As of June 1, 2023, the UAE Corporate Tax System mandates that all taxable entities adhere to specified accounting standards set by the Ministry of Finance for the preparation and maintenance of financial statements. These statements must accurately and fairly represent the taxable income and corresponding tax liability of the entities during each tax period.
The Federal Tax Authority (FTA) is empowered to compel taxable entities to submit their financial statements for a given tax period, specifying the method and deadline for submission. Additionally, the FTA possesses the authority to request supplementary information or documents pertaining to the financial statements. This framework underscores the significance of compliance with the Corporate Tax in UAE, emphasizing the role of the FTA in overseeing and regulating these processes.
Wondering Why Audits Matter in UAE Corporate Tax? Dive into the Essentials Now!
What Is an Audit Report and Why You Need It for the UAE Corporate Tax System?
An audit report serves as a comprehensive document offering an impartial assessment of the accuracy and comprehensiveness of a business’s financial statements. Within the context of the UAE Corporate Tax (CT) system, the significance of an audit report lies in its role of verifying the precise calculation and reporting of taxable income and tax liability for a business.
By providing an independent evaluation, the audit report plays a crucial role in bolstering the credibility and transparency of a business’s financial information. Furthermore, it serves as a deterrent against potential tax evasion and avoidance, contributing to the overall integrity of the CT system.
What’s the Core Purpose and Benefit of an Audit Report?
The primary objective of an audit report is to furnish assurance to the Federal Tax Authority (FTA) and other relevant stakeholders that a taxable entity has adhered to Corporate Tax (CT) laws, accurately and fairly reporting its income and expenses. Beyond compliance, an audit report serves the taxable entity by pinpointing and rectifying errors, omissions, or discrepancies in financial statements while enhancing internal controls and governance processes. Noteworthy benefits for the taxable entity include:
- Credibility and Risk Mitigation: It bolsters the credibility and reliability of both financial statements , minimizing the risk of penalties, disputes, or adjustments imposed by the FTA.
- Access to Resources: An independently verified audit report facilitates access to finance, investments, and business opportunities, as it signifies that financial statements have undergone scrutiny by a qualified and impartial auditor.
- Strategic Insights: The audit report provides valuable insights and feedback regarding the business’s performance, efficiency, and profitability. This information empowers the taxable entity to make well-informed decisions and devise strategic plans for the future.
How to Calculate Taxable Income for the UAE Corporate Tax System?
To compute Taxable Income within the UAE Corporate Tax System, a Taxable Person should adhere to the following steps:
- Determine Accounting Income: Begin by ascertaining Accounting Income based on the Financial Statements. These statements must adhere to accepted UAE accounting standards (IFRS or IFRS for SMEs). If the Taxable Person falls under the category of a Qualifying Free Zone Person or generates revenue exceeding AED 50 million, it is mandatory to have their Financial Statements audited.
- Apply Corporate Tax Law Adjustments: Make requisite adjustments to the Accounting Income in accordance with the provisions of the Corporate Tax Law. This process yields the Taxable Income amount. Subsequently, the Taxable Person is required to submit a Tax Return to the Federal Tax Authority (FTA) within nine months following the conclusion of each Tax Period.
Compliance with audit report requirements in the UAE Corporate Tax System is mandated for specific Taxable Persons, as outlined by Ministerial Decision No. 82 of 2023, which delineates categories necessitating the verification of Financial Statements by an external licensed auditor under Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses.
The decision stipulates that the following Taxable Persons are obligated to prepare and uphold audited financial statements:
- Revenue Exceeding AED 50,000,000: Taxable Persons with revenue surpassing AED 50,000,000 during the relevant Tax Period.
- Qualifying Free Zone Persons: Qualifying Free Zone Persons fall within the scope of entities requiring audited financial statements.
For partnerships, the Minister of Finance holds the authority to designate certain taxable persons, necessitating the preparation and maintenance of audited or certified financial statements by a third party. This also applies to partners in Unincorporated Partnerships within the ambit of the UAE Corporate Tax System.
Partners in such partnerships may be requested by the Federal Tax Authority (FTA) to furnish financial statements disclosing:
- The comprehensive details of the Unincorporated Partnership’s total assets, liabilities, income, and expenditure.
- The partner’s distributive share in the Unincorporated Partnership’s assets, liabilities, income, and expenditures.
- Partners are required to prepare and uphold these financial statements in alignment with accounting standards specified by the Ministry of Finance.
Furthermore, upon request, partners must submit these financial statements to the FTA, ensuring adherence to the regulatory framework.
Preparation and Submission of Audit Report
The process of preparing and submitting an audit report for Corporate Tax (CT) purposes involves several key steps:
- Appointment of Auditor: The taxable person is required to appoint and compensate an auditor who is licensed and registered by UAE competent authorities. The auditor must be independent of the taxable person and its related parties.
- Provision of Information to Auditor: The taxable person is obligated to furnish the auditor with all necessary information, documents, and records pertaining to its business activities, financial statements, income, expenses, assets, liabilities, and transactions.
- Adherence to Audit Standards and Procedures: The auditor is tasked with conducting the audit in accordance with the auditing standards specified by the Ministry of Finance in the UAE (IFRS or IFRS for SMEs). They must apply relevant accounting standards and the CT law to assess the financial statements of the taxable person.
- Audit Report and Opinion: The auditor prepares and signs the audit report, expressing an opinion on whether the financial statements comply with applicable accounting standards and the CT law. The opinion addresses whether these documents present a true and fair view of the financial position and performance of the taxable person.
- Submission of Audit Report: The taxable person may be obligated to submit the financial statements, used in determining taxable income for a tax period, in a format and timeline specified by the Federal Tax Authority (FTA).
Best Practices and Tips for an Effective Audit Report:
- Select a qualified and reputable auditor with expertise in the UAE tax environment and the relevant industry.
- Maintain accurate accounting records and supporting documents consistent with accounting standards and the CT system.
- Maintain regular communication with the auditor, providing all necessary information and explanations.
- Review the draft audit report collaboratively with the auditor, addressing any findings or recommendations before finalization.
- Submit the audit report to the FTA in a timely and accurate manner, retaining a copy for future reference.
Choose Elevate for Premium Corporate Tax Audit and Advisory Services in the UAE
Elevate, a leading audit firm in Dubai offers a range of services to assist you with audit reports for corporate tax in the UAE. Some of the key services they provide include:
- Financial Statement Audit Report for Corporate Tax in UAE:
Elevate ensures the delivery of high-quality financial statement audits that align with the auditing standards specified by the Ministry of Finance and the corporate tax law. This includes comprehensive assistance in preparing and filing your corporate tax return with the Federal Tax Authority (FTA).
- Corporate Tax Advisory Services:
Leveraging a team of experts, Elevate provides valuable corporate tax advisory services in UAE. This involves guiding you through the intricacies of the corporate tax system and offering insights into best practices and strategies to optimize your tax position.
Additionally, we can assist you in handling tax disputes, reconsiderations, and voluntary disclosures.
By engaging with Elevate, you can benefit from our expertise and support to ensure compliance with regulatory standards, navigate the complexities of the corporate tax system, and strategically manage your tax-related matters in the UAE.
In conclusion, as the UAE embraces its Corporate Tax System, effective communication and collaboration between businesses and auditors become paramount. The significance of audit reports in validating financial accuracy and compliance cannot be overstated, particularly for entities exceeding AED 50,000,000 in revenue and Qualifying Free Zone Persons. Elevate stands out as a leading audit firm in Dubai, UAE, offering not just meticulous financial statement audits but also invaluable corporate tax advisory services. Choosing such expert support ensures not only regulatory compliance but also strategic management of tax-related matters.
Corporate Tax Consultants in UAE like Elevate play a pivotal role in facilitating seamless registration, and their expertise proves invaluable in navigating the intricacies of the corporate tax landscape. As businesses adapt to this new era of transparency and compliance, collaboration with top audit firms and consultants in UAE like Elevate Accounting & Auditing becomes a proactive step towards success in the evolving realm of UAE Corporate Tax.
- Corporate Tax Consultancy Services.
- Corporate Tax Training and Awareness.
- Corporate Tax Registration Services
- Preparation and filing of Tax Returns.
- Corporate Tax Audit Services
- Representation Services before tax authorities.