Financial year in UAE
Table of Contents
International Financial Reporting Standards (IFRS) are required for Dubai limited liability companies. Each year, holding enterprises are required to prepare and present enhanced audited financial statements in accordance with IFRS. Transitional holding companies are not required to consolidate. According to official accounting criteria, consolidated financial statements will be prepared by a holding company. For the preparation of annual financial statements in Dubai, our accountants in Dubai can provide you with the necessary information and assistance.
The International Financial Reporting Standards must be followed by free zone businesses in the UAE. The UAE allows all other companies or partnerships limited by shares, subject to any other obligations, to prepare financial statements using any normally accepted methodology, but most follow IFRS. The financial statements of subsidiaries of listed companies in other jurisdictions can be prepared according to the structure used by their parent companies.
- In Dubai, companies listed on the stock exchange must undergo annual audits
- Audits are required by UAE law for any company that is:
- Companies with joint stock;
- Companies with limited liability;
- Partnerships or affiliations limited by shares;
- Any other business mandated by law.
- Any supervisory unit or financial institution, as well as any other special requirement, will audit small companies in Dubai.
I want to know more about US taxes abroad
Dubai business audits serve a variety of purposes
The purpose of an audit is to verify the accuracy and fairness of the information provided in the financial statements of a company. Auditors evaluate incomes, payments, profits, losses, possessions, obligations, equity, and liabilities to prove whether they are accurate and fair, or whether there is any material misstatement.
VAT in the EU: new regulations
UAE introduced the 5% VAT rate in 2018, causing companies to comply with new regulations, including filing VAT returns. You must still prepare annual financial statements if your company does not register for VAT. A complete audited report includes all payroll calculations, income statements, financial adjustments, and other related information. We can assist you with preparing your annual financial statements in Dubai through one of our accountants. Consider hiring our Dubai accounting firm if you are thinking of outsourcing accounting services for your business.
Typical financial statement reports
A set of accounts must be issued for the purpose of the annual financial statement, and these include the balance sheet, statement of retained earnings, cash flow, and income statement. Here is additional information:
1. Income state – this report shows the company’s expenses and income for a whole year. The company’s activities are fully described.
2. It reveals a complete evaluation of a firm’s capital structure, as it includes liabilities, assets, and equity. In addition to reporting cash flow, this financial statement is important.
3. An accounting year’s cash flow statement provides information about how the company used its cash over that period. There are various financial notes.
4. During a particular period, the shareholders equity statement shows the transactions that affect the equity accounts. Details about dividends and transactions will be included in the full report.
Normally, these reports are included in the annual financial statements of Dubai companies with other financial notes and analyses. We have accountants in Dubai who can help you with this type of report. Your company in Dubai will receive complete financial guidance and support from our experts.
Fiscal year
In a company, a fiscal year corresponds to a complete accounting cycle of 12 months. As for the UAE, the fiscal year begins on January 1st and ends on December 31st. However, it does not match the calendar year. Dubai companies can prepare their annual financial statements before the fiscal year ends, allowing time for adjustments.
Dubai investment
A generous business climate and a variety of opportunities have made Dubai a preferred location for international entrepreneurs for many years. Among the fields in which foreign investment is directed are tourism, ITC, automotive, engineering, financial services, and research & development. You might be interested in these facts and figures about the UAE:
- UAE registered USD 140,000 million in FDI in 2018;
- Doing Business 2020 report ranked UAE 16th out of 190 economies;
- Among UAE’s foreign investors are the UK, France, Saudi Arabia, USA, and India;
- A foreigner’s preferred investment areas are finance, real estate, and insurance.
- For UAE businesses with a Tax Year End in February or March 2020, the deadline to submit Tax Year End adjustments is approaching.
Due dates
VAT returns due by 28 June 2020 for businesses with a tax year ending February 2020 must reflect the adjustments.
Businesses must submit their VAT returns by 28 July 2020 for the quarterly tax period ending June 2020, for Tax Year End March 2020.
Is this alert for me?
VAT applies to businesses in the UAE that make both taxable and exempt supplies. In particular,
- Businesses with a Tax Year End of 29 February 2020 or 31 March 2020 will likely find this alert particularly useful. Input tax adjustments are made at the end of the business’s tax year as follows:
- Wash-up adjustment annually
- During the tax year, apportionment was based on the standard method.
- Changes to capital asset schemes
Following the end of the tax year, VAT returns should include these adjustments.
Assumption of input tax Profits from selling taxable supplies is subject to input tax apportionment. Hence, input tax is not recoverable on purchases relating to exempt supplies or non-business activities. The proportion of input tax eligible for taxable and non-taxable goods and services must be calculated by any business that incurs input tax. It’s called input tax apportionment. At the end of the tax year, the Input Tax Apportionment calculation must be revised based on annual figures. A detailed methodology is provided.
The first VAT return following the tax year end should include the relevant adjustment for businesses that make taxable and exempt supplies.
Asset allocation
Input tax apportionment annual adjustments and capital assets scheme adjustments are related. Many businesses fail to recognize this. In both cases, VAT is incurred on purchases of assets of a certain value and must be paid at the same time each year.
VAT was introduced on 1 January 2018, so many businesses are already calculating capital assets scheme adjustments. Upon acquisition of a capital asset, input tax is recouped based on the input tax apportionment rate. Businesses are required to monitor long-term capital asset use for taxable purposes, due to their long useful lives. This results in yearly adjustments to the original input tax recovery being due for the useful life of the asset.
For financial years starting on or after 1 June 2023, the UAE Ministry of Finance (MOF) announced a federal corporate tax (CT). According to the Ministry of Foreign Affairs (MOF), the UAE supports the global minimum effective tax rate under the OECD/G20 BEPS 2.0 project (Base Erosion and Profit Shifting). As a global financial center and international business hub, the UAE Corporation Tax regime will ensure free movement of capital, trade, financing, and services and support investment and headquarters activities. ” Further details are provided in the press release.
