How a Business Should Maintain its Books of Accounts as per UAE Law
When books are not maintained as per UAE law, companies face heavy fines, delayed renewals, and even suspension of licenses. The stress of fixing old records can drain time and money.
The good news is that staying compliant is simple if a business follows the UAE’s clear accounting rules and keeps its records organised for at least five years. Businesses are allowed to seek help in this from expert accounting firms in the UAE, like Jitendra Chartered Accountants (JCA).
In this blog, let’s see what the law requires and how every company can meet these standards with ease.
Why Maintaining Books of Accounts Matters for Businesses
Keeping books of accounts is not just a formality. It helps a business track money flow, check its profit and loss, and make informed decisions. Proper accounting prevents mistakes, reduces the risk of insolvency, and builds trust with partners and authorities.
Under Federal Law No. 2 of 2015 and the UAE VAT Law, all corporations must maintain their financial records for a minimum of 5 years. Free zone authorities and the Federal Tax Authority (FTA) can request these records anytime. Businesses that ignore this rule face administrative penalties that can reach hundreds of thousands of dirhams.
Requirements Under the UAE Commercial Companies Law
The Federal Law No. 2 of 2015 about Commercial Companies clearly explains how accounting records should be kept.
Article 26 states that:
- All companies must keep accounting records at their head office for at least five years from the end of the financial year.
- Records can be stored electronically if they follow the official regulations.
- Financial statements must be prepared in line with International Financial Reporting Standards (IFRS) to show a true picture of profits and losses.
Article 87 adds that company managers are responsible for preparing:
- The annual budget,
- Profit and loss accounts, and
- A report on the financial position of the company.
These must be ready within three months after the end of the financial year and presented to the shareholders or partners. Businesses can seek assistance from outsourced accounting firms in the UAE, like JCA, for proper record-keeping.
Penalties for Non-Compliance
The law also lists the penalties for not maintaining records:
- Article 348: Failing to keep accounting records as required can result in a fine between AED 50,000 and AED 500,000.
- Article 349: Not keeping the records for the required five-year period can lead to an additional fine between AED 20,000 and AED 100,000.
Accounting Records Required Under the UAE VAT Law
The Cabinet Decision No. 36 of 2017 (Executive Regulation of the Federal Tax Procedures Law) sets more detailed requirements. Companies must maintain:
- Balance sheets
- Profit and loss accounts
- Records of wages and salaries
- Records of fixed assets
- Inventory records and statements at the end of each tax period
- All stock count records related to inventory statements
Failure to maintain these records results in a fine of 10,000 AED for the first offense and AED 50,000 for repeated violations.
Companies in the real estate sector must retain their VAT records for 15 years after the end of the tax period, as required by law. The accounts should be checked periodically with the help of expert accounting firms in Dubai.
Key Reasons to Maintain Proper Accounts
- License Renewal
Most mainland and free zone authorities require companies to submit audited financial reports when renewing licenses. Businesses that fail to prepare annual accounts face delays and extra costs. Keeping records up-to-date ensures smooth renewals without last-minute pressure.
- VAT Audits
Since VAT began in the UAE in 2018, any business with taxable supplies over AED 375,000 must register for VAT. During audits, FTA officers check VAT returns against company ledgers and invoices. Inaccurate or missing records can result in penalties. Accurate bookkeeping by accounting and bookkeeping firms in the UAE makes audits faster and easier.
- Liquidation Process
If a business decides to close, a registered auditor prepares a liquidation report.
This requires complete financial records , including previous audit reports, balance sheets, and profit and loss statements.
When the books are properly maintained, liquidation becomes quicker and simpler.
- Country-by-Country Reporting
Businesses that are part of a multinational group with a turnover above AED 3.15 billion must file a Country-by-Country Report (CbCR). Missing or incorrect filings can result in fines ranging from AED 50,000 to over AED 1 million.
Choose JCA: Your One-Stop Accounting Solution in the UAE
Following UAE accounting and tax laws is not only about compliance. It’s about protecting your business. JCA makes sure your records are complete and accurate, you avoid penalties, make smarter financial choices, and maintain a strong reputation. Keeping clean books is one of the simplest and most effective habits a business in the UAE can adopt, and this is possible with JCA’s expert accountants.