Financial Statements record the financial activities and performance of a Business, and are a key element of Corporate Tax Law. A Taxable Person’s Accounting Income (profit or loss) as stated in the Financial Statements is used as the starting point for calculating Taxable Income.

Taxable Persons that earn Revenue that does not exceed AED 3,000,000 in the Tax Period may use the Cash Basis of Accounting.369

Once a Taxable Person’s Revenue exceeds AED 3,000,000 in the Tax Period, they must prepare Financial Statements using the Accrual Basis of Accounting except under exceptional circumstances and following the FTA’s approval.370

Taxable Persons must prepare Financial Statements in accordance with IFRS. However, Taxable Persons that earn Revenue that does not exceed AED 50,000,000 may apply IFRS for SMEs.371

Applying IFRS creates a common definition of Accounting Income across business types and industries. For further details on accounting standards for Corporate Tax,

readers are advised to consult Ministerial Decision No. 114 of 2023 on the Accounting Standards and Methods for Corporate Tax Purposes.372

The FTA can, by notice or by issuing a decision, request a Taxable Person to submit the Financial Statements used to determine their Taxable Income.373 Where a Taxable Person is a partner in an Unincorporated Partnership, the FTA can request the partner to submit Financial Statements that show both the partnership’s overall assets, liabilities, income and expenditure, and the partner’s distributable share of assets, liabilities, income and expenditure.374

Some Taxable Persons may be required to maintain audited Financial Statements. This means that the Financial Statements must be checked by an external licensed auditor.375

The following Persons are required to maintain audited Financial Statements:376

• A Taxable Person deriving Revenue exceeding AED 50,000,000 during the relevant Tax Period; and
• A Qualifying Free Zone Person.

For further details on audited Financial Statements, readers are advised to consult Ministerial Decision No. 82 of 2023 on Maintaining Audited Financial Statements