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A Guide to UAE’s Financial Year & The Tax Planning Strategies

April 30, 2023
Fortius Team
Banknotes of the United Arab Emirates (UAE) of different types and years illustrate UAE’s financial year & tax planning strategies.

An Overview

The start or end of every fiscal year or financial year is a busy time for organisations as they gear up to prepare financial statements according to their country's standards. In Dubai, limited liability companies are required to prepare financial statements according to International Financial Reporting Standards (IFRS). It is mandatory for all holding enterprises to present comprehensive financial statements in accordance with IFRS by the end of every financial year. However, consolidation is not required for transitional holding companies.

Official accounting criteria mandate that the holding company should prepare consolidated financial statements under the official accounting criteria. Dubai-based businesses can start preparing their annual financial statements before the end of the fiscal year so they have enough time to make modifications and rectify any mistakes. Let’s learn more about UAE’s financial year and how they should plan their tax strategies.

UAE’s Financial Year: A Closer Look At the Details

Like the calendar year, a fiscal or financial year covers a period of twelve months. During this time period, organisations must complete a full accounting cycle. Not all financial years are the same as the calendar year. However, the UAE financial year is an exception- It commenced on January 1st and ends on December 31st. It should also be noted that the UAE Ministry of Finance (MOF) announced a federal corporate tax (CT) for financial years beginning on or after 1 June 2023.

Which are the businesses that must submit annual financial statements?

All businesses operating in UAE’s free zone must prepare their annual financial statements as per the IFRS. Company or partnership limited by shares other than those with other obligations in the UAE may prepare their financial statements in accordance with any generally accepted format. However, IFRS is the most common format. All other subsidiaries of listed companies in other jurisdictions can prepare financial statements according to the structure used by their parent companies. All Dubai-based companies listed on the stock exchange must also perform annual audits.

As per the UAE law, annual audits are mandatory for the following:

  • Organisations with joint stock
  • Limited liability companies
  • Partnerships or affiliations limited by shares
  • Businesses mandated by law
  • Supervisory units or financial institutions
  • Businesses with special requirements

Set of Accounts in an Annual Financial Statement

Generally, organisations based in Dubai will prepare annual financial statements comprising a set of accounts that include:

The income statement

This report will have all the details about the income and expenditure of a business for the fiscal year. It will also have all the details about the activities of the organisation.

The balance sheet

The balance sheet is an important financial statement comprising the organisation’s liabilities, assets, and equities. It talks about the cash flow within the company and evaluates its capital structure.

The cash flow statement

This document shows how the company used the cash for a specific period and includes various financial notes.

The statement of shareholder’s equity

This report is all about the transactions implicating the equity accounts for a specific period. It also includes vital information about dividends given to shareholders.

January 1, 2023, signalled the start of a new fiscal year in the UAE. If you are a UAE-based business, it is time to invest in firms that offer tax planning services to help with your tax planning strategies. These efforts will mitigate your tax liabilities and increase your profits.

Fortius Consulting suggests some effective tax planning strategies for the new fiscal year in the UAE.

8 Tax Planning Strategies For UAE-based Organisations

1. Know your tax laws and regulations.

This, of course, is the first step to executing proper tax planning. UAE has various tax rates, deductions and exemptions. You ought to know what your business is eligible for. Additionally, you must update yourself with any changes to the tax laws and regulations that may affect your strategies.

2. Maintain accurate and detailed financial records.

Your financial records are the building blocks that help optimise your tax planning strategies. They also indicate your company’s financial health. Moreover, maintaining accurate financial records enables you to file your taxes without any hassles and eliminates any discrepancies that could land you in trouble with the Inland Revenue Department (IRD).

3. Evaluate tax planning techniques.

Consider all kinds of tax planning tactics that will help your company sail smoothly without any financial hiccups. For example, you can carry forward any expenses incurred in the upcoming fiscal year. It may reduce your taxable income in the current year. In another scenario, the income that may be derived in the next financial year may allow you to pay less tax in the current year.

4. Consider implementing structuring options.

Tax planning is the time to consider harnessing the support of structuring options like:

  • Joint venture
  • Limited liability companies
  • Holding companies

This will help minimise your taxes and capitalise on tax incentives and exemptions available for UAE businesses.

5. Make tax pooling arrangements.

Tax pooling is a great way to avoid tax liabilities and pay lower interest rates. Banks also encourage tax pooling because it allows you to:

  • Consolidate tax obligations with other associated taxpayers.
  • Manage cash flow
  • Mitigate tax-non compliance and impending penalties

6. Prepare and plan for capital expenses.

Unplanned capital expenditures can significantly impact your business tax liabilities. Hence, every capital expense should be well thought out and executed perfectly. Also, all capital expenses, whether big or small, should be planned to give you leeway to optimise tax exemptions or incentives that may be accessible, such as:

  • Accelerated depreciation of assets
  • Ability to claim tax credits for capital expenditures

7. Utilise all available tax deductions and credits.

Taking advantage of whatever tax deductions and credits you are eligible for is advisable. Look out for expenses like:

  • Rent
  • Utilities
  • Salaries
  • Research & development
  • Sustainable energy investments like windmills and solar power
  • The hiring of local employees.

8. Hire professional tax planners.

Unless you understand the intricacies of tax planning, it can be very confusing. There’s a risk of you paying more taxes than you ought to or not paying an important tax. It is best to hire professional tax consultants to ensure you are taking maximum advantage of the tax exemptions at your disposal. Consider it a wise investment because you can rest assured that you have the best tax planning strategies for your business.

Make Tax Planning Easy With Fortius Tax Planning Services, UAE

Dubai has established itself as a pulsing and promising business centre for international investors looking to capitalise on its multitude of possibilities. Staying tax compliant is a significant and mandatory requirement for all UAE-based businesses. You should also make the most of any strategies to avoid missing out on the benefits. Collaborate with Fortius Consulting and make tax planning easier with expert advice from our tax consultants. We offer excellent tax planning services for all UAE-based businesses. Talk to us today.

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Fortius Consulting Services is a trusted name for business consulting and CFO services in the UAE, Singapore and India. Through our expert consulting and advisory services,we assist organisations across the UAE & Asia to boost their profitability, improve operational effectiveness, increase management capability, institutionalise strategies, and upgrade their internal structures.


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