Tips on maintaining books of accounts in Dubai
As per the Federal Law No 2 of 2015 on Commercial Companies, Dubai VAT law, and the free zone laws of the Dubai, the firms have been directed to maintain proper books of accounts for at least the last five years of the business. The maintenance of the proper books of accounts is mandatory for the businesses in the Dubai, and any violation of this rule can attract penalties for the offenders.
The businesses need to hire the professional and qualified accountants to help them maintain their account books that are created in the in accordance with the accounting rules that qualify the International Financial Reporting Standards (IFRS). The businesses who do not hire the accountants for this job, usually outsource their account keeping to the accounting and bookkeeping firms in Dubai. This way, they get their work done and also save on the extra money that they would have to spend had they hired an accountant.
Benefits of maintaining documents for the records
The records of the accounts that are maintained by the companies in Dubai are not only helpful for the government but also guides the management to understand the fluctuations that have occurred in the business following the different set of protocols and strategies for the business in the previous years. The following are the benefits that will accompany the maintenance of the records for the company:
- Effective management of the business
- To analyze the performance of the business for the plans that were followed in the past
- To make space for future trends in the business
- Provide better management of the employees
- To investigate the fraudulent practices that have occurred in the business
How must businesses maintain books of accounts according to Dubai Federal Law?
In Dubai, the firms have to maintain the accounting records that demonstrate the transactions occurring in the business to precisely show the financial situation of the firm at any required time. The records should allow the accomplices or investors to affirm that the records of the organization are appropriately kept as per the arrangements of the Law.
As per Article 26 on the accounting records in the UAE Federal law,
- The firms ought to keep up their books of accounts for minimum of five years from the conclusion of the financial year of the company. These records shall be maintained at the head office of the organizations.
- The firms can also maintain an electronic duplicate of the archives of the account records of the business that comply with the rules and the regulations set by the ministerial decision.
- During the preparation of the periodical as well as the annual account reports, the firms must ensure that the records are made in accordance to the International Accounting Standards and must comply with the commonly followed accounting practices to provide an accurate and precise proof about the profit and loss status of the company.
The responsibility for the maintenance of the books of accounts is given to the manager of the company. The article 87 of the UAE Federal Law No 2 of 2015 on Commercial Companies state that a report on the annual budget and the profit and the loss statement of the business has to be prepared by the manager of the firm. The manager also has to compile an annual report regarding the financial status of the company and also needs to provide a set of suggestions on the appropriations of the benefits of the General Assembly, within a span of 3 months from the conclusion of the monetary year.
Books of accounts maintenance as per the Dubai VAT law
According to the Cabinet Decision 36 of 2017 on the Executive Register of Federal Law No (7) of 2017 on Tax procedures, the organizations are required to maintain the accounting and the commercial book records of the business. The bookkeeping records and the accounts must comprise of the following financial scripts and records:
- Balance Sheet
- Profit and loss record statements
- Wages and salaries records
- Fixed asset reports
- Records of the inventory statements at the conclusion of the relevant tax periods
In case, an individual running a business fails to provide the essential accounting records, a penalty of AED 10,000 will be imposed for the first time. If the person is found to violate the Law for the next time, a fine of AED 50,000 will be levied according to the Tax procedures law and the tax law combined.
Maintenance of the books of accounts as per Tax laws and other laws
The Cabinet Decision 36 of 2017 on the Executive Register of Federal Law No (7) of 2017 on Tax systems declares that all the taxable individuals in the country have to maintain a record of their accounts for at least the last five years from the end of the tax period. As for the companies that function in the real estate sector, they must maintain the records of their accounts and other financial statements for the fifteen years from the end of the tax period.
All the free zones in the Dubai directs the registered enterprises to maintain their books of accounts and records as per the local and the required international standards and regulations. Nevertheless, the larger free zones have commanded the enterprises to conduct proper audits for their accounts to provide the records whenever asked for.
Penalties for not abiding by the laws of maintaining records of accounts
The article 348 of Federal Law No 2 of 2015 states that the companies that fail to maintain the records of the accounts shall be posed with a fine of AED 50,00 to AED 500,000. The article 349 of Federal Law No 2 of 2015 levies a penalty of AED 20,000 to AED 100,000 for the firms that fail to maintain the records for at least five years at their head office.
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