Ministerial Decision No. 82 of 2023

Determining whether to purchase a book often hinges on the opinions of seasoned book critics. Their extensive experience in the field, coupled with their expertise and skill, makes them reliable sources for assessing the worth of a book.

Similarly, assessing the credibility of a business’s financial health is achieved by examining its accounts. Trust is established through the auditor’s expert evaluation, as audited accounts provide added legitimacy. This transparency enables stakeholders to gain an accurate picture of the business’s standing.

Hence, auditing holds immense significance for businesses.

As part of the ongoing changes, the Minister of State for Financial Affairs undertook a comprehensive review of several key legal documents. These include:

• The Constitution
• Federal Law No. 1 of 1972 on the Competencies of Ministries and Powers of the Ministers, along with its amendments
• Federal Decree-Law No. 13 of 2016 on the Establishment of the Federal Tax Authority, and its amendments
• Federal Decree-Law No. 28 of 2022 on Tax Procedures
• Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses

This review led to the determination of categories of taxable individuals who are required to prepare and maintain audited financial statements.

So, who needs auditing?

The focal point of Ministerial Decision No. 82 of 2023 is identifying taxable entities obliged to prepare audited financial statements. These statements are scrutinized by authorities to ensure accuracy. The categories include:

1. Entities with revenue surpassing AED 50,000,000 during the relevant tax period.
2. Qualifying free zone entities.

Understanding these categories requires clarity on who is a taxable entity and a qualifying free zone entity. In terms of UAE corporate tax, a taxable entity is a resident or non-resident deriving income from the UAE. Exempt or qualifying free zone entities are excluded.

Qualifying free zone entities are entities registered in free zones, even non-resident branches. They enjoy 0% corporate tax under certain conditions. As per Ministerial Decision No. 82 of 2023, qualifying free zone entities must audit their books irrespective of revenue.

When is auditing required? Published on April 10, 2023, the decision’s stipulated limits are enforceable 15 days after notification, starting April 25, 2023. This Finance Ministry decision aligns UAE corporate taxation with global norms while retaining the appealing no-income tax feature.

Certain aspects remain unclear in the notification, such as audited financials submission dates. However, we believe that this may be a requirement at the time of filing of the Corporate Tax Return. Nevertheless, updates will be provided as soon as the Ministry clarifies these further. Stay tuned on N R Doshi for the latest UAE corporate tax updates on this platform.