The Accounting Standard “International Financial Reporting Standards” (IFRS) Is the Requirement Of New Amended Law:-

What are the Key points while preparing for compliance with the International Financial Reporting Standards (IFRS):-

1. Financial Statement Submission: 

The FTA may request financial statements to calculate taxable income.

2. Financial Statements That Have Been Audited: 

Financial statements that have been audited or certified may be required by the finance minister. 

3. Financial Statements For UAE Corporate Tax:

• Balance sheet
• Income Statement (Profit/Loss)
• Flow-of-funds statements
• Shareholders’ equity statement

4. Audit of Financial Statements for UAE Corporate Tax:

• Enhances business operations
• Builds credibility and reputation
• Detects and prevents fraud
• Identifies growth opportunities

Accounting Standards for Consistency and Comparability of Financial Statements:

The implementation of the new corporate tax system in the United Arab Emirates (UAE) has led to important changes in determining taxable income for businesses with Revenue of more than 50 million dirhams. Additionally, the Ministry of Finance has introduced specific accounting standards and requirements for financial statements, specifically, implications are there for MNEs as a taxable entity generating revenue exceeding AED 50 million. Larger enterprises with revenue exceeding AED 50 million are mandated to adopt International Financial Reporting Standards (IFRS), promoting consistency and comparability in financial reporting.

UAE’s Acceptance and Willingness For International Tax Reform for Multinational Companies:-

The UAE’s recent embrace of a global minimum tax on multinational corporations, supported by the G20, underscores its dedication to international tax reform and its willingness to cooperate with other nations to establish fair competition for all businesses. The enactment of the UAE corporate tax milestone in economic development with its effective implementation for future economic advancement and prosperity. It is, however, that the tax rates remain highly reasonable and are among the lowest observed in any double taxation avoidance agreements.

MOF’s List For Compulsory Audited Financial Statements:

The Ministry of Finance has published a list of those responsible for creating and maintaining audited financial statements in accordance with the authority provided in Article 54 (2) of the corporate tax law. This requirement applies to taxable entities generating revenue exceeding AED 50 million and qualifying individuals operating in a free zone.

What Is The Utilization of Accounting Standards For Business Entities:

Article 20 of the CT Law emphasizes the importance of using accepted accounting standards in the UAE for preparing standalone financial statements. International Financial Reporting Standards (IFRS) are necessary for CIT purposes and must be used by taxable entities. enterprises having revenue of less than Fifty million UAE Dirhams may choose to adopt  International Financial Reporting Standards (IFRS) for small and medium-sized entities (SMEs) for their accounting standards. Additionally, certain entities with revenue not exceeding AED 3 million can utilize the cash accounting method instead of accrual accounting, subject to approval by the Federal Tax Authority.

Consolidated Financial Statements for Tax Groups:

Companies forming a tax group must prepare consolidated financial statements as mandated by the Ministry of Finance. This requirement ensures a comprehensive and accurate representation of the group’s financial position and tax liability by combining financial statements from all entities within the tax group.

Benefits of the latest Corporate Tax UAE:

The enactment of these decisions brings numerous advantages to businesses and the UAE as a whole. Firstly, by aligning with international tax practices and requiring recognized accounting standards, the UAE enhances the global recognition of exempt status for private pension funds and social security funds. This recognition facilitates overseas investments and allows the acquisition of benefits from double tax treaties, strengthening the UAE’s position as an attractive global investment destination. SMEs benefit from reduced compliance burdens through adopting  IFRS for SMEs. Furthermore, businesses with revenue not exceeding AED 3 million can simplify their accounting processes through cash accounting, reducing administrative complexities. These decisions also promote transparency and credibility by mandating independent auditors to conduct audits and provide opinions on financial statements, ensuring accuracy and instilling confidence in the tax authority.

Conclusion:

The introduction of standalone financial statements and the adherence to recognized accounting standards represent a significant shift in the UAE’s taxation landscape. These decisions streamline the tax reporting process, ensure consistency in determining taxable income, and promote transparency and credibility in financial reporting. The UAE enhances its appeal as an attractive global investment destination by aligning with international practices. The use of standalone financial statements and appropriate accounting standards provides businesses with clarity and options for compliance, ultimately contributing to a robust business environment.