It is often thought, wrongly, that a company in the UAE does not have to keep accounts, make annual declarations, etc.
Here are the main obligations applicable to all companies in the UAE:
Keeping an account
Keeping accounts is mandatory! This means that a balance sheet and an income statement must be prepared every year.
A company in the UAE must keep its accounts according to the IFRS accounting standard.
The article 26 of “UAE Commercial Companies Law” (Federal Law No. 2 of 2015) says:
1. Each company shall maintain accounting records showing its transactions, provided that such records would accurately and at any time demonstrate the Company’s financial standing, and through which partners and shareholders could verify that Company’s accounts are maintained as per the provisions of this Law.
2. Each company shall maintain its accounting records at its head office for at least five (5) years as from the company’s fiscal year end date
This article echoes Article 78 on “Record-keeping” of the Federal Decree-Law No. 8 of 2017 on VAT in the Emirates which requires to keep all accounting elements for 5 years.
In addition to the balance sheet and the profit and loss account, it should be noted that in connection with the bookkeeping it is required to keep:
– Records of wages and salaries (= register of wages paid);
– Records of fixed assets (= register of fixed assets);
– Inventory records and statements (including quantities and values).
Annual audit of accounts
A company in the UAE must perform an annual audit of its accounts, article 27 of the UAE Commercial Companies Law (Federal Law No. 2 of 2015).
The auditor’s mission is to verify that the annual accounts are accurate.
The auditor’s report must be issued within 3 months after the annual closing of the accounts.
Every company in the UAE must hold an annual general meeting within 4 months of the close of the company’s accounts (usually by April 30).
The Manager of the company must then present the balance sheet and profit and loss account of the company, the Manager’s report on the activity and the Auditor’s report.
Here are the applicable sections (Federal Law No. 2 of 2015) on this subject:
– Article (87): Liability for Preparation of Accounts Company’s manager shall prepare annual budget, profit and loss account and annual report on company’s activities and financial standing, and shall provide suggestions regarding distribution of profits to the General Assembly within 3 months as from the expiry date of the fiscal year.
– Article (92) – Formation & Convention of General Assembly: A company with limited liability shall have a general meeting comprised of all the partners. The meeting shall convene at the invitation directed by the managers or board of directors at least once every year within the four months following the expiry of the fiscal year at the venue and date fixed in the MOA.
Corporate Income Tax (CIT)
Starting from 2024, a 9% tax on profits exceeding AED 375,000 will be implemented.
This applies to all companies (Mainland, Free-Zone, etc.). Some Free-Zone companies may be exempted if they have “Qualifying Income.”
Therefore, it will be necessary to submit an annual tax declaration to the authorities. This underscores the importance of maintaining accurate company accounting, as explained above.
It is mandatory to register for VAT (or to request an Exception if necessary). Thresholds are applicable according to the company’s turnover.
Since 2021, it is required to maintain a Register of Ultimate Beneficial Owners (UBO) for the company. This involves keeping two registers:
- Register of Nominee Director/Manager
- Register of Partner/Shareholder
For Free-Zone companies, this register is usually maintained with the Registry. For Mainland companies, it must be kept internally.
ESR Notification and ESR Report
The Economic Substance Regulation (ESR) requires:
– send a notification to the Registry indicating whether the company is concerned by this law;
– send a report to the Registry by 31/12 of each year.
If you have any questions about any of the above requirements, please do not hesitate to contact us. If you already have an existing company, we can review with you to ensure that your company is in order.