Avoid The Most Prevalent Bookkeeping Mistakes!

With the new UAE Corporate Tax regime in place, the interest isn't just in how much tax an enterprise accumulates—but in the quality of its bookkeeping. The FTA's Corporate Tax Guide and Cabinet Decision No. 49 of 2021 stipulate that lax or improper bookkeeping could land you on the FTA's list of audit priorities. 

Essential Bookkeeping Gaps

Below are three of the most critical shortcomings in bookkeeping that can red-flag your company:

• Improper Accounting Method:

The UAE Corporate Tax Law permits both accrual and cash basis accounting (Article 20), but once you elect one method in your tax return, you must consistently apply it. Switching methods without proper FTA approval is a compliance violation.

If your financial statements are on an accrual basis, but you report taxes on a cash basis—or vice versa—you could face adjustments, penalties, or audits. Always align your bookkeeping methodology with your official election in EmaraTax.

• Missing or Misclassified Adjustments in Financial Statements: 

As per the FTA's guide, your accounting records must reflect detailed adjustments for exempt income, non-deductible expenses, and related-party transactions.

Failure to accurately disclose:

• Related Party Transactions (Article 34 & 35),

• Adjustments under Ministerial Decision No. 134 of 2023,

• Exempt income categories (like dividends or qualifying investments)

Can raise red flags during audits. The FTA cross-checks your submitted tax return with your supporting schedules and ledgers, and any mismatch is a potential audit candidate.

• Lack of Proper Audit Trail and Supporting Documentation: 

Article 53 of the Corporate Tax Law mandates the submission of returns within 9 months from the tax period. However, few businesses know that the FTA also mandates auditable proof to support each figure.

According to Ministerial Decision No. 114 of 2023 :

• Financial accounts should be IFRS or IFRS for SMEs compliant.

• Each transaction should be backed by source documents—purchase invoices, sales contracts, trial balances, etc.

FTA audits are often precipitated when businesses cannot produce clean, traceable backup records for income or reported deductions.

Are You Audit-Proof? 

Minor accounting discrepancies can grow into huge tax problems. If you are hesitant about your accounting process, related party disclosures, or paper trail, AMCA Auditing can help.

Our audit and tax experts see to it that your records are not just FTA-ready but also strategically organized to reduce risk.