Let's consider two more aspects of corporate tax in the UAE: TRANSITIONAL RULES and FINANCIAL STATEMENT.
To calculate corporate tax liabilities for the first tax period, taxpayers must have a balance sheet (financial statement) at the beginning and end of the tax period.
The balance at the start of the first tax period should reflect the balance on the last day of the financial year. If no reports were prepared for the previous fiscal year, the balance at the end of the period must be prepared, regardless of whether accounting is done on a cash or accrual basis.
If the taxpayer owns intangible assets, real estate, financial assets, and financial liabilities, adjustments in accounting must be made.
The FINANCIAL STATEMENT serves as the basis for calculating taxable income.
Taxpayers whose income does not exceed 3 million AED in the tax period can use the cash basis of accounting. Once the taxpayer's income exceeds 3 million AED during the tax period, they must prepare financial statements on an accrual basis.
Taxpayers must prepare financial statements by IFRS standards. However, taxpayers with income not exceeding 50 million AED can apply IFRS for SME.
Through notification or decision issuance, the FTA may require taxpayers to submit financial statements to determine their taxable income.
In conclusion, let's note who among taxpayers is obligated to conduct a financial statement audit:
Taxpayer whose income exceeds 50 million AED during the respective tax period.