The significance of adopting
robust accounting procedures in light of the UAE's corporate tax implementation
The implementation of corporate tax in the UAE has brought about
significant changes in the business landscape, making accounting practices more
critical than ever before. Accounting plays a vital role in ensuring tax
compliance as businesses must accurately calculate their taxable income and
fulfil their tax obligations promptly. The ministerial decision has clarified
that for the purpose of calculation of Taxable income of a taxable person, the
Taxable person shall prepare adequate financial statements based on IFRS -
being the applicable accounting standards in the U.A.E .
The Ministry of Finance has issued Ministerial Decision No. 114 of 2023,
clarifying the applicable Accounting Standards and the method of accounting to
be followed for the purpose of preparing financial statements under the Federal
Decree-Law No. 47 of 2022 (’the CT Law’) in the UAE.
Some of the common IFRS that we need to follow while preparing financial
statement are IFRS 15- Revenue Recognition, IFRS 7- Financial Instrument
Disclosure, IFRS 9 – Financial Instrument- Recognition & Measurement, IAS
21- The effect of changes in foreign exchange rates, IAS 12- Income taxes etc.
In light of the recent changes, it is crucial to check the impact of
Deferred Tax Assets (DTA) and Deferred Tax Liabilities (DTL). Deferred taxes
are a result of timing differences in the recognition of income and expenses
for tax and accounting purposes.
Thorough bookkeeping helps in compliance with law, tax planning, audit
trail, accurate tax payment, monitoring profitability & growth, evidence of
expenses and deductions and many more.
By prioritizing robust accounting
practices, businesses can navigate the complexities of corporate tax, enhance
their financial performance, and position themselves for long-term success in
the competitive UAE market.