Introduction
Recently, the Ministry of Finance in the UAE introduced a new decision that requires certain Taxable Persons to maintain Audited Financial Statements. This article provides a deep analysis of these new regulations and their implications for businesses operating in the UAE.
Categories of Persons required to prepare and maintain Audited Financial Statements
The categories of persons that are required to maintain audited financial statements are as follows:
- Qualifying Free Zone Person
- Taxable Person who derives revenue above AED 50 million in the relevant Tax Period
Publication of the decision:
- The decision will be implemented within 15 days of publication.
Financial Statements as per Article 54 of the UAE Corporate Tax Law
The UAE Corporate Tax Law establishes the legal framework for the preparation, submission, and auditing of financial statements for certain companies in the UAE. The main aspects are:
- Submission of Financial Statements: FTA can request a Taxable Person to submit a financial statement for ascertaining Taxable Income.
- Audited Financial Statements: The Minister of Finance can ask for the preparation of audited or certified financial statements for the above mentioned persons.
Need for Audited Financial Statements
- Strengthening Corporate Governance: The UAE Corporate Tax Law emphasizes the importance of robust corporate governance practices in companies operating in the UAE.
- Enhanced Transparency for Stakeholders: The mandatory auditing and submission of financial statements to the FTA will increase transparency for stakeholders, including investors, creditors, and regulators. This will enable them to make more informed decisions and assessments of the financial health and performance of companies in the UAE.
- Attracting Foreign Investment: By aligning its financial reporting and auditing standards with international best practices, the UAE aims to create a more attractive business environment for foreign investors. The new regulations will help boost investor confidence in the UAE’s financial markets and help in the flow of foreign capital into the country.
Implications for Businesses
The new update on the audited financial statements in the UAE has significant effects on businesses operating in the UAE. Companies must ensure that they comply with the requirements of the law and the Ministerial Decision. This includes the preparation and submission of audited financial statements. Also, they should adhere to financial reporting standards and maintenance of such financial records.
Moreover, companies must engage qualified and independent auditors to conduct their audits. This is needed to ensure that their financial statements are accurate, reliable, and in line with applicable laws. This will help companies meet their legal obligations. Also, it increases the faith and trust of investors, regulators, and other stakeholders in the company.
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Conclusion
The UAE’s new decision on the preparation and maintenance of audited financial statements represents a significant step forward. It promotes transparency, accountability, and corporate governance in the UAE.
