accounting for realestate

Accounting for Real Estate in UAE: One of the most booming sectors

The real estate industry in the UAE has witnessed one of its biggest booms in the last few decades. With millions of dollars being invested and transactions going in multi-billions, UAE’s property market is at the cusp of becoming an economic power pillar, riding on heavy foreign investment and a quick delivery model of premium and budget homes. According to a report by Bloomberg, there has been an 89% hike in the price of premium real estate properties in the last 12 months with other popular real estate hubs witnessing a 100% price hike.

While this is great news for the country, it also means more work for the real estate players in terms of their financial planning, submitting their tax papers, and being compliant with all kinds of property tax parameters. Any real estate agency deals with a large number of financial transactions, and accounting and bookkeeping can become a tedious task for them if not handled by a professional Accounting Firm in the UAE. Due to the sheer volume of financial transactions involved, accounting for real estate needs to be done in a more organized and compliant manner to avoid legal hassles and losses.

How will the Federal Corporate Tax on Real Estate Impact Investments

Recently, the UAE Ministry of Finance announced the introduction of federal corporate tax (FCT) for the financial year starting from 1 June, 2023. This means that any commercial or business activity related to the real estate industry will be subjected to FCT whether it is done by an individual in a personal capacity or by a corporate entity. The FCT will be levied on all businesses involved in construction and real estate management and development. This apart, all entities acting as agencies or brokers will also fall under the FCT.

Even though there are still some grey areas in the newly introduced FCT regulations, the initial announcements indicate that the income from real estate investments held by individuals in their personal name meant for personal use will be exempted from FCT. However, it is still not clear if the tax will be levied on multiple property ownership or if those properties are leased out. As far as foreign investments are concerned, the FAQs released by the department indicate that no FCT will be levied on foreign investment income.

On the other hand, all real estate activities undertaken by corporate entities will fall in the FCT category. However, assets held in the Freezones by Freezone entities will be exempted from FCT. But if the same entities hold any properties on the mainland, they will have to pay the tax.

How an accounting firm in UAE can help

A real estate firm has to manage financial transactions of a huge magnitude. Any discrepancy in the records can lead to a long legal battle or huge financial losses. This is why it is advised to hire an accounting company in Dubai to keep accounting and bookkeeping services right on track. An agency with professional accounting and bookkeeping experts with considerable experience in auditing and accounting will help you align your documents with the FCT regulations.

An accounting firm in UAE can help you in multiple ways including:

• Tenant Management
• Accounts Payable Management
• Accounts Receivable Management
• Reconciliation
• Management Reporting
• Business Advisory Services
• Internal and external Audit Services
• CFO Services
• VAT Consultancy Services

That apart a professional accounting firm in UAE will also provide several other supporting advantages that can make a huge difference in the way you manage your real estate-related accounting.

Minimizing errors, maximizing accuracy
Managing in-house accounting for real estate can result in errors and discrepancies. However, hiring an accounting firm in UAE will ensure that all your accounting and bookkeeping activities are 100% errors free and compliant.

Accounting management
When you hire a professional accounting company in Dubai, it will make sure that all your accounting books are maintained properly and on regular basis, allowing you to know exactly what your level of revenue generation is and the profits you stand to earn.

Detecting fraudulent activities
Expert accountants will understand and point out any loopholes in your accounting processes and will also assist you with steps to reduce inherent risk.

Policy, standard, and technology upgradation
A dedicated accounting firm in UAE will be aware of the latest policies, accounting standards, and best technologies to help you with a smooth flow of things. This ensures you are always at the top of your accounting game.

Tax treatment made more efficient
One of the biggest advantages of hiring professional accounting services in Dubai is that they will help you file all taxes well within the deadlines. Doing this will create a positive image of your company in the eyes of the law and will help you comply with tax-related rules and regulations.

Why choose Kloudac?

The real estate industry is one of the fastest-growing industries in the UAE. It will require you to be on your toes so that there are absolutely no loopholes in any tax-related activities. And this is what Kloudac helps you with. Our experienced team, custom-made solutions, quick and trustworthy services, and diverse clientele make us a one-stop solution provider in accounting and bookkeeping. So, if you wish to be on the right side of the tax law, let Kloudac handle your finances for the best results.


DDA Audit Report

DDA Audit Report – Submission of Audited Financial Statements

In the last few decades, Dubai has witnessed an enviable transformation in terms of creating a conducive and inclusive business environment. Not only has the city played a pivotal role in helping the government realize its policies of economic diversification, but it has also been the cynosure of several other plans charted out by the government in order to streamline and systematize the country’s economic growth. One such body that has been forwarding its goals is Dubai Development Authority (DDA). It was formerly called Dubai Creative Clusters Authority (DDCA), which was brought into being with the aim of creating an appealing and encouraging business environment that would help in improving financial competitiveness and set a global standard for businesses across sectors.

To ensure this, DDA made the submission of audited financial statements mandatory for all business entities registered with the authority so that there was absolute clarity about where the economy was heading. Under this provision, all businesses must maintain their accounting records and books for at least eight years after the date or a date that the registrar prescribes. The DDA also prescribes that the accounts must comply with the accounting principles or the standards approved by the Registrar. The financial statements must hence be prepared following International Accounting or International Financial Standards as UAE doesn’t have its own accounting standards.

Who needs to submit audited financial documents?

As per the legal requirements, whether a company needs to submit audited financial documents will completely depend on the jurisdiction of where the company is located. According to the latest provisions, the requirements are:

● Every company must invite more than one auditor to audit their documents
● The company must keep the annual financial accounting ready. This includes a balance sheet, and a profit and loss account
● International Accounting Standards and Practices should be applied by the companies for a clear understanding of net profit and loss

● All companies incorporated in free zones must comply with the requirements of their respective free zones

● Your company type will also make a difference. For example, any branch of a foreign company must get its financial documents audited


Benefits of keeping audited documents ready

The authorities in Dubai make submission of audited financial documents a mandate for a reason as there are definite benefits of doing that:

  • Determines the correct financial situation of a company. It also determines the reliability of the financial information provided by the company
  • Audits help organizations investigate and assess any financial risks they might face
  • Auditing financial reports will analyze if the business is viable or not. When auditors audit the financial reports in UAE, they are expected to evaluate and assess if the business is capable of revenue and profit generation. This helps the government make better-informed decisions about supporting such businesses
  • Auditing the financial reports also helps organizations find out newer ways of improving their business as auditors can show them the right way forward
  • Auditing makes an organization more credible and trustworthy, which increases its chances of getting more investment and financial support from other organizations as well as the government

Mandatory content to include before the Submission of Audited Financial Statements to DDA

Financial reports are important documents and they help the government analyze the individual financial capabilities of an organization and collectively that of the country. So, it is important not to miss out on providing the right information. So, your financial reports must include:

  • A statement indicating the profit and loss during the financial year
  • A statement of equity and retained earnings or deficit
  • A balance sheet at the end of the financial year
  • Notes to all the financial statements

The organization must also submit a copy of its financial statements the report given by the auditor to the Registrar within seven days of the annual general meeting when audited financial statements are submitted.

When must you submit your financial reports to the DDA?

The DDA had mandated that every company under its legislation must provide the latest audited financial report along with the summary sheet before or on October 31, 2022. The DDA also prescribed a particular format in which the documents must be submitted. The authority had also asked all companies that they must continue submitting the said documents every year within 6 months from the end of the financial year. It should be submitted through the AXS portal to the DDA and it must consist of the following:

  • Account of profit and loss: Gross profit, revenue, cost of sales, operating profits, operating costs, depreciation, amortization, interest expenses, net profit, and other income/loss
  • Balance sheet: Fixed assets current assets, other assets, investments, current liabilities, long-term liabilities, retained earnings, share capital, and reserve and surplus

If an organization fails to be compliant with the rules and regulations laid out by the DDA, it may attract a fine and lead to the non-renewal of its license. If things go as planned, the mainland licensing authorities and free zones across the UAE will make submitting the audited financial statements annually a mandate. Corporate tax laws and other laws are expected to be introduced to closely monitor business activities throughout UAE. The government is hopeful that the introduction of these laws will enable better financial planning and development.


Reasons why hiring an accountant can avoid bankruptcy

Reasons why hiring an accountant can avoid bankruptcy

1. Trustworthy & Reliable Service

An accounting firm with practical accounting experience that you might be missing is one justification for hiring them for your company. Even if you’ve studied accounting in class or through online video, faults might still occur. Getting an experienced and reputable firm to handle your accounting is preferable since it may directly impact your money.

 You can also work with independent contractors who have previous direct accounting project experience. Usually, they commit to working on just one project at a time. By retaining their knowledge, you can ensure that your accounting is in top shape and that your company receives the maximum amount of tax benefits.
When seeking for businesses to outsource accounting services, KLOUDAC is one of the most experienced accounting firms in Dubai, UAE.  They are capable of managing payroll, producing financial statements, and performing accounting audits. They provide prompt, dependable services that adhere to your needs and deadlines.

2. Reduced Risk of Fraud

Having accounting experts work on your accounts has several benefits, but one of the biggest is a reduced risk of fraud or mistakes. The probability that your business will be held responsible when this occurs is basically zero. Due to their own reputation to uphold, professional firms make sure the accounts they manage are always accurate. They lessen the risk of fraud and guarantee that your business won’t ever get into legal trouble.

3. Technical mistakes are less likely to happen

The best professionals work for accounting businesses.  Hiring a junior accountant puts you at risk of making in-depth mistakes. Technical professionals are associated with accounting firms and if errors are found in the accounting books, accounting firms may be held accountable. They make sure your finances are in order and that you have access to the best financial resources available.

4. Time is valuable

Time is of the utmost importance when you are the CEO of a firm. You shouldn’t waste it on things like bookkeeping for your business because you should be focusing on expanding your clients and should be in control of running your business. You might avoid errors and spend less time trying to handle your accounts yourself by hiring a third-party provider. These companies can manage your credit cards, represent you in bank negotiations, and collect invoices as necessary. 

You won’t have to do everything yourself, which is the main benefit of employing an accounting firm to handle your company’s accounting needs. If you grant access to an accounting firm, your financial information is secure in their hands. You may focus on expanding your business while keeping your finances in order doing this.

5. Flexibility and ease of use

One of the most obvious benefits of employing an accounting firm for your business is the number of choices available to you. 

Here are a few illustrations: 

  • The adaptability of the accounting business in handling all of your financial needs.
  •  It is simple to use in accounting management and bookkeeping businesses. 
  • Accounting firms can help you expand your company or find areas where you can decrease costs. 

Hiring a company to handle your accounting needs allows you the flexibility you need to expand your company with the aid of the right knowledge. By outsourcing, you may provide the best services without having to pay more for ongoing training.

KLOUDAC Accounting Firm Dubai, UAE

Small firms frequently face significant pressure to balance their budgets and remain profitable. They have faced particularly difficult times in recent years, and many have been forced to shut down. KLOUDAC is a reputable accounting firm with 15 years of service in Dubai, United Arab Emirates and it also has won the certifications for Xero Payroll and Xero Advisor which is awarded by  the industry-leading online accounting software, XERO. 

A guide to IFRS Advisory Services in UAE

A guide to IFRS Advisory Services in UAE

You must adhere to the highest accounting standards when you expand into overseas markets and handle such significant transactions. IFRS is a universal financial reporting standard that is embraced and accepted by all nations. In order to assure compliance and proper paperwork, the majority of businesses comply to this process. However, the system frequently reviews and modifies its policies, which causes uncertainty and necessitates the use of IFRS Advisory Services.

What is IFRS Advisory?

International Financial Reporting Standards, or IFRS, are a fundamental set of instructions for creating financial statements. These universal guidelines assist make financial statements consistent, believable, and comparable around the world. The International Accounting Standards Board, or IASB as it is more generally known, is in charge of publishing the IFRS protocol. Additionally, IFRS acts as a universal language that supports and promotes commercial endeavors with the utmost integrity and openness. As a result, businesses must make sure they adhere to IFRS guidelines in order to maintain effective and sound financial reporting standards.

Benefits of IFRS Advisory Services

  • Enhanced financial reporting’ reliability, comparability, and openness
  • Assists in preventing the uncertainty that results from the reporting standards’ increasing complexity and variations in its requirements
  • Assists a corporation in its efforts to grow and reach new markets abroad
  • Enables the attraction of international investment by acting as a reliable source of financial data.
  • Makes financial statements more exact and accurate, which increases the company’s trustworthiness.
  • Makes managing and complying with VAT reporting and regulations simple.
  • Contributes to the development of a stronger, more effective financial reporting standard that enables better service provision.
  • Increases responsibility, which raises trustworthiness among shareholders and investors.
  • Assists in streamlining decision-making overall, enabling businesses to make more informed choices.

KLOUDAC Accounting Firm Dubai, UAE

Market conditions vary often, and businesses frequently modify their organizational structures to boost their commercial value. KLOUDAC can assist you in navigating and adhering to the special IFRS regulations for organizational changes and restructuring activities in your interim financial statements. We offer specialized employee training based on our IFRS knowledge and skills, either to develop a fundamental understanding of IFRS and IAS or to instruct the specialists on the most recent updates to the standards. 

7 essential strategies to increase your business revenue in UAE

7 essential strategies to increase your business revenue in UAE

You should concentrate on your clients, step up your marketing and sales efforts, assess your pricing tactics, and widen your market if you want to enhance your small business’s revenue. There are several tactics small business owners can employ to boost revenues and enhance bottom lines, regardless of their budget. Achieving success and increasing revenue requires striking a balance between short-term and long-term objectives.

You must boost revenues if you want to keep your company operating. A business’s financial health is good when its sales are growing. The straightforward operational marketing and service strategies listed below might assist small business owners in reducing expenses and increasing income.

1. Identify Your Objectives

You must begin with a specific plan that is in line with your income objectives. Determine what success looks like and plan the path to achieve it. At every stage of your business, it’s critical to establish your income objectives.

For instance, your initial sales target during the start-up phase is to reach profitability. However, after the company makes it through the risky start-up phase, the next objective is to increase sales so that you can finance the company’s strategic expansion, surpass gross and net revenue targets, and create reserves for your organization.

You may focus on the actions that will help you achieve your goals once you have stated them and determined what actually generates sales and money.

2. Prioritize Reoccurring Customers

Small businesses should focus on upselling or cross-selling to current clients rather than devoting resources to attempting to attract new consumers. As your existing consumers are already familiar with your products and services and are therefore more likely to use them, this is substantially more effective and cost-efficient.

Giving your prior customers and clients free gifts and discounts as a sign of your appreciation can encourage them to make another purchase. They get the idea that you went above and above for them because you value them greatly.

Making connections with your customer interaction can also be a great method to attract new clients and accelerate business expansion. Giving existing customers a compelling referral bonus may be a significant win for your business since people are drawn to connect with individuals who think and act like them.

3. Include Bonus Services or Goods

Combining complementary goods and services can boost sales without raising overhead expenses. Savings are frequently linked to bundling. Even if the customer’s savings are minimal, it’s still a much simpler and more affordable sale for you.

4. Develop Your Pricing Plan

The primary consideration when making a purchase is price. Prices for goods and services should be adjusted in accordance with your market conditions and financial objectives.

Only when a price increase has no negative effects on sales will it raise revenues and boost business profits. To position your prices in the market most effectively, you should try to comprehend how the prices of your competitors’ products compare to those of comparable products and how your product stands out among them.

Consider gradually increasing your prices rather than drastically. A slight price increase may not appear significant compared to the full price, but it directly affects the profit margins and the overall balance.

5. Offer Rebates and Discounts

Discounts encourage customers to start purchasing when they are skillfully marketed. Discounts on specific products, such as quantity discounts on two or more products, seasonal reductions, or discounts across the board during a storewide sale, are all possible.

A rebate usually referred to as a deferred discount, is given as a percentage of the product’s price in cash after it has been purchased. While the reduced redemption rate lowers its cost, the advertised discount increases sales.

6. Use Effective Advertising Strategies

Marketing is a clear-cut strategy to increase sales and money. Examine consumer purchasing and product preference data. Create targeted promotions based on strategic plans to reach particular clients with advertising messages and promotional offers.

You can use a variety of marketing techniques and platforms to draw attention to your goods or services. These include social media, email marketing, pay-per-click advertising, and etc.

7. Renew Your Sales Channel

You need to inspire passion and give people a cause to buy in order to re-energize your sales channel. This may be accomplished by including all of your products and services in vibrant, eye-catching sales literature that conveys a sense of urgency, rewarding sales associates, and increasing subscription sales.

KLOUDAC Accounting Firm Dubai, UAE

KLOUDAC helps you to manage all your finances by guiding you through out the journey. Various financial supports are provided such as financial planning, planning and acquisition of funds, increasing profits and many more.   

KLOUDAC is a recognized accounting firm in Dubai, UAE with 15 years of service experience. We have built connections with over 500 customers. It has also won the certification of Xero Payroll and the certification of Xero advisor from the world-leading online accounting software – XERO. Moreover, KLOUDAC is a golden champion partner of Xero.  Accounting and Bookkeeping are more convenient for SMEs via KLOUDAC since they provide their clients with a whole package of services such as Financial Consultancy, Business setup, Audit and assurance services, Taxation services, Recognized accounting software, and more.

How to understand the Comparable Uncontrolled Price (CUP) in UAE

How to understand the Comparable Uncontrolled Price (CUP) in UAE

One of the five primary transfer pricing techniques is the comparable uncontrolled price (CUP) method. It’s utilized to make sure that business dealings between connected companies cost about the same as those with unrelated businesses.

Traditional transaction methods include the CUP technique. To maintain fair pricing everywhere, it examines the terms and conditions of deals struck between linked and unrelated businesses. The comparable uncontrolled transaction (CUT) technique is used to price intangible things, the comparable uncontrolled services price (CUSP) method is used to price services, and the comparable uncontrolled transaction method is used to price tangible items in most other regions of the world. 

The Operation Of The Comparable Uncontrolled Price Method

The internal CUP and the exterior CUP are the two main applications of the CUP technique. We’ll explain them to you.

Internal CUP

The internal CUP technique requires a corporation to identify instances of comparable third-party transactions it has conducted in order to estimate arm’s-length transfer pricing. The CUP approach demands that the terms of transactions with related parties be the same as those of the third-party transactions in order to comply with transfer pricing requirements.

External CUP

The pricing of similar transactions that take place between third parties—to the extent that they exist—can be used by a corporation to calculate arm’s-length transfer prices using the external CUP approach.

Although tax authorities recognize both the internal and external CUP approaches, it is quite difficult for businesses to identify external transactions that are sufficiently comparable to their own. In order to implement the CUP approach, the internal route is typically preferred.

Pros and Cons Of The CUP Transfer Pricing Method

  • The CUP approach is practically error-proof when applied with the proper facts and data; your risk of transfer pricing should be very low. Because it is the most accurate method of determining and defending transfer pricing. The majority of tax authorities advise using this strategy when practical.
  • The CUP method’s drawback is the exceedingly high comparability standard. In order to use this strategy, according to transfer pricing legislation, a number of distinct elements, including volume, contractual terms, and profit potential, to mention a, must be comparable. Alternatively stated, the transactional circumstances must be roughly comparable. Due to the numerous factors that can affect the outcome, it is challenging to meet these requirements.

KLOUDAC Accounting Firm Dubai, UAE

KLOUDAC is a reputable accounting firm with 15 years of service in Dubai, United Arab Emirates. Moreover, the industry-leading online accounting software XERO awarded it certifications for Xero Payroll and Xero Advisor. KLOUDAC is also one of Xero’s golden champion partners.

KLOUDAC offers its clients a comprehensive package of services including Financial Consultancy, ability to hire financial professionals, Business setup, Audit and assurance services, Taxation services, Recognized accounting software, and more. As a result, accounting and bookkeeping are more convenient for SMEs when using our services.

What is the new Golden Visa in UAE?

What is the new Golden Visa in UAE?

The golden visa was launched by the United Arab Emirates (UAE) in 2019 as a long-term residency scheme to grant professionals 10-year golden access. International investors and the best talent from around the world can obtain visas in Abu Dhabi under the UAE’s Golden Visa program. This covers professionals and researchers in the sciences and other domains of knowledge, including physicians, specialists, scientists, and inventors. Additionally, it is available to the emirate’s business, entrepreneurial, and real estate investors as well as skilled creative, and athletic persons.

Why was the UAE GOLDEN VISA introduced?

The golden visa was introduced in order to promote the UAE as a location for commercial investment and to promote regional economic growth. The visa was established to honor long-term residents and their contributions to the advancement of their nation. By providing them with a long-term visa that is valid for ten years and may be renewed, the golden visa is a way to acknowledge and thank them for their commitment.

Who can apply for the Golden card?

Entrepreneurs, top executives, investors, talented students, and scientists are among the five non-resident categories that are eligible to apply for the golden card.

What are the expected requirements?

They must meet at least one of the requirements listed below:

  • must deposit up to 10 million dirhams in a UAE investment fund.
  • a partner in a corporation with a stake worth up to 10 million dirhams or an owner of a business with a capital investment of 10 million dirhams.

In addition, the following requirements must be met:

  • Investment money should be entirely owned rather than financed by a loan, and sufficient documentation must be provided.
  • The investment had to have been held by the applicant for at least three years.
  • The applicant must possess proof of insurance for both themselves and their dependents.


  • The proprietors of a project in a UAE-certified industry with a value of at least 500,000 dirhams are required to apply.
  • The applicant must be the project’s originator and a recognized business incubator. 
  • They also need to have personal and family health insurance.


  • A professor from any of the top 500 foreign universities recognized by the ministry of education may apply.
  • A candidate with a prize or recognition certificate for his field of expertise may also apply.
  • Scientists with a Ph.D. and 20 years of relevant experience who have significantly advanced their field of study
  • Specialists in disciplines important to the UAE should apply.


  • A bachelor’s degree or its equivalent is required
  • Must have at least five years of experience. Must be employed in the UAE and get a salary of at least 30,000 dirhams.
  • Family members, who are required to have health insurance, must be covered.


The ministry of the economy must have approved the patent for it to meet the requirements for inventors, who also need to have a patent that is valuable to the economy of the United Arab Emirates.

In addition, the UAE Ministry of Culture and Knowledge Development must authorize the program’s art and culture specialists.

How can Kloudac help you?

When you set up your business in Dubai, you would need support from the best of the best to identify your business’ needs and cater customized innovative solutions from setting up until growing it. KLOUDAC specializes in Accounting, Auditing, Taxation, Financial Consultancy and Accounting Software Implementation for all your business needs. We have a team of qualified accountants (CA, ACCA, CIMA) who are really dedicated to provide a quality and reliable service to our clients. KLOUDAC was founded with a profound vision of assisting SMEs and Startups in the UAE. We have managed to acquire a large and reputable clientele in various sectors in a few years of time. We continue to grow along with our lients as their success stories equals our success.

Contact us now for inquiries,

Call: +97142569050

Email: info@kloudac.comWebsite:

KLOUDAC Accounting Firm Dubai, UAE

KLOUDAC is a recognized accounting firm in Dubai, UAE with 15 years of service experience. We have built connections with over 500 customers. It has also won the certification of Xero Payroll and the certification of Xero advisor from the world-leading online accounting software – XERO. Moreover, KLOUDAC is a golden champion partner of Xero. 

VAT on transportation services in UAE

VAT Applicability on Local Passenger Transport UAE

UAE or United Arab Emirates is a truly unique global place in this world where tradition and opulence go hand in hand, and that too sometimes synonymously. When opulence goes a long way in the UAE, its transportation services too must bear credibility of this statement. The transportation services and the high class road connectivity help in maintaining the credibility of being a high class nation and provide the levels of connectivity a developed nation needs to provide!

Taxis, buses, metro, mono, and trams are the preferred modes of transportation and each of these modes has its own advantages. Along with fantastic road network and public transport connectivity, the people using these modes of transport also get the facility of hassle free payment mode, thus making the entire process of local passenger transport in UAE much more comfortable and convenient. However, such a comfortable journey and rides involve a cost. Taxes are a way to recover such costs or at least a part of such costs. Value Added Taxes have been implemented in the UAE in 2018 and since then the taxes have had a great impact upon the various businesses operating in UAE.

VAT on Transportation Services in UAE
The transportation services in UAE are well regulated by the laws of the land. Following the rules of VAT Decree-Law is one of the important laws that the organisations involved in providing transportation services in the UAE need to adhere to. However, it is important to understand the implications of the rules and provisions of VAT on Transportation Services in UAE to comply with it.

According to Article 46 (4) of the VAT Decree –Law, the supply of local passenger transportation is exempted. Therefore, if a company ABC operates a Taxi service and offers its service to commuters, people within the UAE should follow the provisions of this law carefully. Services provided by this company ABC can include picking up employees from their residence to their places of work situated in the UAE. Suppose, when an employee or an organisation where such employees work arranges for the transportation of its employees connects with this transport Company ABC, Company ABC need not include VAT since such a journey is exempt from VAT according to Clause 4 of Article 46 of the VAT Decree – Law

Another Article 45 (1) of the Executive Regulation mentions that the supply of local passenger transportation service in any qualifying means of transport, as mentioned in the above section of the article (Taxi, bus, tram, metro, and mono and others) via land, air or water would be exempted. Therefore, company ABC is exempt even under this provision. How? Company ABC, as mentioned in the above paragraph, provides taxi services, which is a qualifying means of transport as mentioned above. Thus the services of Company ABC, if availed by any passenger or any organisation for the purpose of transporting the employees to the office and back, are exempt from VAT implications under Clause 1 of Article 45. However, suppose the organisation where the employees work organises a private jet and uses it to transport their employees to their homes would certainly not qualify as a means of local passenger transport in UAE.

It is clear that VAT Applicability on Local Passenger Transport UAE is zero in case it is a normal transportation service provided for regular activities such as travelling to work place and back or availing public transport to travel to the airport or take a drop from the airport. However, is every journey using the local passenger transport exempted from VAT in UAE? No, probably not.

This is because according to Article 45 (4) of the Executive Regulation, such exemption of VAT Applicability on Local Passenger Transport UAE will not apply in case the transportation service has been availed with a purpose of a pleasure trip. The definition of a pleasure trip includes sightseeing, dining out or enjoying catering services, and/or any other form of pleasure or entertainment that might include going to watch a theatrical performance too!

Now, let us understand these provisions through an example.
● Suppose there is a person X. Person X hires a taxi to travel to his office which is towards the south of his city, he need not pay VAT on Transportation Services in UAE.
● Person X, after finishing his office, needs to go for dinner. He hires another taxi to reach the hotel where he plans dinner with his friends. He needs to pay VAT on Transportation Services in UAE as this trip qualifies as a pleasure trip and is not exempted from VAT under Article 45 (4) of the Executive Regulation.
● After dinner, Person X needs to travel to the airport as he has to travel to the USA for a business meeting. Person X calls for a taxi to drop him to the airport. He need not pay VAT on Transportation Services in UAE as this trip is exempted under Article 45 (1) and 46 (4).

In the case of the trips in which Person X is exempted from paying taxes, the taxi operating company cannot claim or recover any expense under the VAT subheading.
Suppose the same taxi company is hired for all three trips mentioned above and coincidentally the same taxi and taxi driver completes the trip with Person X, only one trip would be applicable for VAT on Transportation Service in UAE – the one where he goes for dinner. For the remaining two trips, no VAT should be included in the bills.
Understanding these provisions of the law clearly would help you be aware and not give in to any inappropriate taxation. For more information, you can connect with KLOUDAC

What is transfer pricing

What is Transfer Pricing: It’s Impact and Importance in UAE

United Arab Emirates or UAE or Emirates is the federation of seven Emirates, including Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al-Quwain, Fujairah, and Ras Al Khaimah. Though taxation in UAE was initially restricted to corporate taxes levied on foreign banks and oil companies, the companies will have to follow the transfer pricing rules and documentation procedures as mentioned and mandated in the OECD (Organisation for Economic Co-operation and Development) Transfer Pricing Guidelines.

What is Transfer Pricing?

Transfer pricing can be explained as the price paid for the transfer of goods and services from one unit of an organization to another unit of the same organization situated in a different country. Suppose company X, headed by Mr. Alex and headquartered in the USA, produces biscuits. The company has operations in the UK, Dubai, and India. Now the UK Company is in short supply of a particular flavoring agent used in the biscuit that is available at the Dubai Office in surplus. Now the UK Company asks the Dubai Office to send ten units of the flavoring agent to the UK. Usually, company X being the mother company, would guide the Dubai Office to parcel the ten units of flavoring agent to the UK office and make adjustments in the stock ledger of both companies.

The monetary considerations, in lieu of such a transaction, have a huge probability of being influenced by Mr. Alex or his team at the headquarters. For example, He can say that instead of Dh100, charge Dh80 since this is an internal transfer. There can be a probability of tax evasion too. How? Well, suppose the UK imposes an import tax on the flavouring agent in case the UK company ordered it in the normal UK Market. This internal transfer helps the UK company save on such import tax because the transfer is happening internally from a sister concern of the same company.

In order to avoid such price alterations and tax evasion among related companies or companies under the same operations, the policy of transfer pricing has been implemented by the OECD. The same transfer pricing mechanism would now be applicable for companies operating within UAE or with operations involving any company in Dubai. Transfer pricing can be explained as the due consideration that has to be paid by the companies to avail of a product or service from another company, though both companies might be related. So, under the influence of transfer pricing the UK company needs to pay due consideration for the flavouring agent to the Dubai Company.

Transfer pricing is also helpful in managing situations where a related person to the entities might take benefits, either in kind or salaries, that are much higher than the existing salary or perquisites applicable in the market, for e.g., extraordinary salaries are being paid to some employee or expat diplomat working in some other location. This might be in favour of an individual’s gain; however, this would erode the profitability of the organisation and thus might not be in favour of the shareholders of the company at large. Therefore, Transfer pricing is mandated to take care and control over any of the above financial irregularities that might happen due to multiple location operations of the organisation.

Methods of Calculating Transfer Pricing

While the concept of transfer pricing has been an acceptable feature globally, in all kinds of cross border operations of organisations, UAE had a different way of looking at corporate taxes. In the UAE, only foreign banks and oil companies came under the ambit of corporate taxation till date. However, according to the announcement of the Ministry of Finance, UAE, on January 31, 2022, a New Federal Corporate Income Tax System will be introduced in the emirates that will be effective from June 2023 onwards.

According to the announcement, the ministry proposes to levy a standard corporate income tax rate of nine percent upon the business profits earned by UAE businesses during a tax accounting period, following the global practice of taxation. Levying of Corporate Income Tax will imply levying of OECD Transfer Pricing Rules too! Various methods have been used to calculate the Transfer Pricing applicable to organisations and entities for years such as the:

  • Traditional Transaction Methods including:
    • Comparable Uncontrolled Price Method
    • Resale Price Method
    • Cost plus Method
  • Transactional Profit Method including:
    • Transactional Net Margin Method
    • Transactional Profit Split Method

The implementation of Corporate Income Tax and OECD Transfer Pricing Rules in UAE implies that the transactions within and between the enterprises under common control and management will be conducted at Arm’s Length Pricing Terms

What is Arm’s Length Pricing Term?

The Arm’s Length Price Term practiced between two enterprises controlled by the same management implies that the transfer price paid for the transaction between the two related entities (under the same management) will be the same as the transfer price paid for the transaction between two unrelated and independent entities. Therefore, the transaction of flavouring agent between the UK Company and the Dubai Company would be dealt as if the Dubai and the UK Company were unrelated to each other. The Dubai Company would be treated as an independent supplier of the flavouring agent for the UK Company. This way the Dubai Company realises the appropriate cost and tax evasion between the companies would also not be possible.

Impact of Transfer Pricing

The impact of levying OECD Transfer Pricing Rules as part of the new Federal Corporate Income Tax System will definitely cause a ripple effect in the global market and therefore, it is the most trending topic currently. Some of the important impacts of transfer pricing includes:

  • Corporate Taxpayers paying transfer prices at Arm’s Length Price between related entities. Thus the transactions between the related parties will also be treated at par with the transactions between independent parties.
  • Payment of Transfer Price at Arm’s Length Price is the fair market price of the commodity, goods, or services in the open market.
  • Transfer pricing will be calculated using various methods depending on the type of transaction and the entities involved
  • The entities also need to undertake detailed transfer pricing documentation annually
  • The Federal Tax authorities will be regularly assessing and scrutinising the policies related to transfer pricing, the documentation submitted by the organisations, and detailed scrutiny into the intercompany and inter group transactions conducted within the organisation within a tax assessment year.
  • The entities will be subjected to harsh penalties in case of non-compliance with the Transfer Pricing rules and documentation procedures.

Though the entire process of transfer pricing and its documentation will increase the workload of the organisations operating out of the UAE, implementation of such transfer pricing rules is important in order to create parity between the UAE organisations and the global organisations.

Importance of Transfer Pricing

The transfer pricing rules, and documentation procedures might look cumbersome, but the introduction of the new Federal Corporate Income Tax System is beneficial for individual organisations as well as important for the UAE. Some reasons why the introduction of transfer pricing policy and documentation procedure is in the favor of the organisation include:

  • Organisations that have a huge quantum of international operations can find ways to optimise their profits across the different jurisdictions of company operations. This is in accordance with the Base Erosion and Profit Shifting (Beps) Action Plan of OECD.
  • The Transfer Pricing policy will lead to unprecedented disclosure from the organisational perspective. However, such disclosure will also lead to transparency in terms of corporate dealing, thus improving the corporate reputation and trust, in the long run, that too in the global domain.
  • The global companies with headquarters in UAE and operations across the globe are expected to have streamlined supply chains.
  • The global companies are also expected to mitigate their tax risks with the introduction of a Transfer Pricing policy.
  • The global companies will also have a chance to fulfil the compliance requirements at multi-location operations with such a transfer pricing policy.
  • The global companies with headquarters in UAE are expected to curtail their tax burdens with proper understanding and guidance on Transfer Pricing Policy and Beps regulation.
  • With the curtailment of tax burdens, the returns of the shareholders of these global companies will also increase.
  • Further, the prices fixed for the consumers, also, will be reduced with such savings on taxes by the global companies.

However, the introduction of the option of Beeps can lead to abuse and manipulation by the organizations in order to save taxes artificially. Therefore, the Federal Tax Authorities will have the added responsibility of scrutinizing the documentation submitted by the organisations thoroughly.

How to avoid common accounting problems for your business

How to avoid common accounting problems for your business

Today’s small and medium-sized businesses have access to a wide variety of accounting tools, making it simpler than ever to maintain precise records of where your company’s money is going. Accounting software has simplified bookkeeping and accounting for small firms, but it has also increased the likelihood of errors and mistakes in accounting, from misclassifying a transaction to handling all of the accounting yourself.

The reality of your company’s financial health may be distorted over time by bad accounting practices. Repeated accounting errors and poor accounting procedures, in extreme situations, might push your firm into bankruptcy 

5 Common mistakes are:

  1. Not employing a finance expert with experience.
  2. Inaccurate cost tracking for businesses.
  3. Mixing up personal and professional accounts.
  4. Ineffective billing management.
  5. Inadequate preparations for tax time.

Now lets look into each mistake in detail.

1. Not employing a finance expert with experience

Employing a specialist will reduce the possibility of mistakes in crucial areas including expense tracking, timely vendor payment, bank account balancing, and maintaining payroll.

Assisting with tax preparation, certified public accountants can also help you identify patterns in your bookkeeping so you can correct them. Check the database for a license to confirm that a prospective employee is a CPA.

2. Inaccurate cost tracking for businesses

Inaccurate record keeping reduces the efficiency of accounting and bookkeeping.  When you do that, your company is left open to financial losses, late payments on significant bills, headaches during tax season, and other issues that might obstruct the growth of a company.

It goes beyond mistakes made while putting transactional information into a spreadsheet or forgetting to indicate that you paid a bill. The inability to prepare for the upcoming month or beyond is hampered by inaccurate financial tracking, which eventually costs your company money.

Whether it’s just you and a spreadsheet or someone you’ve hired to handle your books, it’s critical that your accounting system keeps track of every transaction so you can accurately assess the health of your firm.

While having a financial expert manage your books is beneficial, an integrated accounting system offers another way to assist you or your bookkeeper in doing their duties more effectively.

In an integrated system, the software links numerous financial transaction-related tasks that a business performs, such as paying bills, monitoring bank deposits and withdrawals, billing customers, and issuing paychecks, so that all the transactions are recorded automatically.

The ability to fully capture a company’s costs, which is necessary for expansion and continued profitability, is one of the main advantages.

3. Mixing up personal and professional accounts.

The distinction between personal and business finances is frequently blurred by small business owners. It makes sense, especially for a new company trying to establish itself.

However, it goes further than simply merging professional and personal purchases on one invoice.  That’s not a wise course of action.

Mixing up your financial accounts might make it more difficult to distinguish between your personal and corporate transactions, which could be a major hassle come tax time. This may result in you overlooking an item that qualifies for a business deduction.

It might also be a problem if you apply for a loan or a line of credit because lenders need a thorough and accurate picture of your company’s financial situation in order to evaluate your loan request.

Wean yourself off the habit if you’ve been using your personal and professional bank accounts interchangeably. Open a distinct business checking account. The bank where you have your personal account may provide you certain incentives to do so.

4. Ineffective billing management.

Maintaining a company’s operations from one day to the next requires a steady cash flow.

Effective client billing or invoicing goes a long way toward ensuring that your revenue is received promptly so that you may use it for costs, payroll, and other requirements.

However, companies who don’t have a firm grasp on the accounting side of their operations may fall far short of this. Delayed invoicing leads to naturally delayed consumer payments, which could leave your company struggling to pay its own expenses.

It is obvious that sending an invoice by email is preferable. There is also software for invoicing and tools you can utilize to send bills to your clients automatically for a quicker, more smooth procedure.

5. Inadequate preparations for tax time.

In order to save money on an accountant or other tax specialist, small businesses may find it tempting to use do-it-yourself tax software to prepare a straightforward tax return.

Even those adopting a DIY method to file their small business taxes may encounter difficulties if they haven’t taken the necessary precautions to accurately record their corporation’s financial information along the route.

The ideal strategy is to ensure that your firm is using an accounting system that smoothly manages business spending, payroll, and other essential elements of your business’s profit and loss statement. This will help you reduce mistakes and oversights.

Before the tax year is through, having a certified tax professional conduct frequent audits and organize your company’s tax-related activities can also help you identify areas for potential savings or even changes that could be made.

KLOUDAC Accounting Firm Dubai, UAE

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KLOUDAC is a recognized accounting firm in Dubai, UAE with 15 years of service experience. We have built connections with over 500 customers. It has also won the certification of Xero Payroll and the certification of Xero advisor from the world-leading online accounting software – XERO. Moreover, KLOUDAC is a golden champion partner of Xero.