Essential Record-Keeping Documents for UAE Corporate Tax Compliance

When it comes to UAE Corporate Tax compliance, having the right Record-Keeping Documents for UAE Corporate Tax is essential. These documents ensure that businesses can substantiate their financial activities and fulfil their obligations to the Federal Tax Authority (FTA). At WellTax, we recognize the importance of accurate and organized record-keeping. We’re here to guide you through the process to ensure your business remains compliant. This article explores the essential record-keeping documents for UAE Corporate Tax, highlighting key categories and emphasizing the importance of adhering to legal requirements.

Key Financial Records in General

1. Financial Statements and Accounting Records

The foundation of any tax compliance strategy is accurate and detailed financial statements. These include balance sheets, income statements, and cash flow statements. Under UAE Corporate Tax Law, businesses are required to maintain these financial records for at least seven years following the end of the relevant tax period. WellTax assists businesses in generating and maintaining these crucial documents, ensuring they align with regulatory standards.

2. Invoices and Receipts

Invoices and receipts are critical Record-Keeping Documents for UAE Corporate Tax compliance. They provide proof of transactions, both incoming and outgoing, and must be retained to validate the figures reported in your tax returns. Although the Tax Authority does not require a specific format for retaining these documents, records must support the amounts declared in tax returns. WellTax advises businesses to organize these documents by date and transaction type, whether stored digitally or physically, to ensure they are easily accessible and compliant with regulations.

3. Bank Statements and Reconciliations

Bank statements and their reconciliations are vital to ensuring that recorded transactions match the bank’s records. Any discrepancies could lead to issues during audits. WellTax emphasizes the importance of regular bank reconciliations as part of a comprehensive tax compliance strategy. This practice not only keeps your records accurate but also helps prevent potential penalties in case of tax audit.

4. Contracts and Agreements

Contracts and agreements, whether for sales, purchases, or employment, form the backbone of many financial transactions. These documents must be retained to support the validity of your transactions and to substantiate the terms under which they were conducted. WellTax helps businesses organize and maintain these records, ensuring they are readily available if needed by the FTA.

5. Payroll Records

Maintaining accurate payroll records is crucial for compliance with Record-Keeping Documents for UAE Corporate Tax. Essential records include employee contracts, salary slips, and approvals of management for bonuses. Employment contracts are vital as they provide proof of salary payments, benefits, and other compensations, and must be retained to support payroll expenses claimed in tax returns.

In the UAE, particularly for Mainland entities, payroll records are supported by the Wages Protection System (WPS), ensuring compliance with UAE Labour Law. The Salary Information File (SIF) through WPS is required for both mainland companies and Free Zone entities registered in DMCC and JAFZA.

WellTax provides comprehensive payroll management services to ensure that all records are accurate and compliant with UAE regulations, supporting both tax and labor law compliance.

Industry-Specific Documents

1. Trading Companies

For trading companies, customs documentation, such as import/export declarations, bills of lading, packing lists, and certificates of origin, are crucial. These Record-Keeping Documents for UAE Corporate Tax must be meticulously organized for each trading transaction.

2. Holding Companies

For holding companies, records of investments in subsidiaries are vital. This includes subsidiaries’ financials, investment agreements, and share certificates.

When dealing with real properties, property deeds, lease agreements, and valuation reports are essential for tax compliance. These documents must be properly maintained to support the figures reported in your tax returns.

Transfer Pricing Documentation

For any company conducting transactions with related parties, maintaining accurate Record-Keeping Documents for UAE Corporate Tax is essential in demonstrating compliance with the arm’s length principle, which ensures that these transactions are conducted at fair market value.

Key Transfer Pricing Documents:

• Transfer Pricing Disclosure Form: Summarizes the business’s transfer pricing policies to be completed annually by Taxable Persons. To date, the FTA has not yet published any sample of this form on its website.
• Master File: Provides an overview of the MNE group’s global operations and transfer pricing practices.
• Local File: Contains detailed information on local entity transactions.
• Country-by-Country Reporting (CbCR): Details the MNE group’s revenue, profits, and taxes by jurisdiction.

Other Related-Party Transactions (RPT) Documentation and Records:

• Inter-Company Agreements;
• Management Fees and Services;
• RPT Remuneration Agreements: Records of remuneration for shareholders, directors, and managers.

MNE groups with consolidated revenue of AED 3.15 billion or more, or taxable persons with revenue exceeding AED 200 million, must maintain both Master and Local Files along with Country-by-Country Reporting (CbCR). UAE-headquartered groups without foreign operations must keep a Local File if they meet the revenue thresholds. Below these thresholds, businesses need only maintain reasonable records to support arm’s length transactions, available upon request by the FTA.

Timeframe for Record-Keeping Documents for UAE Corporate Tax

Article 56 of the UAE Corporate Tax Law mandates that all records and documents be maintained for a minimum (7) seven years following the end of the relevant tax period. This timeframe applies to both taxable and exempt persons and is crucial for supporting the information provided in tax returns or other documents filed with the FTA. Maintaining these records ensures that the Authority can readily ascertain the taxable income, making it a critical aspect of compliance.

Administrative Penalties for Non-Compliance

Failure to keep the required records and documents as specified by the UAE Tax Procedures Law and Corporate Tax Law can result in significant penalties. The penalties are structured as follows:

• First-time offense: AED 10,000;
• Repeated offense: AED 20,000.

These penalties highlight the importance of diligent record-keeping and the potential financial impact of non-compliance.

Leveraging Technology for Record-Keeping

1. Digital Storage Solutions

In today’s digital world, using technology for record-keeping is crucial. Cloud-based storage solutions provide businesses with a secure and accessible way to store and manage their Record-Keeping Documents for UAE Corporate Tax. WellTax recommends using these platforms to keep records safe and easily retrievable when needed. By utilizing digital storage, businesses can ensure that their records are protected from physical damage and can be accessed remotely, offering flexibility and convenience.

2. Automation and Software

Accounting software and automation tools can significantly streamline the process of record-keeping. These tools can automatically generate financial reports, track invoices, and manage bank reconciliations, reducing the risk of human error. WellTax provides consultancy on selecting the right software solutions tailored to your business needs. By integrating these tools into your record-keeping practices, you can improve accuracy and efficiency, making tax compliance less burdensome.

Conclusion

Maintaining accurate and comprehensive records is not just a legal requirement under UAE Corporate Tax Law but also a crucial practice for ensuring your business operates smoothly and remains compliant with tax regulations. From financial statements to industry-specific documents and transfer pricing documentation, keeping well-organized records will help you substantiate the information in your tax returns and avoid potential penalties.

At WellTax, we understand the complexities of tax compliance and are committed to helping businesses in the UAE navigate these challenges with confidence. Our team is here to support you in maintaining proper records, ensuring that your business is prepared for any audits or inquiries from the Federal Tax Authority. By partnering with WellTax, you can rest assured that your record-keeping processes are robust, compliant, and tailored to the unique needs of your business.

For further information on Record-Keeping Documents for UAE Corporate Tax, please visit our website.