Why Audit Reports Matter Under the UAE Corporate Tax System
The UAE Corporate Tax System, in effect since 1 June 2023, requires taxable persons to prepare and maintain financial statements in line with the accounting standards specified by the Ministry of Finance, statements that must accurately and fairly present taxable income and tax liability for each tax period. Article 54 of Federal Decree-Law No. 47 of 2022 gives the Federal Tax Authority the power to request those financial statements directly, along with any additional information or documents it considers necessary to verify them.
For a defined set of taxable persons, that financial statement cannot simply be self-prepared — it has to carry an external audit opinion attached. This guide explains what an audit report is, who is actually required to obtain one under current UAE law, how taxable income gets calculated, and what the preparation process looks like in practice.
What Is an Audit Report and Why It Matters for Corporate Tax
An audit report is a formal document in which an independent, licensed auditor states an opinion on the accuracy and completeness of a business’s financial statements. Within the Corporate Tax system, that opinion serves a specific function: it gives the FTA assurance that a taxable person’s reported income and tax liability have been calculated correctly, while simultaneously reducing the practical scope for tax evasion or avoidance to go undetected.
Beyond regulatory assurance, an audit report carries real value for the business itself. It surfaces errors, omissions, or discrepancies in the underlying financial statements before they become FTA findings, and it strengthens the internal controls and governance processes a growing business increasingly depends on as its operations scale.
Benefits of an Audit Report for the Taxable Person
- It strengthens the credibility and reliability of both the financial statements and the corporate tax return, reducing the risk of penalties, disputes, or FTA-initiated adjustments
- It supports access to financing, investment, and new business opportunities, since the underlying numbers have already been verified by an independent, qualified auditor
- It generates insight into the business’s actual performance, efficiency, and profitability, feeding directly into better-informed decisions and strategic planning
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Contact the team at Farahat & Co. for professional support and expert insights for businesses operating in the UAE.
How to Calculate Taxable Income Under the UAE Corporate Tax System
Calculating taxable income follows two distinct stages.
First, a taxable person establishes its accounting income from its financial statements, prepared in accordance with the accounting standards accepted in the UAE — IFRS, or IFRS for SMEs where annual revenue does not exceed AED 50 million in the relevant tax period. Where the taxable person is a Qualifying Free Zone Person, or derives revenue exceeding AED 50 million, those financial statements must additionally be audited.
Second, the taxable person applies the adjustments set out in the Corporate Tax Law to that accounting income, arriving at the final taxable income figure. The completed tax return, reflecting that figure, must then be filed with the FTA within nine months of the end of the relevant tax period.
Who Needs Audited Financial Statements Under UAE Corporate Tax Law
The requirement to obtain audited financial statements is set out in Ministerial Decision No. 84 of 2025, which took effect for tax periods commencing on or after 1 January 2025 and replaced the earlier Ministerial Decision No. 82 of 2023 — the decision that still applies to tax periods that began before that date, but no longer governs the current compliance landscape going forward.
Under the current decision, audited financial statements are required for:
- A Taxable Person, not part of a Tax Group, deriving Revenue exceeding AED 50,000,000 during the relevant tax period
- A Qualifying Free Zone Person
- A Tax Group, which must prepare audited special purpose financial statements in the form and manner the FTA specifies
The Tax Group requirement is the most significant change introduced by the 2025 decision. Under the earlier rule, only tax groups whose consolidated revenue exceeded AED 50 million faced an audit obligation; under the current rule, every tax group must prepare audited special purpose aggregated financial statements regardless of consolidated revenue, though individual member entities within the group are not separately required to prepare their own stand-alone audited statements.
For a non-resident person, the AED 50 million threshold is calculated only on revenue derived through that person’s permanent establishment or nexus in the UAE — revenue earned outside that UAE connection does not count toward the threshold. A Qualifying Free Zone Person engaged in distributing goods or materials in or from a Designated Zone is also subject to any additional procedures the FTA separately prescribes for that activity.
Businesses with annual revenue below AED 50 million, Non-Qualifying Free Zone Persons taxed at the standard 9% rate, individual members of a tax group, and non-resident entities without a UAE permanent establishment or nexus are not required to maintain audited financial statements under the current framework.
Audit Requirements for Partnerships
The Minister of Finance retains the authority to require additional categories of taxable persons to prepare financial statements that are audited or certified by a third party. This extends to partners in an Unincorporated Partnership, where the FTA can request financial statements showing the partnership’s total assets, liabilities, income, and expenditure, alongside the individual partner’s distributive share of each.
A partner subject to this request must prepare and maintain the financial statements according to the accounting standards specified by the Ministry of Finance, and submit them to the FTA on request.
How an Audit Report Is Prepared and Submitted
The process behind a corporate tax audit report follows a consistent sequence.
Appointment of the Auditor
The taxable person appoints and pays an auditor who is licensed and registered with the competent UAE authorities, and who is independent of the taxable person and any of its related parties.
Provision of Information to the Auditor
The taxable person supplies the auditor with the full set of information, documents, and records connected to its business activities — income, expenses, assets, liabilities, transactions — along with its financial statements and corporate tax return.
Application of Audit Standards
The auditor conducts the audit in line with the auditing standards specified by the Ministry of Finance, applying the relevant accounting standards and Corporate Tax Law provisions to both the financial statements and the tax return under review.
The Audit Opinion
The auditor prepares and signs the audit report, expressing a formal opinion on whether the financial statements and tax return have been prepared in accordance with the applicable accounting standards and Corporate Tax Law, and whether they present a true and fair view of the taxable person’s financial position and performance.
Submission to the FTA
A taxable person may be required to submit the financial statements used to determine taxable income for a tax period, in the form, manner, and within the timeline the FTA prescribes.
Record-Keeping Requirements Tied to the Audit Report
All documents and records supporting the figures in a corporate tax return — including the underlying financial statements and, where applicable, the audit report — must be retained for a minimum of seven years following the end of the relevant tax period. This retention period applies regardless of whether the FTA has actually requested the records during that window, since the obligation exists independently of any active audit or inquiry.
Best Practices for Preparing an Audit Report for Corporate Tax
- Choose a qualified, reputable auditor with genuine experience in the UAE tax environment and familiarity with the specific industry the business operates in
- Maintain proper accounting records and supporting documents consistent with the accepted accounting standards and the requirements of the Corporate Tax system
- Communicate with the auditor regularly, providing the information and explanations requested promptly rather than allowing requests to accumulate
- Review the draft audit report carefully, discussing any findings or recommendations with the auditor before the report is finalized
- Submit the audit report to the FTA accurately and on time, retaining a copy for the seven-year record-keeping period described above
Frequently Asked Questions (FAQs)
What is an audit report for UAE corporate tax purposes?
An audit report is a document in which an independent, licensed auditor expresses an opinion on the accuracy and completeness of a taxable person’s financial statements, confirming whether taxable income and tax liability have been calculated correctly and whether the statements present a true and fair view of the business’s financial position.
Who is required to obtain an audited financial statement under UAE corporate tax law?
Under Ministerial Decision No. 84 of 2025, audited financial statements are required for any taxable person not part of a Tax Group whose revenue exceeds AED 50 million, any Qualifying Free Zone Person, and Tax Groups, which must prepare audited special purpose financial statements.
What changed between Ministerial Decision No. 82 of 2023 and No. 84 of 2025?
Ministerial Decision No. 84 of 2025 replaced the earlier 2023 decision for tax periods commencing on or after 1 January 2025. The most significant change extended the audit requirement to all Tax Groups regardless of consolidated revenue, while individual members of a tax group remain exempt from preparing their own separate audited statements.
How is the AED 50 million revenue threshold calculated for non-resident persons?
For a non-resident person, only revenue derived through that person’s permanent establishment or nexus in the UAE counts toward the AED 50 million threshold. Revenue earned outside that UAE connection is excluded from the calculation.
How long must corporate tax records and audit reports be retained in the UAE?
Documents and records supporting a corporate tax return, including financial statements and audit reports, must be retained for at least seven years from the end of the relevant tax period.
Do all free zone businesses need an audited financial statement?
No. Only Qualifying Free Zone Persons are required to maintain audited financial statements. Non-Qualifying Free Zone Persons, who are taxed at the standard 9% rate rather than the 0% qualifying rate, are not subject to this audit requirement.
What accounting standards apply to financial statements used for UAE corporate tax?
IFRS is the default accounting standard accepted in the UAE for corporate tax purposes, with IFRS for SMEs available to taxable persons whose revenue does not exceed AED 50 million in the relevant tax period.
Need Expert Advice?
Contact the team at Farahat & Co. for professional support and expert insights for businesses operating in the UAE.
How Farahat & Co. Can Help
Farahat & Co. is an established audit firm in Dubai, supporting businesses with financial statement audits prepared in line with the standards specified by the Ministry of Finance and the requirements of the Corporate Tax Law, alongside preparation and filing of the corporate tax return itself. The firm’s tax advisory team also assists with navigating the broader Corporate Tax system, including tax disputes, reconsiderations, and voluntary disclosures where they arise.
Contact Farahat & Co. today to discuss your audit report and corporate tax compliance requirements.
