, that meets the conditions of Article 8 of this Decree-Law.
What are the Tax Periods?
- A CT return is required for each 12-month tax period.
- The default financial year of a taxable person is the Gregorian calendar year.
- A business may choose whatever year-end date it wishes for its financial statements, and its tax period end for CT will be the same as its accounting date.
- It is also possible to apply for a change of the start and end date of a tax period.
What is the Registration procedures for CT?
A taxable person will need to register with The Authority to submit CT returns. [Art. 51 of the CT Decree-Law]
It is compulsory for a person who becomes subject to Corporation Tax to:
- make themselves known to The Authority
- apply to be registered for CT and obtain a TRN,
The taxable person’s Tax Registration Number (TRN) will then be issued and subsequently used by The Authority.
Returns must be submitted to the Authority within nine months of the end of the tax period, or by such other date as is determined by The Authority.
Who can apply for Tax Group registration?
- Only UAE-resident juridical taxable persons (companies) may form a tax group.
- The ownership requirement is a minimum of 95%. The relationship may be direct or indirect.
- All three of the following must be held:
- The companies must have the same accounting date and must use the same accounting standards.
What is the Family Foundations?
- A foundation is a vehicle which may be used to hold assets, manage, and restructure wealth.
- Unlike a trust, in which assets are passed to trustees to be managed, assets in a foundation are overseen by a Council.
- The Council, which must have at least two members, ensures the foundation’s affairs are conducted in accordance with its charter applicable laws and by-laws.
- It is possible to set up a foundation under one of three regimes: ADGM, DIFC and the RAK International Corporate Centre. Each of these has different rules and requirements.
- The Dubai International Financial Centre allows a company to be converted into a foundation.
- Family foundations are independent juridical persons with separate legal personalities and are therefore prima facie subject to UAE CT in their own right.
- An election is available for a foundation to be treated as an unincorporated partnership.