Accruals and Prepayments in Accounting: A UAE Guide

Ask most business owners in Dubai or Sharjah what an accrual is and you will get a shrug. Ask them what their profit was last month and they will quote you the bank balance. Those two facts are related, and the gap between them is exactly what accruals and prepayments exist to close.

For years this was a topic accountants cared about and owners ignored. That changed the day UAE Corporate Tax went live. Under Federal Decree-Law No. 47 of 2022, the profit in your financial statements is no longer just a management number — it is the legal starting point for the tax you owe the Federal Tax Authority. And profit only means something if the timing is right. Record a cost in the wrong period and you have understated or overstated the very figure the FTA taxes.

This guide walks through accruals and prepayments the way a senior accountant would explain them across the desk: what they are, why the accrual basis is now the UAE default for most businesses, where the AED 3 million cash-basis line sits, how accrued expenses and prepaid costs flow into Corporate Tax, and the one trap that catches nearly everyone — a prepayment that triggers VAT before you have earned a single dirham of the income.

What accruals and prepayments actually are

Strip away the jargon and both concepts answer a single question: does this belong in this period?

An accrual pulls something into the current period that the cash has not yet caught up with. An accrued expense is a cost you have already incurred — the electricity you burned in Ramadan, the audit fieldwork already done, the December salaries earned but paid in January — for which no invoice has been paid or perhaps even received. You recognise the expense now, and park the amount you owe as a liability on the balance sheet.

A prepayment does the opposite. It pushes something out of the current period because you paid cash for a benefit you have not consumed yet. The classic UAE example is the annual trade-licence renewal or a twelve-month office rent cheque paid up front in Dubai. You paid the full amount in one month, but the benefit stretches across the year. So you record an asset — a prepaid expense — and release it to the profit and loss account month by month as the benefit is used.

Two mirror concepts sit alongside them. Accrued income is revenue you have earned but not yet invoiced or collected — consultancy delivered in one quarter, billed in the next. Deferred income (also called unearned revenue) is cash a customer paid you in advance for work you have not done — a retainer collected in January for a project delivered across the year.

Here is the shape of all four in one table.

Entry type	Cash timing vs. profit timing	Balance-sheet effect	Everyday UAE example
Accrued expense	Cost incurred now, cash paid later	Liability (accrual)	December wages paid in January
Prepaid expense	Cash paid now, benefit consumed later	Asset (prepayment)	Annual trade-licence fee paid up front
Accrued income	Revenue earned now, cash received later	Asset (receivable)	Advisory work done, invoice next month
Deferred income	Cash received now, revenue earned later	Liability (deferred)	Retainer collected before work starts

Concept table; recognition principle grounded in the accrual definition below (FTA Corporate Tax Guide — Determination of Taxable Income, CTGDTI1).

Notice what unites the whole table: cash and profit move at different moments, and these four entries are the bridge. That is the entire idea. Everything else is detail.

The accrual basis, in the FTA’s own words

You do not have to take a textbook’s word for what “accrual” means in the UAE. The Federal Tax Authority defines it directly, and its definition is now the operative legal standard for Corporate Tax.

The FTA Corporate Tax Guide on the Determination of Taxable Income defines the Accrual Basis of Accounting as “an accounting method under which the Taxable Person recognises income when earned and expenditure when incurred.” The same guide defines the Cash Basis of Accounting as “an accounting method under which the Taxable Person recognises income and expenditure when cash payments are received and paid.”

Read those two definitions side by side and the difference is stark.

Feature	Accrual basis	Cash basis
Income recognised	When earned	When cash received
Expense recognised	When incurred	When cash paid
Accruals used?	Yes	No
Prepayments used?	Yes	No
Depreciation	Yes	No — asset deducted when paid
FTA definition source	CTGDTI1, Definitions	CTGDTI1, Definitions

Source: FTA Corporate Tax Guide — Determination of Taxable Income (CTGDTI1), Definitions; cash-basis mechanics corroborated by MD 115 of 2023, Art. 5.

Under the accrual basis, accruals and prepayments are not optional refinements — they are how the method works. You cannot claim to recognise expense “when incurred” and simultaneously ignore a cost you have incurred but not paid. Under the cash basis, by contrast, accruals and prepayments essentially disappear: you record cash in and cash out, and a December bill paid in January simply lands in January.

That distinction is the hinge of this entire guide, because UAE law decides which of these two methods you are allowed to use — and for most businesses of any size, it decides in favour of accrual.

The AED 3 million line that decides your method

This is the single most important UAE-specific fact in the topic, so it gets its own section.

Ministerial Decision No. 114 of 2023, which sets the accounting standards and methods for Corporate Tax purposes, draws a bright line at revenue. Under Article 2 of that decision, a business whose Revenue does not exceed AED 3,000,000 in a Tax Period may use the Cash Basis of Accounting. Cross that threshold, and the accrual basis becomes mandatory — the only exception being exceptional circumstances, on application to the FTA.

Revenue in the Tax Period	Accounting basis allowed	Basis of the rule
AED 3,000,000 or below	Cash basis (may elect) or accrual	MD 114/2023, Art. 2(1)
Above AED 3,000,000	Accrual basis mandatory	MD 114/2023, Art. 2; FDL 47/2022, Art. 20(1)
Exceptional circumstances	Apply to FTA	MD 114/2023, Art. 2

Source: Ministerial Decision No. 114 of 2023, Art. 2 (Ministry of Finance); corroborated by FTA Corporate Tax Guide — Determination of Taxable Income, §4.1 and §10.

So the practical rule for every UAE business is simple. If your revenue is comfortably under AED 3 million, you have a genuine choice and cash accounting is on the table. If your revenue is over AED 3 million, or heading there, the accrual basis is not a preference — it is the law, and that means accruals and prepayments are now part of your monthly close whether you find them convenient or not.

There is a movement clause too. A business sitting on the cash basis can apply to the Federal Tax Authority to switch to the accrual basis, under Article 20(6) of the Corporate Tax Law. The traffic mostly runs one way in practice: as UAE businesses grow past AED 3 million, they graduate onto accrual and stay there.

A warning about a lookalike figure. There is a second AED 3 million threshold in UAE Corporate Tax — the Small Business Relief revenue ceiling — and it is a completely different rule for a completely different purpose. Do not confuse the two. The AED 3 million in this section is the cash-basis accounting threshold (MD 114/2023). The other AED 3 million is the Small Business Relief ceiling under Small Business Relief legislation, which lets qualifying businesses elect to be treated as having no taxable income. They happen to share a number. They do not share a meaning. If Small Business Relief is relevant to your position, verify its current threshold and end date directly against the latest Ministerial Decision before you rely on it, because relief thresholds and sunset dates get amended.

Why accounting profit is now the tax base

Before Corporate Tax, an owner could run sloppy accruals and the only casualty was the quality of their own management information. Now there is a second casualty: the tax return.

Article 20(1) of Federal Decree-Law No. 47 of 2022 states that Taxable Income is determined “on the basis of adequate, standalone financial statements prepared for financial reporting purposes in accordance with accounting standards accepted in the State.” Article 20(2) goes further: “The Taxable Income for a Tax Period shall be the Accounting Income for that period,” which the law then adjusts for specific items. “Accounting Income” is defined as the accounting net profit or loss for the period per those financial statements.

Put plainly: the FTA taxes your accounting profit, adjusted. And your accounting profit is only correct if your accruals and prepayments are correct.

Corporate Tax provision	What it establishes	Reference
Taxable Income from financial statements	Accounts are the legal starting point	FDL 47/2022, Art. 20(1)
Taxable Income = Accounting Income, adjusted	Profit per the accounts is the base	FDL 47/2022, Art. 20(2)
Realisation-basis election	Optional treatment for fair-value / impairment items	FDL 47/2022, Art. 20(3)–(4)
CT law prevails over accounting standards	Where the two conflict, tax law wins	FDL 47/2022, Art. 20(7)

Source: Federal Decree-Law No. 47 of 2022, Art. 20 (Ministry of Finance).

That last row matters. The accounting standards and the Corporate Tax Law usually agree, but where they conflict, Article 20(7) says the Corporate Tax Law prevails. So an accrual can be perfectly correct under IFRS and still be adjusted for tax if a specific provision of FDL 47/2022 says otherwise. The accounts set the starting line; the law can move the finish line.

There is also an election worth knowing. Accrual-basis businesses may elect the realisation basis for gains and losses on fair-value or impairment items, or on capital-account assets. It is an election, it is irrevocable, and it is made in the first Tax Period. If your balance sheet carries assets that swing in value, discuss this election with your advisor before you file — reversing it later is not on the menu.

Accrued expenses in depth

Because “accrued expenses” is the heart of this topic, it deserves a proper walk-through.

An accrued expense is recognised in the period the cost is incurred, not the period it is paid. The FTA guidance on the determination of taxable income confirms that, on the accrual basis, expenditure is deductible in the Tax Period in which it is incurred; for a cash-basis taxpayer, it is deductible when paid. Either way, the cost must be incurred wholly and exclusively for the business, and it must not be capital in nature — those conditions come from Article 28(1) of the Corporate Tax Law.

Think of the mechanics as two moments. First, at period-end you recognise the expense and raise a liability. Then, when the invoice is settled, you clear the liability against cash — no second hit to profit.

Here is a worked example a Dubai SME would recognise. Your annual audit fieldwork is done across December, but the auditor invoices in February and you pay in March.

Date	Event	Debit	Credit	Effect on December profit
31 Dec	Accrue audit fee (work done)	Audit expense	Accrued liability	Reduces Dec profit
Feb	Invoice received	Accrued liability	Trade payable	No profit effect
Mar	Invoice paid	Trade payable	Cash	No profit effect

Illustrative journal sequence; deductibility timing per FTA Corporate Tax Guide — Determination of Taxable Income, §4.5, and FDL 47/2022, Art. 28(1).

The point of the accrual is that the audit cost lands in December — the period whose numbers the audit actually covers — rather than distorting the following year. Skip the accrual and your December looks more profitable than it was, and your following February looks worse. For an FTA return, that is not a cosmetic difference; it shifts taxable income between two Tax Periods.

Common accrued expenses across UAE businesses include employee end-of-service and leave costs earned but not paid, utility charges (DEWA, SEWA, Etihad Water and Electricity) consumed before the bill lands, interest accrued on financing, professional fees for work already performed, and staff bonuses earned in one year but paid after year-end. Each follows the same logic: the cost was incurred, so it belongs now.

Prepayments and prepaid expenses

If accruals pull costs into a period, prepayments push them out.

A prepaid expense is cash you have already paid for a benefit that spans future periods. You record it as an asset when paid, then release it to the profit and loss account in step with the benefit consumed. In the UAE, the textbook cases are almost all recurring annual outlays: the trade-licence renewal, twelve months of office rent paid up front in a single cheque (still common in Dubai leasing), annual insurance premiums, prepaid software subscriptions, and prepaid maintenance contracts.

Take a licence renewal. You pay the full annual fee in one month, but the licence covers the whole year.

Month	Prepaid asset (opening)	Released to P&L	Prepaid asset (closing)
Month 1 (paid)	Full annual fee recognised as asset	1/12	11/12
Month 2	11/12	1/12	10/12
…	…	…	…
Month 12	1/12	1/12	0

Illustrative amortisation of a prepaid annual cost across a twelve-month period; accrual-basis recognition principle per FTA Corporate Tax Guide — Determination of Taxable Income, Definitions.

Without the prepayment entry, the entire licence fee would hit the profit and loss account in month one, making that month look loss-making and the remaining eleven months artificially profitable. For a business over the AED 3 million line, that is not just untidy — it distorts the accounting profit that feeds the Corporate Tax return.

There is a discipline here that pays for itself: keep a prepayments schedule. One row per prepaid item, the total paid, the period it covers, the monthly release, and the running balance. At any month-end you can prove the prepaid asset on your balance sheet in thirty seconds. When an FTA query or an auditor arrives, that schedule is the difference between a five-minute answer and a two-day reconstruction.

Provisions and accrued liabilities under Corporate Tax

Provisions are the sophisticated cousin of the simple accrual: estimated liabilities where the amount or timing is uncertain but the obligation is real. And UAE Corporate Tax has a clear position on them.

The FTA guidance confirms that provisions recognised under IFRS are deductible for Corporate Tax purposes, provided they also meet the Corporate Tax deductibility conditions. The FTA sets out the recognition test in language taken straight from the accounting standards: a provision is recognised when a past event has created a legal or constructive obligation, an outflow of resources is probable, and the amount can be estimated reliably — measured at the best estimate at year-end.

The reciprocal rule is the one businesses forget. When a provision is later released or reversed — because the estimated cost did not materialise, or came in lower — that credit is taxable in the later period. You do not get to deduct the provision on the way up and keep the reversal tax-free on the way down.

Stage	Accounting treatment	Corporate Tax effect	Reference
Recognition	Provision raised (best estimate)	Deductible if CT conditions met	FTA CTGDTI, §4.5.8
Recognition test	Past obligation + probable outflow + reliable estimate	Condition for deductibility	FTA CTGDTI, §4.5.8
Release / reversal	Provision credited back	Taxable in the later period	FTA CTGDTI, §4.5.8

Source: FTA Corporate Tax Guide — Determination of Taxable Income, §4.5.8 (Chapter Nine, Federal Decree-Law No. 47 of 2022).

The reason this matters for a UAE business is discipline of estimation. Over-provision to depress this year’s taxable income and you simply create a taxable reversal next year — you have moved the tax, not removed it, and you have handed the FTA a reason to question your estimates. The right approach is an honest best estimate, documented, at each year-end. A provision you can defend is an asset; a provision you cannot is a liability in an audit.

Bad debts: accruals with teeth

Bad-debt write-offs are a specific, common form of accrual-basis adjustment, and the FTA addresses them directly.

Under the FTA guidance, a bad-debt write-off is deductible if it is made in accordance with IFRS or IFRS for SMEs and the Corporate Tax conditions are satisfied. And — as with provisions — the mirror rule applies: if you later recover a debt you had written off, that recovery is taxable when it is recognised.

Event	Treatment	Corporate Tax effect
Debt written off (per IFRS, CT conditions met)	Expense recognised	Deductible
Debt later recovered	Income recognised	Taxable when recognised

Source: FTA Corporate Tax Guide — Determination of Taxable Income, §4.5.8.1.

For UAE businesses carrying long-dated receivables — and in a market where payment terms stretch, plenty do — this is a live issue every year-end. A receivable that is genuinely irrecoverable, written off in line with the standards, reduces taxable income legitimately. But the write-off has to be real and evidenced, not a convenient parking of an awkward debtor. And if that customer pays two years later, the recovery goes back through as taxable income.

The prepayment trap: VAT can bite before you earn a dirham

This is the section every UAE business owner should read twice, because it is where accrual accounting and VAT pull in opposite directions.

On the accrual basis, a prepayment you receive from a customer is deferred (unearned) income — a liability. You have not earned the revenue yet, so it is not in your profit and loss account. Perfectly correct for accounting and for Corporate Tax.

VAT does not care. Under Federal Decree-Law No. 8 of 2017 on VAT, the date of supply — the moment VAT becomes due — is the earliest of several events, and that list expressly includes “the date of receipt of payment.” So the instant an advance payment lands in your account, the VAT clock can start, even though, for accounting purposes, you have earned nothing.

Trigger for VAT date of supply	Included?
Date of receipt of payment	Yes
Date the tax invoice is issued	Yes
(Various other supply events)	Yes — earliest applies

Source: Federal Decree-Law No. 8 of 2017 on VAT and amendments, Art. 25(7).

For contracts with periodic payments or a run of consecutive invoices, there is a separate rule. Article 26(1) (as amended by Federal Decree-Law No. 18 of 2022) sets the date of supply as the earliest of: the date of a tax invoice, the due date shown on the invoice, the date of payment, or one year from the date the goods or services were provided.

Periodic / consecutive supply — date of supply	Earliest of:
Date of the tax invoice	✓
Payment due date shown on the invoice	✓
Date of actual payment	✓
One year from provision	✓

Source: Federal Decree-Law No. 8 of 2017 on VAT, Art. 26(1), as amended by FDL 18/2022.

The practical consequence is a genuine cash-flow trap. A UAE consultancy collects a large advance retainer in January for a project delivered across the year. For Corporate Tax and accounting, the income sits in deferred revenue and is released as the work is done. For VAT, the standard rate of 5% may be due on that advance in the January return — long before the revenue is earned or the project delivered. Businesses that treat the advance as “not income yet, so no VAT yet” get this wrong and end up under-declaring VAT on their FTA return. The two systems are not aligned, and the prepayment is exactly where they diverge.

The rule to carry away: deferred income is an accrual-basis concept; the VAT tax point is not. Check the date of supply on every advance you receive, because the accounting entry will not tell you when the VAT is due.

IFRS is the framework — and it requires accrual

Which accounting standards must a UAE business actually apply? Ministerial Decision No. 114 of 2023 answers that too.

Under Article 4 of that decision, IFRS is required, and IFRS for SMEs is permitted only where Revenue does not exceed AED 50,000,000. Above that revenue figure, full IFRS applies. And separately, businesses with Revenue above AED 50 million must have audited financial statements, prepared by a UAE-registered auditor.

Revenue in the Tax Period	Standard permitted	Audit required?
Up to AED 50,000,000	IFRS or IFRS for SMEs	Not on this test
Above AED 50,000,000	Full IFRS	Yes — audited statements

Source: Ministerial Decision No. 114 of 2023, Art. 4(1)–(2); audit requirement per FDL 47/2022, Art. 54(2) and related Ministerial Decision; auditing profession regulated under Federal Law No. 41 of 2023.

Why does this belong in a guide on accruals? Because IFRS itself requires the accrual basis of accounting for financial statements. Once you are on IFRS — and every UAE business above the cash-basis line is — accruals and prepayments are mandatory, not stylistic. The standards do not offer a version where you recognise a cost only when the cash leaves. (We state the accrual requirement qualitatively on purpose: the specific standard paragraph should be confirmed against the current text before it is quoted, and standards get renumbered.)

Cash basis vs accrual: what actually changes

For a business genuinely under AED 3 million weighing the cash basis, it helps to see what disappears when you drop accrual accounting — because accruals and prepayments are among the casualties.

Under the cash basis, there is no depreciation and no notional accruals. Instead of capitalising an asset and depreciating it, a cash-basis taxpayer takes a deduction for the asset purchase in the period it is paid. That treatment comes from the FTA guidance and from Ministerial Decision No. 115 of 2023.

Item	Accrual basis	Cash basis
Accrued expenses	Recognised when incurred	Not used — recognised when paid
Prepayments	Asset, released over time	Not used — expensed when paid
Depreciation	Yes	No
Asset purchase	Capitalised, then depreciated	Deducted in period paid
Deferred / accrued income	Recognised	Not used

Source: FTA Corporate Tax Guide — Determination of Taxable Income, §10.3.7; Ministerial Decision No. 115 of 2023, Art. 5.

The cash basis is simpler, and for a genuinely small UAE business it can be the right call. But it is simpler precisely because it ignores timing — and that simplicity is only available below AED 3 million. The moment you grow past that line, every one of these entries switches back on, and the reporting habits you skipped have to be built from scratch, often mid-year. That transition is smoother when you have kept a rough eye on accruals all along.

A practical month-end checklist

None of this is difficult once it is a routine. Here is the shape of a disciplined UAE month-end close for accruals and prepayments.

Step	What to do	Why it matters
1	List costs incurred but not yet invoiced/paid	Raises the accrued expenses
2	Update the prepayments schedule; release the month’s share	Keeps prepaid assets accurate
3	Review provisions against the recognition test	Defensible deductions; no surprise reversals
4	Check advances received against VAT date of supply	Avoids under-declaring VAT to the FTA
5	Review receivables for genuine bad debts	Legitimate write-offs, properly evidenced
6	Confirm cut-off: right cost, right period	Protects the accounting profit that feeds CT

Practical close procedure; recognition and deductibility principles per FTA Corporate Tax Guide — Determination of Taxable Income and FDL 47/2022.

Cut-off — step six — is where most errors live. A single supplier invoice booked in the wrong month moves cost between two Tax Periods, and under Corporate Tax that moves taxable income. The whole point of accruals and prepayments is to get the cut-off right so that each period’s profit is honest. Do that, and the tax follows correctly. Get it wrong, and every downstream number inherits the error.

Where this fits in the bigger UAE picture

Accruals and prepayments used to be the accountant’s private housekeeping. Corporate Tax made them a matter of public record and legal consequence. The chain is short and unforgiving: your accounting profit is your Corporate Tax base (FDL 47/2022, Art. 20); your accounting profit is only right if your accruals, prepayments, provisions and cut-off are right; and above AED 3 million, the accrual basis that requires all of this is not optional (MD 114/2023, Art. 2).

For a UAE business, the sensible posture is to treat the accrual basis as your default long before you are forced onto it, keep a real prepayments schedule and defensible provisions, and — above all — watch the VAT date of supply on every advance, because that is the one place where your careful accrual accounting and the FTA’s VAT rules will disagree. Handled properly, none of it is burdensome. Handled as an afterthought under audit, all of it is expensive.

Frequently Asked Questions

What is the difference between an accrued expense and an account payable?

An accrued expense is a cost you have incurred but for which you have not yet received or processed an invoice — you are estimating the amount and recognising it now. An account payable is a supplier invoice you have received and recorded but not yet paid. Both are liabilities and both are accrual-basis entries; the difference is whether a formal invoice exists yet. In a UAE close, accruals typically clear into payables once the invoice arrives.

Do I have to use the accrual basis in the UAE?

It depends on your revenue. Under Ministerial Decision No. 114 of 2023, Article 2, a business with revenue of AED 3,000,000 or below in a Tax Period may elect the cash basis. Above AED 3,000,000, the accrual basis is mandatory (save for exceptional circumstances on application to the FTA), and accruals and prepayments become part of your required accounting.

Are accrued expenses deductible for UAE Corporate Tax?

Yes, when the conditions are met. On the accrual basis, expenditure is deductible in the Tax Period in which it is incurred, per the FTA Corporate Tax Guide on the Determination of Taxable Income and Article 28(1) of Federal Decree-Law No. 47 of 2022. The cost must be incurred wholly and exclusively for the business and must not be capital in nature.

Are provisions deductible under UAE Corporate Tax?

Provisions recognised under IFRS are deductible for Corporate Tax if they also satisfy the Corporate Tax deductibility conditions, according to the FTA guidance. The provision must reflect a past obligation, a probable outflow of resources, and a reliable estimate. Remember the reciprocal: when a provision is later released or reversed, that credit is taxable in the later period.

Can a prepayment I receive from a customer trigger VAT before I earn the income?

Yes — this is the key trap. Under Federal Decree-Law No. 8 of 2017 on VAT, Article 25(7), the date of supply is the earliest of several events, expressly including the date payment is received. So an advance you record as deferred (unearned) income for accounting can create an immediate VAT liability at 5%, even though the revenue is not yet earned on the accrual basis.

What is deferred income and how is it treated?

Deferred income (unearned revenue) is cash a customer paid you in advance for goods or services you have not yet delivered. On the accrual basis you record it as a liability and release it to revenue as you earn it. For Corporate Tax, it enters accounting profit only as it is earned. For VAT, however, the advance may be taxable when received — the two systems diverge on timing.

What accounting standard must UAE businesses follow?

IFRS is required. Under Ministerial Decision No. 114 of 2023, Article 4, IFRS for SMEs is permitted only where revenue does not exceed AED 50,000,000; above that, full IFRS applies. Businesses with revenue above AED 50 million must also have audited financial statements prepared by a UAE-registered auditor.

Does the cash basis use accruals and prepayments at all?

No. Under the cash basis, income and expenditure are recognised when cash is received and paid, so accruals and prepayments are not used. There is no depreciation either; instead, a deduction is taken for an asset purchase in the period it is paid, per the FTA guidance and Ministerial Decision No. 115 of 2023, Article 5.

How is a bad-debt write-off treated for Corporate Tax?

A bad-debt write-off is deductible if it is made in accordance with IFRS or IFRS for SMEs and the Corporate Tax conditions are met, per the FTA Corporate Tax Guide. If the debt is later recovered, the recovery is taxable when it is recognised. The write-off must be genuine and evidenced, not a way to park a difficult debtor.

Why does accounting profit matter so much now?

Because it is the legal starting point for tax. Article 20 of Federal Decree-Law No. 47 of 2022 sets Taxable Income from the financial statements and states that Taxable Income equals Accounting Income for the period, then adjusted. If your accruals, prepayments and cut-off are wrong, your accounting profit is wrong — and so is the figure the FTA taxes.

Are the two “AED 3 million” thresholds in UAE tax the same thing?

No, and they must not be confused. One AED 3 million is the cash-basis accounting threshold (Ministerial Decision No. 114 of 2023) covered in this guide. The other is the Small Business Relief revenue ceiling, a separate relief with its own rules and end date. They share a number, not a meaning — verify the Small Business Relief figure against the latest Ministerial Decision before relying on it.

What happens when I cross the AED 3 million revenue line mid-way?

Once your revenue exceeds AED 3,000,000 in a Tax Period, you must prepare financial statements on the accrual basis (MD 114/2023, Art. 2, with FDL 47/2022, Art. 20(1)). That means switching on accruals, prepayments, provisions and depreciation. A business already on cash basis can also apply to the FTA to move to accrual under Article 20(6). Planning the switch before you cross the line avoids a scramble.

What is the realisation basis and should I elect it?

The realisation basis is an optional election available to accrual-basis businesses for gains and losses on fair-value or impairment items, or on capital-account assets, under Article 20(3)–(4) of Federal Decree-Law No. 47 of 2022. It is irrevocable and made in the first Tax Period. Whether it helps depends on your balance sheet, so take advice before electing — you cannot reverse it later.

If accounting standards and the Corporate Tax Law disagree, which wins?

The Corporate Tax Law. Article 20(7) of Federal Decree-Law No. 47 of 2022 provides that where the Corporate Tax Law conflicts with the applicable accounting standards, the Corporate Tax Law prevails. In practice the two usually agree, but where a specific provision of the law says otherwise, the tax treatment follows the law, not the accounts.

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This guide is general information on UAE accounting and tax practice, not advice for your specific situation. Rates, thresholds and rules change — verify current figures against the primary source before acting. Velmont Crest provides advisory, preparation and support services; we are not a tax agent or FTA representative. For guidance on your own accruals, prepayments and Corporate Tax position, request a consultation.