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 U.A.E .
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 change 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.
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