The UAE Ministry of Finance has issued Ministerial Decision No. 84 of 2025 (“MD 84”), a crucial update that clarifies and refines the requirements for preparing and maintaining audited financial statements under the UAE Corporate Tax Law. This Decision, effective for tax periods commencing on or after January 1, 2025, supersedes Ministerial Decision No. 82 of 2023, which will continue to apply to tax periods before this date. MD 84 underscores the UAE’s steadfast commitment to enhancing transparency, bolstering financial reporting standards, and aligning its corporate tax framework with global best practices.
Core Requirements for Audited Financial Statements
MD 84 meticulously delineates the categories of taxable persons obligated to prepare and maintain audited financial statements. This is paramount for businesses operating across various sectors and structures within the UAE.
Specifically, the following entities are mandated to obtain audited financial statements:
- Taxable Persons (Excluding Tax Groups) with Revenue Exceeding AED 50 Million: Any taxable person that is not a member of a Corporate Tax Group, and whose revenue for the relevant tax period surpasses AED 50 million, must prepare and maintain audited financial statements. This threshold ensures that larger, more complex individual entities are subject to rigorous financial scrutiny.
- Qualifying Free Zone Persons (QFZPs): All Qualifying Free Zone Persons are consistently required to prepare and maintain audited financial statements, irrespective of their revenue threshold. This stipulation reinforces the substance requirements for maintaining the preferential 0% corporate tax rate for QFZPs on their qualifying income.
- Tax Groups: A significant clarification introduced by MD 84 is the mandate for all Tax Groups to prepare and maintain audited special purpose financial statements. This requirement applies regardless of whether the consolidated revenue of the tax group exceeds the AED 50 million threshold. Importantly, to mitigate the administrative burden, individual members within a tax group are generally not required to prepare audited standalone financial statements. The Federal Tax Authority (FTA) is expected to issue further guidance detailing the specific form, procedures, and rules for these special purpose aggregated financial statements, which is a crucial juncture for compliance planning.
- Non-Resident Persons: For non-resident persons, the AED 50 million revenue threshold, which triggers the requirement for audited financial statements, will only consider revenue derived through their Permanent Establishments (PEs) and/or other nexuses within the UAE. This clarifies that only UAE-sourced business activities are accounted for in determining this compliance obligation, aligning with the territorial scope of the UAE Corporate Tax Law.
Key Highlights and Strategic Implications for Businesses
MD 84 introduces several crucial nuances and reinforces the underlying principles of the UAE Corporate Tax regime, demanding proactive planning and adjustments from businesses.
- IFRS Adherence: All financial statements prepared for UAE Corporate Tax purposes must adhere to International Financial Reporting Standards (IFRS). This stipulation is non-negotiable and affects free zone companies and smaller entities that may have previously followed simplified accounting formats. Strict IFRS compliance is now the unequivocal standard.
- Enhanced Reporting for QFZPs in Distribution: Qualifying Free Zone Persons engaged in the activity of distribution of goods or materials in or from a Designated Zone will be subject to additional procedures to be prescribed by the FTA. This indicates a heightened focus on ensuring that such activities maintain full compliance with the Free Zone Corporate Tax regime.
- Record Retention Obligations: All financial records, encompassing statements, ledgers, invoices, and supporting data, must be diligently retained for a minimum period of seven years. These records must be readily available for inspection by the Federal Tax Authority at any given time, underscoring the critical importance of robust record-keeping systems.
- Purpose of Audited Financial Statements: The mandate for audited financial statements extends beyond mere compliance. These statements serve as the bedrock for accurate corporate tax return calculations, are instrumental in maintaining QFZP status, facilitate group structuring and business exits, and significantly bolster investor confidence and access to funding.
Navigating the Evolving Landscape: Actionable Steps
The issuance of MD 84 crystallizes the understanding of audit requirements and necessitates immediate action from affected businesses. Proactive planning is paramount to ensure seamless transition and compliance.
- Review Revenue Streams: Businesses must meticulously review their revenue streams and existing structures to ascertain whether they meet the thresholds or fall into categories requiring audited financial statements under MD 84.
- Align with IFRS: Companies not currently applying full IFRS for financial reporting must transition to ensure compliance with the mandated accounting standards. This may necessitate updating accounting systems and training personnel.
- Engage Professional Advisors: It is imperative to consult with tax and audit professionals to fully comprehend the implications of MD 84 on your specific business operations. Expert guidance can facilitate accurate interpretation, identify potential compliance gaps, and steer the implementation of necessary changes.
- Prepare for Tax Group Aggregation: Tax groups must anticipate the upcoming guidance from the FTA regarding special purpose aggregated financial statements. Preparing for data aggregation and potential adjustments will be crucial for the 2025 tax periods.
- Strengthen Record-Keeping: Reassess and, if necessary, upgrade internal record-keeping systems to ensure all financial documents are organized, accessible, and retained for the statutory seven-year period. Digital storage and secure backups are highly recommended.
Ministerial Decision No. 84 of 2025 represents a significant step in the UAE’s continuous efforts to establish a sophisticated and internationally aligned corporate tax framework. By ensuring higher standards of financial transparency and reporting, the Decision reinforces the UAE’s position as a globally competitive commercial ecosystem, built on regulatory certainty and fiscal responsibility.