Key takeaways
- For corporate tax, the cash basis is allowed where revenue does not exceed AED 3 million and IFRS for SMEs where it does not exceed AED 50 million; above that, full IFRS (Ministerial Decision No. 114 of 2023).
- The cash basis still requires financial statements. It changes when income and costs are recorded, not whether books are kept.
- For corporate tax, audited financial statements are required above AED 50 million of revenue, for every Qualifying Free Zone Person and for every tax group.
- Company law separately requires every LLC and joint stock company to have its accounts audited every year, whatever its revenue.
Corporate tax starts from the financial statements, so the basis on which those statements are prepared carries through to the return. For cash or accrual accounting in the UAE, Ministerial Decision No. 114 of 2023 sets which standards each taxable person may use, and the answer turns mainly on revenue. In a group, that test is applied entity by entity, so a large parent and a small service company beside it can sit in different bands. This article sets out the options, who may use them, and how they interact with the separate audit rules.
Cash or accrual accounting: the difference
Under the cash basis, income is recorded when the money arrives and costs when they are paid.
Under the accrual basis, income is recorded when it is earned and costs when they are incurred, regardless of when cash moves. IFRS (International Financial Reporting Standards) and its simplified version for smaller entities, IFRS for SMEs, are both accrual frameworks.
Take a services entity that completes a AED 60,000 project in December 2026, with the client paying in February 2027. In October 2026 the same entity pays AED 12,000 for a software licence covering the 12 months to September 2027.
| FY2026 | Cash basis | Accrual basis |
|---|---|---|
| Project income | AED 0 (recorded in FY2027) | AED 60,000 |
| Software licence cost | AED 12,000 | AED 3,000 (October to December) |
One entity, one year, two different profits. Accrual accounts show what was earned and what was owed at the year-end. Cash accounts show what passed through the bank. Lenders, auditors and boards generally read the first.
What Ministerial Decision No. 114 of 2023 allows
Federal Decree-Law No. 47 of 2022, Art. 20(1) provides that taxable income starts from adequate, standalone financial statements prepared under accounting standards accepted in the UAE. Ministerial Decision No. 114 of 2023 sets those standards:
| Revenue | Standards permitted for corporate tax |
|---|---|
| Does not exceed AED 3,000,000 | Cash basis, IFRS for SMEs or IFRS |
| Above AED 3,000,000, not exceeding AED 50,000,000 | IFRS for SMEs or IFRS |
| Above AED 50,000,000 | IFRS |
Some points of detail matter in practice. The tests are worded "does not exceed": revenue of exactly AED 3 million still allows the cash basis, and exactly AED 50 million still allows IFRS for SMEs. IFRS is the default (Art. 4(1)); IFRS for SMEs (Art. 4(2)) and the cash basis (Art. 2) are options, not requirements. Above AED 3 million, the cash basis is possible only in exceptional circumstances, on application to the Federal Tax Authority (FTA). And the cash basis still means financial statements. It changes the timing of what is recorded, not whether accounts are prepared.
A tax group prepares its statements by aggregating its members' standalone statements and eliminating the transactions between them (Art. 3). That elimination only works if the members' intercompany balances agree, which is one more reason to keep every member on a consistent accrual basis.
Audits are a separate question
The accounting standard and the audit requirement are two different questions, answered by different rules.
For corporate tax, Ministerial Decision No. 84 of 2025 requires audited financial statements, for tax periods starting on or after 1 January 2025, from:
- a taxable person with revenue of more than AED 50,000,000 in the period;
- every Qualifying Free Zone Person, whatever its revenue;
- every tax group, which needs audited special-purpose statements.
Under company law, every joint stock company and limited liability company (LLC) must have one or more auditors to audit its accounts every year (Federal Decree-Law No. 32 of 2021, Art. 27(1)). Revenue plays no part in this. Company law also requires annual accounts, including a balance sheet and a profit and loss account, prepared applying international accounting standards (Art. 27(2) to (3)).
Many free zones set their own audit and filing requirements on top of these, so each free zone entity in a structure needs checking against its own authority's rules.
| Revenue | Basis for corporate tax | Audit for corporate tax |
|---|---|---|
| Up to AED 3m | Cash basis, IFRS for SMEs or IFRS | Only if a Qualifying Free Zone Person or a tax group |
| Above AED 3m, up to AED 50m | IFRS for SMEs or IFRS | Only if a Qualifying Free Zone Person or a tax group |
| Above AED 50m | IFRS | Yes |
Company law sits on top of this table. An LLC that already needs an annual audit and accounts under international standards gains little from the cash basis, and keeping the books on an accrual basis from the start is usually the simpler route.
The same revenue figure decides other things
E-invoicing: revenue of AED 50 million or more places a business in the first wave, which goes live on 1 January 2027. The wording differs from the audit rule, "or more" for e-invoicing and "more than" for the audit.
Small Business Relief is available for tax periods ending on or before 31 December 2029 (Ministerial Decision No. 131 of 2026), where revenue does not exceed AED 3 million in the period and in every previous period. Our sister site, corporatetax.ebs.ae, covers it in depth.
To map which accounts each entity needs, use Which accounts do I need?
Moving from cash to accrual
The usual triggers are revenue passing AED 3 million, a financing application or a first audit. The conversion involves:
- recording receivables (what customers owe) and payables (what is owed to suppliers) at the start date;
- accruals and prepayments for costs that span periods;
- capitalising fixed assets and depreciating them, rather than expensing equipment on purchase;
- valuing inventory at the year-end;
- a provision for staff end-of-service gratuity (see how to calculate and accrue gratuity).
A change of basis can also affect corporate tax in the year of the switch, so confirm the position with your tax adviser before moving.
We carried out this conversion for a Dubai restaurant group: from cash to accrual accounting under IFRS, with its assets capitalised, revenue split by channel (dine-in, delivery and catering) and cloud accounting connected to its point-of-sale (POS) system and bank feeds. The outcome was a 37% cost reduction between 2023 and 2024, as published in our case study.
How ebs can help
ebs Chartered Accountants prepares IFRS-based year-end accounts and the audit-ready file your auditor needs, and keeps the books on the right basis through the year with our bookkeeping service. Where an entity is moving from cash to accrual, we carry out the conversion with your finance team. The first consultation is free: contact us.
This article is general information as at 21 September 2026, not advice on your specific circumstances. Rules change; check the current position before acting.