Ministerial Decision No. 114 Of 2023 On The Accounting Standards And Methods For The Purposes Of Federal Decree-law No. 47 Of 2022 On The Taxation Of Corporations And Businesses

Aug 13, 2023 | KCG Library

Brief

On May 9, 2023, the Ministry of Finance (MoF) released Decision No. 114 of 2023 concerning Accounting Standards and Methods for the implementation of Federal DecreeLaw No. 47 of 2022 on the Taxation of Corporations and Businesses (referred to as the ‘CT Law’).

Key Highlights

The recently issued Decision provides important clarifications regarding accounting standards and methods for the implementation of the CT Law:

Cash basis option: Taxpayers whose revenue does not exceed AED 3 million have the option to prepare financial statements on a cash basis instead of accrual. In exceptional circumstances, taxpayers can seek approval from the tax authorities to use the cash basis.
Consolidated financial statements: Tax Groups should prepare consolidated financial statements by aggregating the standalone financial statements of each member while eliminating intragroup transactions
Applicable accounting standard: The only accounting standard allowed for determining taxable income is the International Financial Reporting Standards (IFRS). Corporate taxpayers must use IFRS to determine their accounting profit/loss, which serves as the starting point for calculating taxable income. Taxable persons with revenue below AED 50 million have the option to apply IFRS for small and medium-sized entities (IFRS for SMEs), a simplified version of full IFRS designed for smaller entities

KCG Insights

The application of accounting standards, particularly the International Financial Reporting Standards (IFRS), plays a crucial role in standardizing corporate tax reporting in the UAE. By adhering to IFRS, the CT regime establishes a framework that promotes accurate financial reporting and enables a consistent and comparable approach for Taxable Persons. This consistency enhances transparency and facilitates effective tax assessment and compliance procedures.