The Definitive Guide to Tax Record Retention for UAE Businesses
In the UAE’s new era of taxation, the adage “it’s not what you know, it’s what you can prove” has never been more relevant. With the Federal Tax Authority (FTA) equipped with sophisticated audit capabilities, the foundation of every tax return, every declaration, and every transaction is the quality and accessibility of its supporting documentation. Tax record retention is no longer a passive administrative task of storing old paperwork in a dusty archive; it is an active, legally mandated component of corporate governance and a critical line of defense during a tax audit.
- The Definitive Guide to Tax Record Retention for UAE Businesses
- Part 1: The Legal Foundation for Record Keeping
- Part 2: What Records Must You Keep? A Comprehensive Checklist
- Part 3: The "How" and "Where" of Record Retention
- How Excellence Accounting Services (EAS) Manages Your Record Retention
- Frequently Asked Questions (FAQs) on Tax Record Retention
- Is Your Business Audit-Ready?
The UAE’s Tax Procedures Law, along with the specific requirements of the VAT and Corporate Tax legislation, sets out clear and strict rules about what records must be kept, for how long, and in what manner. A failure to comply is not a minor infraction; it carries hefty financial penalties—AED 10,000 for a first offense and AED 20,000 for a repeat offense. More importantly, a lack of proper records can render a business unable to defend its tax position, leading to the disallowance of deductions, the reversal of input VAT claims, and potentially devastating assessments by the FTA. This guide provides a definitive overview of the tax record retention requirements in the UAE, offering a clear roadmap to ensure your business is always compliant, auditable, and secure.
Key Takeaways on Tax Record Retention
- It’s a Legal Mandate: The requirement to keep proper records is enshrined in the UAE Tax Procedures Law and carries significant penalties for non-compliance.
- Standard Retention Period is 5 Years: Most business and tax records must be kept for a minimum of five years after the end of the relevant tax period.
- Real Estate Records: 15 Years: A much longer retention period of 15 years applies to all records related to real estate transactions.
- Digital is Preferred, but Rules Apply: Electronic records are acceptable but must be secure, legible, and readily accessible. Proper backups are essential.
- Comprehensive Scope: The requirement covers everything from financial statements and tax invoices to contracts, bank statements, and internal calculations.
- Audit Extends the Deadline: If the FTA audits your business, you must keep the records for that period for an additional year after the audit is completed, even if it’s beyond the standard 5 years.
Part 1: The Legal Foundation for Record Keeping
The obligation to maintain records is not merely a suggestion; it’s codified in law. Several pieces of legislation work together to create a comprehensive framework that all businesses must adhere to.
- Federal Decree-Law No. 8 of 2017 on Value Added Tax: Article 78 explicitly requires a taxable person to keep a range of specific accounting records and commercial books.
- Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses: Article 56 mandates that a taxable person must maintain all relevant records and documents to support the information in their tax return.
- Federal Law No. 7 of 2017 on Tax Procedures: This is the overarching law. Article 2 is particularly important, stating that any person conducting any business must keep accounting records and commercial books.
Together, these laws establish an undeniable legal requirement. The question for businesses is not *if* they should keep records, but *what*, *how*, and for *how long*.
Part 2: What Records Must You Keep? A Comprehensive Checklist
The law requires you to keep any and all information, documents, records, and data that allow the FTA to ascertain your tax liability. This is a broad definition, but it can be broken down into specific categories.
Category 1: Core Financial and Accounting Records
This is the bedrock of your compliance. These records form the basis of your financial statements and, by extension, your tax returns.
- Annual Financial Statements: Including the Balance Sheet, Profit & Loss Statement, Cash Flow Statement, and notes to the accounts.
- General Ledger and Trial Balances: The complete record of all financial transactions.
- Records of all assets and liabilities.
- Fixed Asset Register: Detailing the cost, depreciation, and net book value of all fixed assets.
- All underlying accounting records: Journal entries, adjustment entries, and supporting calculations.
Category 2: VAT-Specific Records
For VAT compliance, the documentation requirements are highly specific and transactional.
- All Tax Invoices issued and received.
- All Tax Credit Notes and Tax Debit Notes issued and received.
- Records of all supplies of goods and services: This includes details of standard-rated, zero-rated, and exempt supplies.
- Records of all imported goods and services.
- Records of goods or services used for private or non-business purposes.
- Documentation related to the annual input tax apportionment adjustment.
Category 3: Corporate Tax-Specific Records
Corporate Tax requires documentation that supports every single number in your tax return.
- Detailed book-to-tax reconciliation schedules: Showing every adjustment made to your accounting profit to arrive at your taxable income.
- Records supporting all deductible expenses.
- Records supporting all claimed tax relief (e.g., Small Business Relief, business restructuring relief).
- Transfer Pricing Documentation: The Master File and Local File, which must be ready upon request.
- Records of all transactions with Related Parties and Connected Persons.
Category 4: General Business and Supporting Documents
These documents provide the commercial context for your financial transactions.
- Bank Statements for all company accounts.
- Contracts, agreements, and amendments with customers, suppliers, and employees.
- Complete payroll services records: Including employee contracts, salary calculations, and proofs of payment (WPS records).
- Shareholder Register and records of dividends or distributions.
- Board meeting minutes and resolutions that have a financial impact.
Part 3: The “How” and “Where” of Record Retention
The law also specifies the manner in which records must be maintained.
- Language: Records must be in Arabic or English. The FTA can request translation of any documents that are not in one of these languages at the taxpayer’s expense.
- Location: Records must be kept in the UAE, either at the business premises or another location, and must be made available to the FTA upon request.
- Format (Physical vs. Digital): The law permits records to be kept electronically. However, if you choose this route, you are responsible for ensuring the digital records are secure, legible, tamper-proof, and readily accessible. Regular, secure backups are not just a good IT practice; they are a compliance necessity.
An accounting system implementation of a cloud-based platform is the most effective way to meet these digital storage requirements.
How Excellence Accounting Services (EAS) Manages Your Record Retention
A robust record retention policy is the bedrock of good governance and tax compliance. EAS helps you build and maintain a system that is not only compliant but also adds value to your business.
- Comprehensive Accounting and Bookkeeping: We ensure that every transaction is meticulously recorded and supported by the necessary documentation from day one.
- Digital Archiving Solutions: We assist in implementing and managing cloud accounting systems that provide a secure and compliant digital archive for all your records.
- Audit and Assurance Support: We act as your primary point of contact during an FTA audit, organizing and presenting the required records in a clear and professional manner to facilitate a smooth process. An external audit conducted by our partners can also help identify gaps in your record-keeping.
- Policy Development: Our business consultancy team can help you draft and implement a formal record retention policy for your organization, assigning clear responsibilities and procedures.
- Data Reconciliation: Our account reconciliation services ensure that your supporting documents always match your accounting entries, a key requirement during an audit.
Frequently Asked Questions (FAQs) on Tax Record Retention
The clock starts from the end of the tax period to which the record relates. For example, a tax invoice from March 2024 relates to the VAT period ending March 31, 2024. You must keep this invoice for five years starting from that date, i.e., until at least March 31, 2029.
It covers all records related to the creation, acquisition, disposal, or alteration of any real estate (land or buildings). This would include purchase agreements, construction contracts, invoices for major renovations, and sale agreements. Given the long-term nature of these assets, the law requires a correspondingly long record trail.
You must ensure you can still access and retrieve the records from the old system for the full retention period. This often means maintaining a read-only subscription to the old software or performing a complete and verified data export into a stable and accessible format before decommissioning the old system.
No. The obligation to retain records continues even after a business has been liquidated or has ceased trading. The appointed liquidator or the former owners are responsible for ensuring the records are maintained for the legally required period.
Yes, provided the service is secure and you can retrieve the documents promptly upon request from the FTA. You remain legally responsible for the records, so your contract with the archiving service should clearly outline their security measures and your access rights.
This is a force majeure event, but you would need to provide strong evidence to the FTA of the event (e.g., police or civil defense reports). This underscores the critical importance of having off-site or cloud-based digital backups, which are immune to such physical disasters.
Yes, absolutely. In fact, records for transactions with related parties are subject to even greater scrutiny under the Transfer Pricing rules. You must maintain detailed documentation, including contracts and benchmarking analyses, to prove these transactions were conducted at arm’s length.
Under the Cabinet Resolution on Violations and Administrative Penalties, the penalty is AED 10,000 for the first instance of non-compliance and AED 20,000 for a repeated violation within 24 months. This is a per-offense penalty, not per document.
Yes. Every transaction, no matter how small, that is recorded in your books must have supporting documentation. A good practice is to scan and digitize these small receipts regularly to prevent them from getting lost or fading over time.
The FTA will issue a formal written request specifying the records they require and the timeframe for providing them (typically 5 to 20 working days). They may request electronic copies, physical copies, or a visit to your premises to inspect the original documents.
Conclusion: Your First and Best Line of Defense
In the structured and regulated tax environment of the modern UAE, comprehensive record-keeping is not a matter of choice but a fundamental legal obligation. It is the bedrock upon which all tax compliance is built. A well-organized, accessible, and complete archive of your business’s financial life serves as your primary evidence, your corporate memory, and your most crucial line of defense. By investing in robust systems and processes for record retention, you are not just mitigating the risk of penalties; you are fostering a culture of transparency and good governance that will pay dividends for years to come.
