How a Business Should Maintain its Books of Accounts As Per UAE Law?

It is mandatory for the companies to maintain the books of accounts for at least 5 years in accordance with the Federal Law No 2 of 2015 on Commercial Companies and the UAE VAT law and relevant free zone laws. Maintaining proper books of accounts is compulsory in the UAE and any violations will attract administrative penalties.

Businesses in UAE need to have qualified accountants to maintain their books of accountants in compliance with local laws & regulations and as per International  Financial Reporting Standards (IFRS). Another good option for the companies is to outsource accounting & bookkeeping services to accounting companies in the UAE. Hiring services of accounting & bookkeeping firms allow them to focus more on their company operations and completion of the business goals.

Keeping proper books of accounts as per the UAE regulations would ensure accuracy in receipt and payment of cash and other transactions done by the company. It would also help companies in addressing cash flow requirements, preventing insolvency & bankruptcy, plan & forecast budgets that help in effective financial management & stability of the business.

How Should Companies Maintain Books of Accounts as per UAE Federal Law?

In the UAE, companies are required to keep accounting records showing transactions to accurately reveal at any time the financial position of the company. The records should enable the partners or shareholders to confirm that the accounts of the company are properly kept in accordance with the provisions of the Law. The following Articles of the Federal Law No 2 of 2015 list the requirements to maintain books of accounts in UAE

Article 26 on Accounting Records

• Companies should maintain their books of accounts at their head office for at least 5 years from the end of the financial year of the company.
• The companies can keep an electronic copy of the documents and records kept in accordance with the regulations issued by a Ministerial Decision.
• While preparing the periodical and annual accounts, companies need to ensure that they comply with the International Accounting Standards and Practices to give a clear and accurate view of the profits and losses of the company.

Responsibility for Preparing the Accounts

According to Article 87 of the Federal Law, No 2 of 2015 on Commercial Companies, the manager of a company is required to prepare the annual budget and the profit and loss account. The manager is also required to compile an annual report on the financial position of the company and provide recommendations on the distributions of the profits of the General Assembly, within 3 months from the end of the financial year.

Read also: 6 Reasons Why Companies Should Outsource Accounting & Bookkeeping Services in UAE

Administrative Penalties as per UAE Law

Failure to Maintain Accounting Records

As per Article 348 of the Federal Law No 2 of 2015, companies should ensure that their books of accounts are maintained and kept as per the law. Failure to keep records would result in a fine of AED 50,000 to AED 500,000.

Failure to Keep Accounting Records for the Period Determined in the

Article 349 of Federal Law No 2 of 2015 mandates that companies need to maintain their books of accounts in their head office for at least 5 years from the end of the financial year of the company. Any company that fails to keep the records within this time period is obliged to pay a penalty of AED 20,000 to AED 100,000.

How to Maintain Accounting Record as Per the UAE VAT Law?

The Cabinet Decision 36 of 2017 on the Executive Register of Federal Law No (7) of 2017 on Tax procedures mandates that the companies need to keep accounting records and Commercial Books. The accounting records and books must include:

1. Balance Sheet and profit and loss accounts
2. Records of Wages and Salaries
3. Records of Fixed Assets
4. Inventory Records and Statements at the end of any relevant Tax periods
5. All records of stock counts related to Inventory Statements

If the person conducting the business fails to keep the required accounting records, a fine of AED 10,000 will be levied for the first time and AED 50,000 in the case of repetition as per Tax Procedures Law and Tax Law.

Regulations Related To Keeping Books of Accounts Under Tax Laws

As per the Cabinet Decision 36 of 2017 on the Executive Register of Federal Law No (7) of 2017 on Tax procedures, every taxable person should keep their books of accounts for a period of 5 years after the end of the tax period. However, as per the VAT Laws, companies in the real estate sector are required to maintain records and must be kept for 15 years after the end of the Tax Period.

Regulations Related To Keeping Books of Accounts for Others

Every free zone in the UAE mandates the registered companies to keep books of accounts to comply with local and international regulations. However, some larger free zones mandate that the companies are required to conduct an audit of the accounts.

How Jitendra Chartered Accountants Can Help?

Jitendra Chartered Accountants (JCA) has an excellent track record of assisting companies with accounting & bookkeeping services in Dubai & across the UAE as per the UAE Company Law and FTA Law. As a reputed accounting and bookkeeping firm in Dubai, JCA addresses a company’s cash flow requirements, plans and forecasts budgets for efficient financial management. JCA’s team of well-experienced accountants has provided effective outsourced accounting and bookkeeping services to thousands of clients in Dubai, UAE.