Dividends are a portion of a company's profits paid to its owners, or shareholders, for a specific period. In the United Arab Emirates (UAE), dividends can be paid annually, quarterly, or on another schedule (irregularly). The amount of dividends is always less than the total profit; they are only a part of it. The remaining funds are used, for example, to cover operating expenses, expand the business, make investments, replace equipment, and other needs. Also, part of the profit may be left as a reserve. Here we will discuss the main aspects of regulation, financial reporting requirements, document preparation, and the procedure for paying dividends by legal entities in the UAE. In addition, we will consider the role of the consulting company Alliance Business Advisors' auditing services in the payment of dividends.
Dividend payment process
The company's management prepares financial statements and conducts an audit at the end of the financial year. After receiving the final data, the shareholders decide at a general meeting how the profits will be distributed and how much dividends will be paid. This decision is recorded in the minutes of the shareholders' meeting, and then the payment is made.
In most cases, dividends are paid at the end of the financial year, and their amount is determined by the number (shares) of shares held by each shareholder. However, there are situations in which company owners want to receive their dividends before the end of the financial year. In this case, a bank in the UAE may request confirmation of the payment (see the list of documents below) if the amount is significant.
Intermediate dividends and audit
To be eligible to pay interim dividends, the following documents must be prepared:
- The company's interim balance sheet;
- An audit report prepared in accordance with International Financial Reporting Standards (IFRS);
- Shareholders' decision on profit distribution.
For example, if a company in Dubai earned AED 3 million in the first half of the year and intends to pay AED 2 million in interim dividends, an audit for that period is mandatory.
The financial indicators are confirmed by the report, and the payment is legalized by the shareholders' decision. Such documents not only justify the transfer of funds within the company, but also confirm their origin.
Why else might an audit be necessary?
In addition to dividend payments, an audit may also be required to establish a company's tax residency. In this case, an audit report covering the period from the company's registration date through the end of the following year (up to 18 months) is required for submission to the UAE tax authorities.
Conducting an audit is an important component of achieving transparency in a company's financial operations. Audit services from Alliance Business Advisors partners include verification of:
- bank statements;
- invoices;
- contracts;
- other important financial documents.
This is necessary to ensure the authenticity and accuracy of financial statements.
During the audit for dividend payments, specialists check:
- The company's financial results;
- The adequacy of profits;
- How future payments in the planned amount will affect the company's financial well-being.
Thus, the audit gives shareholders confidence that operations will proceed smoothly and will not jeopardize the business's stability.
In the UAE, professional accounting and auditing services are required to process dividend payments. An interim or annual audit will be required to verify the company's payments and financial position.
Types of accounting and auditing services for dividend payments in the UAE
Dividends are a crucial component of corporate governance, as they distribute most of the company's profits among shareholders. Sometimes shareholders may demand dividend payments before the end of the financial year. In this case, banks and regulatory authorities will require guarantees that these payments are legitimate, and therefore, in such cases, enhanced control is necessary. Alliance Business Advisors and its partners are ready to provide the accounting and auditing services you need to make dividend payments to shareholders, while ensuring transparency and compliance with local laws.
Intermediate dividends and their regulation
Intermediate dividends are profits that a company must distribute before the end of the financial year. They allow shareholders to receive payments without waiting for the year-end report. However, for large payments, banks must be certain of their legality. Therefore, an audit is an effective tool for implementing unscheduled dividend payments.
In addition, under local law (Federal Decree-Law No. 32 of 2021), audits are mandatory for all companies. It is also necessary for dividend payments. Accountants document the shareholders' decision on the distribution of income.
Audit rules in the UAE permit the preparation of reports covering a specific period.
For example:
If a company began operations on September 1 and its fiscal year begins on January 1, the first audit may cover 16 months – from the start of active operations through December 31 of the following year.
Dividend payments and audit services
Professional auditing ensures transparency and compliance with all regulatory requirements. Audit reports are important for banks and regulatory authorities because they verify the legality of all payments. Auditing also helps owners make informed decisions, improving corporate governance and overall financial stability.
Interested in learning more about dividend payment audits in the UAE?
Feel free to ask us any questions you may have on this topic by filling out the feedback form. Our specialists will contact you and provide all the necessary advice.
Frequently asked questions
Can dividends in the UAE be paid throughout the year?
Yes, companies in the UAE can pay dividends throughout the year, for example, once a quarter. However, to organize such payments, it is necessary to prepare the required documentation for the bank and conduct an audit.
Who decides on the payment of dividends?
This decision is made at a meeting of shareholders and owners and must be recorded in the relevant minutes. This document is required to process dividend payments.
How to pay dividends correctly in the UAE?
To ensure the payment is processed, it must be supported by financial statements, audit results, and an official decision by the shareholders based on the audit.
How is the amount of dividends calculated?
Usually, the decision on the amount of dividends to be paid is made at a general meeting of shareholders and owners, based on the results of the financial year. The same meeting also decides how much of the profit will be allocated to the company's development.
Is there a tax on dividends in the UAE?
In the UAE, dividends are not taxed either at source or when received by shareholders.
How many times can dividends be paid in the UAE?
Most often, payments are made once a year, but another procedure can be determined, for example, quarterly or even monthly. This requires a special decision by the board of directors.
What services does Alliance Business Advisors offer?
We offer detailed advice on taxation and dividend payments. In addition, we provide accounting services and conduct audits with our licensed partners. We can also help you prepare shareholder resolutions and other documents. For more information on this topic, please contact us using the feedback form on our website.
