TaxSavvyAE

Cash basis versus accrual accounts

Can I prepare my accounts on cash basis for Corporate Tax?

The situation

Cash basis is allowed only for businesses with revenue up to AED 3 million, or in exceptional cases with FTA approval. Others use accrual accounts under IFRS.

The law

  • Art 20, Federal Decree-Law 47 of 2022: Taxable income based on financial statements under accepted standards
  • Ministerial Decision 114 of 2023 on accounting standards: Cash basis allowed below AED 3 million revenue; IFRS for SMEs below AED 50 million

What it means for you

Example: a firm with AED 5 million revenue must prepare accrual accounts; it may use IFRS for SMEs because revenue is under AED 50 million. A freelancer at AED 1.5 million can use cash basis. Choose early, because switching changes the timing of income.

What to do

  1. Check your revenue band.
  2. Pick cash basis or accrual as allowed.
  3. Use IFRS for SMEs below AED 50 million if suitable.
  4. Keep the method consistent each year.

Confirm the thresholds in Ministerial Decision 114 of 2023 before relying on them.

We can do this for youStandard Corporate Tax return: taxable income computation at 0% and 9%, adjustments, losses and payment: AED 4,750

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