As businesses in the UAE prepare for corporate tax compliance, closing the books of accounts effectively and in alignment with regulatory requirements is essential. Here are 12 key focus areas to ensure accurate financial reporting and compliance under Federal Decree-Law No. 47 of 2022:
- Classify Correctly: Ensure proper categorization of taxable income, exempt income, deductible expenses, and other exemptions.
- Revenue Recognition: Align revenue recognition practices with IFRS 15 (Revenue from Contracts with Customers) to maintain compliance and consistency.
- Reconcile Revenues: Cross-check revenues reported in financial statements with VAT and corporate tax records to eliminate discrepancies.
- Validate Expenses: Verify that all expenses are documented, business-related, and distinguish between deductible and non-deductible expenses (e.g., fines, penalties, personal expenses).
- Intercompany Transactions: Review related-party transactions for compliance with Transfer Pricing Regulations and maintain a Local File and Master File as required.
- Provisions: Accurately account for provisions such as bad debts, gratuity, and leave salary, adhering to both accounting and tax regulations.
- Tax Losses: Document carried-forward tax losses effectively to offset future taxable income, within permissible limits.
- VAT Reconciliation: Cross-check VAT returns with financial statements to ensure accurate reporting and identify transactions impacting corporate tax.
- Related Party Disclosures: Disclose all related-party transactions in compliance with UAE Corporate Tax Law and adhere to arm’s length pricing principles.
- Profit/Loss Adjustments: Reconcile book profits with taxable profits by incorporating necessary adjustments for corporate tax purposes.
- Stay Updated: Regularly update accounting records to reflect changes in tax laws or guidelines issued by the Federal Tax Authority (FTA).
- Documentation: Maintain robust documentation to ensure readiness for audits and support compliance with corporate tax requirements.
By focusing on these key areas, businesses can streamline their tax compliance process, minimize risks, and achieve accuracy in their financial reporting.
Let’s prepare together for a seamless transition into the UAE’s corporate tax regime!