Most UAE businesses keep accounting records because their accountant
told them to. Fewer know which records are legally required, under which
law, or for how long. When the FTA audits and the records are inadequate
— missing invoices, unreconciled ledgers, no supporting documents for
key entries — the consequences run across VAT, Corporate Tax, and
sometimes the Companies Law at the same time.

This guide covers the bookkeeping obligations that apply to UAE
businesses, the legal basis for each, the retention periods that
currently apply, and the errors that most often surface at audit.

Bookkeeping in the UAE is not a best practice. It is a statutory
obligation under multiple laws operating in parallel.

UAE Companies Law (Federal Law No. 32 of 2021)
requires every company to maintain proper books of account that
accurately and fairly reflect its financial position. The books must be
sufficient to prepare financial statements in accordance with the
applicable accounting standards. For most UAE businesses, that standard
is IFRS or IFRS for SMEs.

UAE Corporate Tax Law (Federal Decree-Law No. 47 of
2022) requires every taxable person to maintain all records and
documents that support the information disclosed in their Corporate Tax
return. This includes source documents, accounting records, contracts,
correspondence, and any other documentation the FTA may require to
verify tax positions.

UAE VAT Law (Federal Decree-Law No. 8 of 2017)
requires every VAT-registered business to maintain accounting records
from which the FTA can verify the accuracy of the VAT return. This
includes invoices issued and received, import and export records, and
records of adjustments.

These three frameworks apply to the same underlying documents. A
business operating under all three — which describes most UAE trading
and services companies — has a single set of records that must
simultaneously satisfy the Companies Law, the Corporate Tax
requirements, and the VAT requirements.

Source: Federal Law No. 32 of 2021 (Companies Law);
Federal Decree-Law No. 47 of 2022 (Corporate Tax); Federal Decree-Law
No. 8 of 2017 (VAT).

What Records Must Be
Maintained

The FTA and the Corporate Tax law do not specify a single list of
required records. What they require is that your records are sufficient
to support every position taken in your returns and financial
statements. In practice, that means:

Financial records: General ledger, trial balance,
chart of accounts, journal entries, and supporting workpapers for every
material account balance.

Transaction records: Sales invoices issued, purchase
invoices received, contracts, purchase orders, delivery notes, and any
documentation linking a transaction to the amounts reported.

Bank records: Bank statements for all accounts, bank
reconciliations prepared at each period end, and documentation
supporting any unreconciled items.

Payroll records: Monthly payroll calculations, WPS
transfer confirmations, leave records, end-of-service gratuity
calculations, and employee contracts. These are required under both
Corporate Tax (as a deductible expense) and MOHRE regulations.

Asset records: Fixed asset register with acquisition
date, cost, depreciation method, accumulated depreciation, and disposal
records. Capital expenditure records must be maintained separately from
revenue expenditure.

VAT records: Tax invoices issued and received,
import VAT documentation, reverse charge calculations for imported
services, credit notes, and supporting documents for any input tax
recovery claim.

For businesses with related party transactions — including supplies
between group companies, loans, management fees, and cost-sharing
arrangements — the Corporate Tax law requires transfer pricing
documentation to support that the terms are at arm’s length.

IFRS: The Accounting
Standard That Applies

The UAE does not prescribe a specific chart of accounts. What it
requires is that financial statements are prepared in accordance with
IFRS as issued by the International Accounting Standards Board, or IFRS
for SMEs for businesses that qualify.

IFRS for SMEs is available to businesses that do not have public
accountability — broadly, businesses that are not listed and do not hold
assets in a fiduciary capacity for a broad group of outsiders, such as
banks and insurance companies. Most UAE SMEs qualify.

The choice of standard affects how you measure and recognise revenue,
how you account for leases, how you handle financial instruments, and
how you present your financial statements. Getting this wrong at the
accounting level means the financial statements and the Corporate Tax
return built from them are both incorrect.

Retention
Periods: What Most Businesses Get Wrong

The UAE has three different retention periods, and which one applies
depends on the type of document and the regulatory framework:

5 years — the minimum retention period under UAE VAT
law (Cabinet Decision No. 52 of 2017, Article 71). This applies to
records required for VAT purposes.

7 years — the retention period required under the
UAE Corporate Tax law (Federal Decree-Law No. 47 of 2022). This applies
to all records required to support Corporate Tax positions.

10 years — for records related to capital assets,
covering the period during which the asset is being depreciated or
amortised and the subsequent period.

15 years — for real estate transaction records.

The critical point: most UAE businesses above the AED 375,000 revenue
threshold are registered for both VAT and Corporate Tax. Their invoices
and accounting records are governed by both frameworks simultaneously.
The operative retention period for those records is 7
years, not 5. A business that retains only 5 years of records
is compliant with the VAT minimum but non-compliant with the Corporate
Tax obligation — and a Corporate Tax audit can reach back 7 years.

Source: Cabinet Decision No. 52 of 2017, Article 71
(VAT); Federal Decree-Law No. 47 of 2022, Article 56 (Corporate
Tax).

Consequences of Inadequate
Records

Inadequate bookkeeping is not treated as an administrative oversight.
It has direct compliance consequences under each framework:

Under VAT: If the FTA requests records to support an
input tax recovery claim and the records are missing or incomplete, the
claim is disallowed. The tax is due, plus 14% per annum interest from
the original return date. If the FTA determines the return was
incorrect, the AED 500 incorrect return penalty also applies.

Under Corporate Tax: The FTA can assess additional
tax if it cannot verify the accuracy of a return from the records
provided. Where records are missing, the FTA can reconstruct taxable
income using available information. The taxpayer cannot effectively
challenge a reconstruction they cannot disprove.

Under Companies Law: Directors and managers of
companies that fail to maintain adequate books of account are personally
exposed to liability where the inadequacy causes financial harm or where
the company enters insolvency.

The compounding risk is that an FTA VAT audit or a Corporate Tax
audit that surfaces inadequate records does not stop at the year under
review. Auditors look at the pattern. If the records are missing for one
year, the audit extends. The problem is usually older than the
audit.

Common Errors

No monthly close process. Businesses that reconcile
at year-end rather than monthly accumulate errors that cannot be
unpicked from ledger data alone. Bank reconciliations done once a year
are not reconciliations — they are guesses. The FTA can see the
difference.

Missing purchase invoices. The input tax recovery
claim fails without a valid full tax invoice. Storing receipts and
payment confirmations instead of invoices is the most common reason
input tax positions collapse at audit.

Intercompany transactions not documented. Management
fees, loans, guarantees, and cost allocations between related parties
require documentation that the terms are at arm’s length. Undocumented
intercompany charges are among the first items reviewed in a Corporate
Tax audit.

Capital expenditure misclassified as expense.
Treating a capital purchase as an operating expense understates taxable
income in the year of purchase and creates a deferred tax position. The
FTA examines this in asset-heavy businesses.

Payroll records incomplete. WPS payment
confirmations alone are not sufficient payroll records. The underlying
calculation, the accruals, and the end-of-service gratuity workings must
all be held and must reconcile to the financial statements.

What Sound Bookkeeping Looks
Like

A business with adequate records closes its books monthly. Each
month-end produces a reconciled trial balance, a bank reconciliation for
every account, a reviewed accounts payable and receivable ledger, and an
updated payroll register. Invoices are filed systematically — by
supplier or by period — not in folders labelled by year.

By the time the VAT return is due, the numbers in the return come
from the accounting records, not from the accounting records adjusted to
match the return.

This is not a complicated system. It is a consistent one. The
businesses that run into problems at audit are rarely those with complex
accounting — they are those that have been deferring the close for
months, filing returns from summaries, and discovering at year-end that
the supporting documents no longer match.

Prepared by BPOAS. This article provides general guidance and
does not constitute specific tax advice. Businesses should seek advice
from a qualified UAE tax professional on their individual
circumstances.