It should be noted that the conditions for doing business in the UAE are among the most favorable in the world - there are practically no taxes and export/import duties (when goods are moving in free economic zones), bureaucratic procedures are minimized, and the audit procedure and accounting reporting are strongly simplified in comparison with other countries. But still, there are certain requirements for financial reporting and audit for onshore companies (no accounting and reporting is required for offshore companies). And there are reliable companies that carry out this set of services to fulfill the requirements.
Since January 2018, the government has introduced the VAT tax rate of 5%, and most companies in the country will be required to file the VAT returns. But even if the company does not fall under the compulsory registration of a VAT payer, every onshore company must file yearly financial statements which shall include: income statement, payroll calculations, fixed assets and other data. This report should be submitted in the form of an audited report, submitted once a year. In this regard, companies that start their business in this country or are already in operations, in any case, require accounting and auditing services and support in bookkeeping.
General requirements for accounting in the UAE
Any private or legal person conducting business on the territory of the country must file financial/accounting reports - a VAT return, as well as an annual audit report that contains all information on income and expenses, and the audit can be submitted in Arabic or English.
The process of filing an annual audit is as follows:
- The company, which is subject to return filing, must prepare an appropriate report within the regular deadline. Usually, this period is from 3 to 6 months from the date of the fiscal year end.
- The Report/Declaration must be certified by the auditor and submitted to the FTZ administration, where the company is registered. The filing of annual financial return statements takes place within the established schedule, and without its timely filing, the license of the onshore company can not be renewed.
- There is no corporate tax payable when this report is filed since there are no corporate taxes in the UAE.
The legal entity is responsible for the accuracy and reliability of bookkeeping and the data provided in the financial audit report.
Submission of the annual tax report/declaration on the income of individuals - residents of the UAE, is not required. The exception is individuals who own commercial properties in the UAE and rent it. The income from the lease of the commercial real estate is subject to VAT at the rate of 5%, and it is necessary to submit the appropriate VAT report and make appropriate VAT payment.
Who should file the VAT return in the UAE?
A company in the UAE must be registered as a VAT payer in the following cases:
- If this company is resident in the UAE;
- It delivers goods to/or gets them from the UAE, or services are provided on the local market.
- The annual turnover of goods or the volume of services subject to VAT exceeds 375 thousand dirhams (about 102 thousand dollars).
These reporting requirements are also applied to companies in free economic zones. As for VAT reporting, this reporting should contain data on goods and services, as well as on all suppliers and agents, and these financial records should be kept for five years.
The UAE Tax Service can conduct a tax audit on VAT payments
It should be noted that the federal tax service of the UAE can periodically conduct a tax audit of a legal person who conducts business in the country, in compliance with the provisions of tax legislation.
Such audit is conducted after preliminary informing the legal entity - subject to tax audit at the place of business, or in the place where the accounting records are kept. The tax auditor has the right to close the place to be audited (for example, a warehouse or a store) for a period of up to 72 hours to conduct an appropriate audit of reporting records.
What do professional companies offer in the UAE regarding accounting and audit?
As a rule, companies providing audit services and accounting services in the UAE and the submission of reports and VAT declarations offer one of the following options for joint work:
1. Bookkeeping in remote mode
In this interaction format, the company, which provides accounting and auditing services regularly obtains information on the financial transactions carried out by the client: sales, purchases, revenues and all other payments. According to the data received, tax reports are prepared with the required periodicity. Data exchange takes place via the Internet. This form of work costs less, but has certain limitations, related to the absence of direct contact.
2. Bookkeeping on a call-out basis to client’s office
In the same way as in the previous case, but the specialist periodically visits the client's office, fixing all the necessary data for preparing the tax reports. The regularity of the visit depends on the volume of operations performed and is discussed individually. This service will cost more, but you can solve your difficulties with your accountant in a "live mode."
3. Bookkeeping on a call-out basis to client’s office once a year (only final reports)
With this form of interaction, the representative of the audit company visits the client’s office periodically (for example, quarterly or once a year), and the company's staff member performs the work of collecting the necessary data for tax reports. The expert from the audit company only collects this data and forms the final report for the applicable period.
4. Auditing services for companies in the UAE
First of all, it should be noted that onshore companies registered in the UAE are required to appoint an independent auditor. And it is this independent auditor who should prepare an audit report. At the same time, if the company does not conduct any activities, it is still necessary to submit a report - it will simply be with zero results. The audit company, after its appointment, sends a special letter to the government registrar, in which it requests his appointment as auditor for the client’s company. A list of accredited audit companies can be found on the website of the relevant state registration authority. An audit of the existing financial statements will give an independent, objective assessment of the submitted data, which will be the guarantee of meeting all the requirements for the financial reporting of state tax authorities.
Advantages of accounting and audit services
In Dubai, UAE you can find a large number of companies that offer bookkeeping, audit services and a full range of accounting and VAT services for any business. There are following advantages of accounting services:
- Independent auditing and accounting services are provided at a high level, by all tax requirements and rules applicable in the country, so that you can be sure about meeting all the requirements of the Internal Revenue Service. This is especially true for new companies with limited experience.
- Using the services of specialists who provide audit and accounting services, you should not hire a full-time accountant, and you can save money, because you do not have to invest in equipment and specialized software, and you will get a guaranteed high-quality result.
- The manager of the company should not be distracted from his main activity for solving issues related to the reporting and filing of return declarations and shall focus on the development of the business.
The decision on whether it is worthwhile to perform a bookkeeping by yourself, or hire professionals, is certainly up to you, but given the cost of outsourcing services for audit and accounting is relatively low (for example, the services of an outsorced accountant can cost $500 per month), trust to experienced professionals will be a wise decision. You will save yourself and your company from potential difficulties and troubles and also save your time and money.