IFRS in the UAE: A Complete Guide for Businesses and Tax Groups

International Financial Reporting Standards (IFRS) are a globally recognized framework for preparing financial statements. In the UAE, compliance with IFRS is not only a best practice for transparency and consistency but is also a regulatory requirement for Corporate Tax purposes under Ministerial Decision No. 114 of 2023 and FTA regulations. Understanding IFRS, its applications, and its interaction with corporate tax is essential for businesses of all sizes.

What is IFRS?

IFRS refers to a set of accounting standards developed by the International Accounting Standards Board (IASB) to ensure consistent, transparent, and comparable financial reporting worldwide.

There is also IFRS for SMEs, a simplified version designed for small and medium-sized enterprises, which reduces the reporting burden while maintaining compliance and reliability.

In the UAE:

• IFRS is the default accounting framework for all Taxable Persons.
• IFRS for SMEs can be used by businesses with annual revenue ≤ AED 50 million.

Failure to comply with these standards for Corporate Tax purposes can result in administrative penalties.

IFRS and Corporate Tax in the UAE

The UAE Corporate Tax Law requires that Taxable Income be calculated based on financial statements prepared under IFRS or IFRS for SMEs. Key points include:

• Revenue and expenditure recognition is determined by IFRS, forming the starting point for Taxable Income.
• Businesses may use other accounting standards for internal purposes, but all tax-related calculations must comply with IFRS or IFRS for SMEs.
• Exempt Persons (such as government entities) must use IFRS for any taxable business activities they operate.

IFRS Compliance for Tax Groups

For businesses forming a Tax Group, FTA Decision No. 7 of 2025 provides additional guidance:

• Aggregated Financial Statements must comply with IFRS or IFRS for SMEs.
• Standalone Financial Statements of each member must also be IFRS-compliant and serve as the basis for aggregation.
• Business Combinations Exception: Adjustments like goodwill or fair value changes under IFRS 3 and IFRS 10 are generally excluded from the Aggregated Financial Statements, unless no separate legal entity is acquired.
• Uniform Accounting Policies: All members of a Tax Group must use consistent accounting policies.
• Members Leaving a Tax Group: If IFRS does not allow opening balances from the Tax Group, the exiting member must calculate Taxable Income as if those balances were permitted.

This ensures accuracy, consistency, and audit readiness for all Tax Group members.

IFRS and Accounting Methods

IFRS also interacts with different accounting methods that affect Corporate Tax:

• Accrual Basis: Recognizes income when earned and expenses when incurred.
• Cash Basis: Permitted for businesses with revenue ≤ AED 3 million or with FTA approval in exceptional cases.
• Realisation Basis: Allows recognition of gains/losses only when assets are disposed of.
• Equity vs. Cost Method: For non-Tax Group parent companies, the Cost Method replaces the Equity Method to avoid double taxation of investment income.

Definitions of assets and liabilities, including financial assets, financial liabilities, intangible assets, and capital expenditure, follow IFRS treatment. Capital expenditures themselves are not directly deductible, but depreciation, amortization, or similar adjustments are deductible for tax purposes.

Audit Requirements

• Taxable Persons with revenue exceeding AED 50 million and all Qualifying Free Zone Persons must maintain audited financial statements.
• For Tax Groups, only consolidated/aggregated statements need auditing if revenue exceeds AED 50 million.
• Audits must be performed by a UAE-registered auditor.

Benefits of IFRS Compliance

1. Regulatory Compliance: Ensures alignment with Ministerial Decision No. 114 of 2023 and FTA guidance.
2. Consistency: Standardized accounting ensures comparability across periods and entities.
3. Transparency: Accurate reporting fosters trust with investors, stakeholders, and regulators.
4. Audit Readiness: IFRS-compliant statements reduce risk during statutory audits.
5. Tax Accuracy: Proper revenue and expenditure recognition minimizes risk of penalties or disputes with the FTA.

Conclusion

IFRS is more than a global accounting standard—it is a mandatory framework for businesses in the UAE for Corporate Tax purposes. From standalone companies to complex Tax Groups, compliance ensures transparency, accuracy, and audit readiness while aligning with FTA regulations.

For businesses in Dubai and across the UAE, professional accounting and auditing services can help:

• Implement IFRS or IFRS for SMEs correctly
• Prepare accurate financial statements for tax and statutory purposes
• Ensure compliance with FTA decisions and Corporate Tax Law
• Optimize corporate tax reporting while minimizing risks

Learn more about IFRS and corporate tax compliance by consulting with a trusted accounting and auditing firm in the UAE