How to maintain books of accounts in DubaiApril 11, 2021
Maintaining books of accounts in Dubai is vital if you're running a business in Dubai. It does not matter whether you engage a bookkeeping and accounting firm in Dubai or you prefer to maintain your books in-house; your books must be in order. Here we answer some of the most commonly asked questions about keeping books of accounts in Dubai.
Is maintaining books of accounts mandatory in Dubai?
According to the Federal Law No 2 of 2015 on Commercial Companies, it is mandatory for Dubai companies to maintain proper books of accounts for the last 5 years. Any violation of this rule can attract hefty penalties for the offenders. A business can choose to hire professional and qualified accountants to help them maintain their account books, created according to the accounting rules and the International Financial Reporting Standards (IFRS). Businesses that do not hire accountants for this job usually outsource their account keeping to expert accounting and auditing firms in Dubai. This is a great way to maintain and update books of accounts and save on the extra money they would have to spend if they had hired an in-house accountant.
What are the benefits of maintaining documents for records in Dubai?
The records of the accounts maintained by the companies in Dubai are helpful for the government. They can help the company's management understand the ups and downs that have occurred in the business and compare the plans and strategies used in previous years. By maintaining documents for records, the organization can benefit in the following ways:
- Manage the business effectively
- Scrutinize the performance of the business based on plans that were followed in the past
- Prepare for future trends and disruptions
- Offer better management of employees
- Scrutinize fraudulent practices that may have occurred
How should businesses maintain books of accounts as per Dubai Federal Law?
According to Dubai Federal Law, businesses should maintain accounting records that validate the transactions going on in the company so as to indicate the firm's financial situation at any given time. The records must be in such a way that allows stakeholders or investors to affirm that the organization's records are maintained appropriately as per the mandates of the Federal Law. This can be done through companies like Avyanco who offer accounting and bookkeeping services in Dubai.According to Article 26 in the UAE Federal law, regarding accounting records
- Companies must maintain books of accounts for a minimum of five years from the conclusion of the company's financial year. These records must be maintained at the head office of the company.
- Companies can maintain a digital copy of the accounting records (including archival) that comply with the ministry's rules and regulations.
- During the preparation of the periodical and annual account reports, businesses must make sure that the records are made according to the International Accounting Standards. They should also comply with the commonly followed accounting practices to provide accurate proof regarding the company's profit and loss status.
The duty of maintaining the books of accounts is given to the manager of the company. Article 87 of UAE Federal Law No 2 of 2015 on Commercial Companies mandates that the company's manager must prepare a report on the annual budget and the profit and the loss statement of the organization. The manager also has to compile a yearly report regarding the company's financial status and offer a set of recommendations on the appropriations of the General Assembly's benefits within 3 months from the financial year's conclusion.
What is meant by books of accounts maintenance as per the Dubai VAT law?
As stated in the Cabinet Decision 36 of 2017 on the Executive Register of Federal Law No (7) of 2017 on Tax procedures, businesses must maintain their accounting and commercial book records. The bookkeeping records and the accounts of any Dubai company must include the following financial scripts and records:
- Balance Sheet
- Profit and loss record statements
- Wages and salaries accounts
- Fixed asset reports
- Records of the inventory statements after relevant tax periods
If a person running a business fails to provide the necessary accounting records of their business, a fine of AED 10,000 will be imposed for the first time. If the same person is found in violation of the law for a second time, a fine of AED 50,000 will be imposed according to the Tax procedures law and the tax law. Make sure you maintain the necessary accounting records or hire one of the bookkeeping and accounting firms in Dubai to do so.
What does maintenance of the books of accounts as per Tax laws and other laws entail?
The Cabinet Decision 36 of 2017 on the Executive Register of Federal Law No (7) of 2017 on Tax systems decrees that the country's taxable individuals must maintain a record of their accounts for a minimum of 5 years from the end of the tax period. Companies that function in the real estate industry must maintain their accounts and other financial statements 15 years from the end of the taxation period.
All the free zones in Dubai instruct businesses registered with them to maintain their books of accounts and records according to local and the required international standards and regulations. However, the more prominent free zones have directed businesses to conduct accurate audits for their accounts and provide the records at any given time. Companies can do this process with the help of their in-house accountant or with the help of any one of the leading bookkeeping and accounting firms in Dubai.
What are the penalties for not maintaining records of accounts in Dubai?
Article 348 of Federal Law No 2 of 2015 declares that the companies that fail to maintain records of the accounts shall be posed with a fine of AED 50,00 to AED 500,000. Article 349 of Federal Law No 2 of 2015 charges a penalty of AED 20,000 to AED 100,000 on businesses that fail to maintain the records at their head office for a minimum of five years.
Why Avyanco for bookkeeping services in Dubai
As one of the leading A-to-Z business setup and auditing firms in Dubai, Avyanco has regularly demonstrated its expertise by dealing with accounting and taxation services with accuracy. Over the years, Avyanco has effectively handled accounting and taxation services for many business entities, start-ups, and established companies. Our bookkeeping experts will assist you in filing VAT returns efficiently in a way that reduces the costs incurred during tax payments.
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