How to Maintain Accounting Records Under UAE Corporate Tax Rules

When the UAE introduced corporate tax on June 1, 2023, one of the big changes for companies was a stronger requirement to maintain good accounting records. It’s no longer enough just to keep your papers. You must follow rules, standards, and documentation practices so that your records are reliable, transparent, and audit-ready.

Suppose you run a business in Dubai, Abu Dhabi, or any emirate. This guide will help you learn what accounting records you need and how to keep them (electronically or on paper). Moreover, how to reconcile your books with tax rules and best practices, pitfalls, and real tips. 

Why these records matter for audits and compliance. And, of course, how a specialist firm can support you in managing this process smoothly.

Why Proper Accounting Records Matter Under UAE Corporate Tax

Accounting records are the foundation of any corporate tax compliance. Without them, your tax filing may be rejected. You may face penalties, and audits can be difficult.

Here are key reasons that you need to know why they are so important:

Starting point for tax calculations

The UAE tax law expects the taxable income to be based on your accounting profit. According to the tax law, your financial statements are prepared under acceptable accounting standards. These are the basis from which tax figures are derived. 

No separate “tax books” needed

Yes, unlike some countries, the UAE does not require you to maintain separate accounting books just for tax. Your regular books, if prepared correctly, will serve both business and tax purposes. 

Audit readiness

 The FTA (Federal Tax Authority) can audit your company. If your books are messy or unsupported, the audit may lead to adjustments, fines, or challenges. Every corporate tax filing must rest on well-documented accounting & bookkeeping.

Reconciliation between accounting and tax

Because accounting rules (IFRS) and tax rules in some areas differ. So you need reconciliations. Like unrealized gains allowed under accounting, they may need to be excluded or adjusted for tax.

Meeting regulatory thresholds and audit requirements

If your revenue passes certain thresholds (e.g. AED 50 million). Or if you are a free zone entity claiming 0% tax, then you may need audited financial statements

Support for transfer pricing 

Transactions between related parties must adhere to the “arm’s length” principle. If you don’t keep clear records, the FTA may make adjustments.

Penalties for non-compliance

If you fail to maintain records that meet the standards or to produce them during inspection. Then you may face administrative penalties.

What Records & Documents Must Be Kept

To comply with corporate tax in UAE, you must maintain a broad set of documents. Here’s a checklist:

Accounting Standards & Methods You Must Use

IFRS or IFRS for SMEs

Businesses must prepare financial statements in either:

• IFRS (International Financial Reporting Standards)
• Or IFRS for SMEs, if your revenue does not exceed AED 50 million in a tax period.

For corporate tax, using other standards is not acceptable. If your books are not in compliance. You risk administrative penalties. 

Accrual Basis, unless allowed to use Cash Basis

Normally, you must record income and expenses on an accrual basis. When they are earned or incurred, not when cash changes hands.

However, there’s a cash basis option if:

• Your total receipts for the tax period do not exceed AED 3 million
• Or in “exceptional circumstances” with FTA approval
• If you use the cash basis, that must be clearly documented.

Adjustments & Reconciliations

Because tax rules differ from accounting in some respects, you must prepare reconciliation schedules:

Unrealised gains and losses: 

International Financial Reporting Standards IFRS may allow fair value changes even if not sold, for tax. Often, only realised gains apply unless you make a special election.

Non-deductible items: 

Some expenses are allowed under accounting. For example, entertainment beyond 50%, fines, and certain interest must be disallowed or adjusted.

Transfer pricing adjustments:

If related-party deals are not arm’s length, then tax adjustments must be made.

How Long to Retain Records in the UAE

You must keep accounting and tax records for at least seven years. From the end of the relevant financial year. For example, if your financial year ends December 31, 2024, you must store all relevant papers up to December 31, 2031.

Best practice is to keep both physical and electronic copies. Also securely stored and backed up.

Electronic vs Paper Records

The law allows electronic accounting systems, but with conditions:

• They must be secure, reliable, and tamper-evident
• They should permit retrieval and inspection by tax authorities
• They must preserve the audit trail. Like a record of changes, who edited and when.
• Scanned copies of invoices and receipts must be legible and preserve original metadata.

Many modern accounting systems used in the UAE already integrate electronic formats and aim to be tax-friendly.

Daily, Monthly, and Yearly Record Keeping

Daily / Weekly:

Record your revenues, purchases, payments, bank reconciliation, petty cash, and inventory adjustments

Monthly / Quarterly: 

Reconcile accounts, prepare intercompany eliminations, review accruals, and prepare book-to-tax reconciliations

Year-End: 

Close books, prepare financial statements, make final adjustments, and produce audit-ready documentation.

Common Mistakes

From real-world insights and guidance. Common errors include:

• Mixing business and personal expenses
• Missing or incomplete supporting documents
• Delaying the recording of transactions
• Using inadequate or non-compliant software
• Not doing reconciliations (e.g., book vs tax, cash vs bank)
• Failing to document related-party transactions
• Ignoring adjustments for unrealised gains and losses or non-deductibles

These mistakes can trigger penalties, disallowances, or extended audits.

Filing & Audit Readiness

When tax time arrives:

1. Use your financial statements plus reconciliation schedules to compute taxable income
2. Prepare audit reports if required
3. Submit corporate tax return by deadline (9 months after year-end) 
4. Keep backup files (screenshots, support documents) 
5. Many companies keep screenshots of submitted forms in case the portal does not allow downloads later.

How Bestax Helps with Accounting Record Maintenance

Maintaining compliant financial records is a complex task. Especially as rules evolve. 

• Accounting & bookkeeping: Helps in recording transactions, reconciling accounts, and maintaining ledgers.
• Corporate tax implementation training: Training your internal team for record-keeping and compliance.
• Tax return filing services: Preparing and filing the corporate tax return correctly.
• Document check & audit readiness: Ensuring your files and records are complete and organised.
• Accounting software setup & support: Configuring systems to meet UAE tax and record-keeping standards

Maintaining accounting records under UAE corporate tax rules is no longer optional. It is essential. With the right standards, disciplined practices, and organised systems. You build a firm foundation for compliance, smooth audits, and trustworthy filings.

If the process feels overwhelming, you don’t have to do it alone. Bestax specializes in accounting, bookkeeping, tax filings, compliance audits, and system implementation.

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Disclaimer: The information provided in this blog is for general informational purposes only. For professional assistance and advice, please contact experts.