What Records Are Mandatory for Corporate Tax in UAE

Corporate tax in UAE pushes every taxable person to maintain accurate records and documents that will have to substantiate the information submitted in the tax returns. These records enable the Federal Tax Authority (FTA) to readily determine the taxable income. This article shares the mandatory requirements, like types of documents, and the consequences of failing to adhere to record-keeping obligations. 

The FTA has the authority to call for the financial statements used to determine the taxable income. Hence the financial statements are a mandatory document to be maintained by every taxable person. Financial statements provide a comprehensive overview of an entity's financial stature and are instrumental in assessing the accuracy of reported taxable income.  

Corporate tax regulations in the UAE do not specify a rigid format or set of documents other than financial statements.  This means that documents other than financial statements may differ according to the type and complexity of the business. This flexibility allows businesses of varying types and complexities to maintain records in formats that suit their unique needs. However, certain common information and documents must be kept consistent.  The common information & documents that shall be maintained by every taxable person include: 

• A record of the Taxable Person’s transactions in the Tax Period 

• A record of the Taxable Person’s assets, including details of any purchases or disposals 

• A record of the Taxable Person’s liabilities 

• A record of any stock held at the end of the Tax Period 

• Bank statements 

• Loan or financing documentation 

• Sale and purchase ledgers 

• Invoices or other records of daily earnings, such as till rolls 

• Order records and delivery notes 

• Other relevant business correspondence 

 It is not mandatory that the documents must be maintained physically. Businesses have the option to store documents electronically like scanned copies. 

  Any failure in maintaining the relevant documents required shall attract the following penalties: 

• AED 10000 for each violation 

• AED 20000 for repeated violation, within 24 months from date of last violation. 

 Even exempt persons are not excused from record-keeping obligations. They must maintain accurate records and be ready with proper documents that enable the FTA to ascertain their taxable income status. This ensures transparency and facilitates a smooth auditing process, allowing the FTA to verify exempted cases whenever necessary.  

Taxable persons and exempt persons alike are obliged to keep records and documents for seven years following the end of the tax period to which they relate. This extended duration provides a comprehensive view of financial activities over a significant timeframe. The seven-year period begins from the tax period to which the documents relate, not the period in which they were created. Which means, if a taxable person follows the cash basis accounting method, the period starts from the tax period in which invoices or bills were paid.  

Ensuring records are readily available upon the FTA's request is imperative. This accessibility facilitates a seamless audit process, enabling the FTA to efficiently confirm the accuracy of reported information. Keeping records accessible, whether in physical or electronic form, is crucial to meet corporate tax regulations. 

Under corporate tax, taxable persons must maintain comprehensive records. The corporate tax system in the UAE places a significant emphasis on meticulous record-keeping on taxable persons and exempted persons alike. This includes financial statements, invoices, and transaction details. Accurate record-keeping ensures compliance with tax regulations, transparency, and efficient financial management, facilitating a smooth and lawful business operation. Therefore, businesses should prioritize robust record-keeping practices to navigate the corporate tax landscape successfully.