Revolutionizing Bookkeeping Practices with under the New UAE Corporate Tax Law

As multinational companies build a strong foothold in the UAE, focus on financial numbers is gaining more attention. Having a solid grasp of financial figures and performance is a significant factor in managing businesses successfully. Bookkeeping acts as a clear snapshot that sheds light on a business’s financial credibility.

Maintaining books of accounts plays a critical role in the UAE taxation system as emphasized by Federal tax authority guidelines. Bookkeeping ensures the need to keep precise financial records, reducing the chances of penalties, and boost tax efficiency while adhering to the UAE corporate tax laws.

For expert help, smart businesses depend on top accounting and bookkeeping firms in the UAE, where expert teams put stress on good financial practices to stay compliant. Whether your business is a startup or a multinational company, an FTA approved tax agent and a prominent accounting and audit firm in UAE such as Jaxa can assist your business with the bookkeeping requirements in UAE.

Let us come and consider this as a pathway for mastering bookkeeping and helping to thrive in adapting to the latest UAE corporate tax law. It is not just about record keeping, it is a catalyst for financial excellence.

The key highlight of corporate tax

1. Corporate tax compliance: According to Article 56 of Federal Decree Law 47 of 2022, taxable businesses must maintain financial records for a 7 years following a tax year. A hefty penalty will be charged for non-compliance with this regulation levied by the Federal Tax Authority (FTA).

Fundamental corporate tax compliance requirement in the UAE:

• Preparation of Financial statement: Financial statements must be prepated in compliance with the International Financial Reporting Standards(IFRS).
• Correct categorization: To comply with corporate tax regulations, all taxable income, deductible expenses, and tax claims are properly and accurately classified.
• Audit readiness: Businesses must ensure financial records are organized and accessible for conducting audits by FTA.

2. Corporate tax Filing: Businesses must ensure timely and accurate submission of Corporate tax returns within a stipulated time frame to avoid hefty penalties. This requires accurate bookkeeping and preparation of financial reports. Failure to maintain proper bookkeeping records may lead to errors, which can cause tax loss, increased risk of non-compliance and penalties for delayed and incorrect filings.

Common Bookkeeping Mistakes:

• Incorrect recognition of revenue relating to a tax period
• Incorrect classification of deductible, partial/non-deductible expenses
• Failure to identify partial/non-deductibles
• Failure to conduct periodical reconciliation of accounts such as banks
• Failure to identify missing or incorrect documentations
• Failure to identify and account for non-business expenses
• Delay or inaccurate tax filing
• Failing to use accounting software

Benefits of proper Bookkeeping Records

• Generation of accurate financial statements
• Deliver a well organized financial records for FTA
• Prompt submission of tax returns
• Eliminates the risk of penalties for non-compliance
• Safeguards business credibility and trust

3. Corporate Tax Planning: Sound bookkeeping practices are essential for managing tax liabilities and uncovering tax-saving solutions. Under the Corporate tax framework, businesses can make strategic informed decisions and take the benefits from tax relief and exemptions with the support of precise bookkeeping records.

Smart tax Planning with Robust Bookkeeping

• Tax relief for small businesses: Until December 31, 2026, businesses with an annual revenue of below AED 3 million can eliminate tax obligations by applying for small business tax relief.
• Foreign tax credit: Businesses that have foreign source income on which foreign taxes have been paid can reduce corporate tax liability in the UAE by utilizing foreign tax credit.
• Free Zone Tax benefit: Free Zone Business must prepare audited financial statements to qualify for a 0% corporate tax rate on qualifying income.

Strategic Financial Management for strengthening corporate tax compliance in the UAE

Well-organized and established bookkeeping standards provide insights into the company’s financial position. Accurate records assist in making properly informed decisions. Effective bookkeeping practices also help to keep businesses compliant with regulatory requirements and drive businesses to flourish.

Get ready for a corporate tax audit

The Federal Tax Authority in UAE possess power to perform corporate tax audits or tax assessments whereby they can source the accounting records and  any supporting documents related to the corporate tax filing in the UAE. Failure to comply with the requirements can result in a hefty administrative burden. Hence it is important to maintain proper bookkeeping records for easy accessibility of records to FTA.

Key steps to ensure FTA audit readiness:

• Maintain proper financial records
• Categorize documents related to tax
• Regularly reconcile bank accounts
• Be ready for surprise audits
• Engage with a top corporate tax consultant to monitor proper bookkeeping records.

Why Accurate Bookkeeping is Essential for Successful Corporate Tax Compliance in the UAE?

Sound bookkeeping practices in UAE is essential for businesses to ensure compliant corporate tax to avoid penalties and high risks.

• Boost financial stability: To determine taxable income and ensure correct corporate tax rates are applied to the figures, it is essential to keep accurate financial records of income, expenses, and liabilities.
• Eliminate Tax burden: Accurate bookkeeping records help to ensure all corporate tax deductions are applied, helping to reduce corporate tax liabilities as per UAE Corporate Tax Law.
• Zero penalties: Under corporate tax law, a key requirement for a business’s success is maintaining proper books. Accurate bookkeeping helps to prevent penalties and fines while adhering to legal requirements.

Best Strategies for effective and complete bookkeeping in UAE

Maintaining correct and accurate financial records, and complying with corporate tax is the key.

• Tracking thorough details: It is required to maintain records meticulously including all expenses and income to comply with UAE corporate tax regulations.
• Observing legal requirements: Businesses must comply with International Financial Reporting standards as per the UAE corporate tax law.
• Efficient record organization: Businesses must implement an organized storing software to store invoices, contracts, and bank statements for effective record keeping.
• Implement cloud accounting software: It is necessary to adopt cloud-based accounting software to maintain correct tax calculations and accurate record keeping. It is the best choice to choose FTA-approved software for streamlined reporting and recording systems, making it easy for a corporate tax audit.
• Maintain digital records: It is essential to keep tax documents in a digital and physical drive that is easily retrievable.
• Retention timelines: Financial records must be kept for a period of 7 years as per UAE tax law.
• Regular update: It is crucial to conduct regular reviews of financial statements to prevent errors and help to detect any discrepancies while supporting good financial decision-making.

How does Jaxa Chartered Accountants help?

Jaxa Chartered Accounting is an FTA-approved agency in the UAE. Our seasoned professionals are experts in the financial domain – accounting/ bookkeeping, audit and taxation services across UAE. Our knowledge of corporate tax services and bookkeeping enables the team to deliver personalized solutions to all clients.

Whether you are looking for corporate tax or bookkeeping, Jaxa is here as a helping hand for all your problems.

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