With the introduction of Corporate Tax in the United Arab Emirates (UAE) effective from June 1, 2023, businesses are now required to adopt a more rigorous approach to internal controls and documentation. This transformation demands that UAE entities establish robust financial systems and maintain comprehensive records to ensure compliance, minimize tax risk, and prepare for potential audits by the Federal Tax Authority (FTA). In this detailed blog, we will explore the essential internal controls and documentation businesses need to implement to be fully Corporate Tax-ready.
1. Understanding the Need for Internal Controls
Internal controls refer to processes, policies, and procedures that organizations put in place to ensure the accuracy and integrity of financial reporting, compliance with applicable laws, and efficient operations. In the context of Corporate Tax, internal controls play a vital role in ensuring that all taxable income is accurately reported and that eligible deductions and exemptions are claimed appropriately.
Inadequate controls can result in inaccurate tax filings, missed deadlines, penalties, and reputational damage. As the UAE transitions into a more regulated tax environment, businesses must elevate their internal control systems to meet global compliance expectations.
2. Core Areas of Internal Control for Corporate Tax Compliance
There are several key internal control areas that every UAE business must focus on:
- Financial Reporting Controls: Ensuring the accuracy and completeness of financial statements prepared in accordance with International Financial Reporting Standards (IFRS).
- Transaction Controls: Documenting and reviewing revenue, expense, and intercompany transactions.
- Tax Calculation Controls: Establishing frameworks to calculate taxable income and deferred tax accurately.
- Approval Hierarchies: Implementing clear authorization levels for key financial decisions.
- Audit Trail and Recordkeeping: Maintaining complete audit trails for all tax-relevant activities.
3. Documentation Requirements under UAE Corporate Tax
Under the UAE Corporate Tax regime, businesses must maintain and retain a variety of documents to support their tax filings and financial statements. Key documentation includes:
- General ledger and trial balance reports
- Sales and purchase invoices
- Bank statements and payment records
- Contracts and agreements with customers, suppliers, and related parties
- Asset registers and depreciation schedules
- Transfer pricing documentation (Master File and Local File, where applicable)
- Tax return copies and supporting working papers
- Audit reports and management letters
These records must be retained for a minimum period of seven years and be readily available for review during an FTA audit or inspection.
4. Importance of Transfer Pricing Documentation
Businesses engaged in related-party transactions must comply with OECD-aligned Transfer Pricing (TP) rules. This means preparing detailed documentation justifying the pricing of transactions between group entities. Required documents include:
- Master File outlining the global structure and operations
- Local File containing detailed analysis of UAE-specific related-party transactions
- Economic analysis and benchmarking reports
Failure to maintain adequate TP documentation can result in tax adjustments, penalties, and increased scrutiny from the FTA.
5. Role of PEAK Business Consultancy Services
Ensuring tax readiness involves more than just submitting returns—it requires strategic planning, continuous monitoring, and expert advice. PEAK Business Consultancy Services, a premier VAT and Corporate Tax consultancy firm in the UAE, supports businesses in designing effective internal controls and preparing the right documentation to stay compliant.
From initial readiness assessments to designing compliant control frameworks and providing ongoing audit support, PEAK BCS offers end-to-end services tailored to the UAE tax environment.
To learn more or book a consultation, visit https://www.peakbcs.com/.
6. Leveraging Technology for Compliance
Modern tax compliance is data-driven. Businesses must leverage accounting software and ERP systems to automate data capture, ensure consistency, and generate reports with ease. Technology helps in:
- Maintaining real-time financial data
- Generating audit-ready reports and reconciliations
- Tracking intercompany transactions for TP reporting
- Setting alerts for key tax deadlines
Businesses should assess whether their current software platforms are equipped to handle the complexities of Corporate Tax compliance and consider upgrading or integrating with compliant solutions.
7. Internal Audit and Control Testing
Regular internal audits are essential to ensure the internal controls are operating effectively. Businesses should periodically test:
- Accuracy of financial records
- Proper implementation of tax calculations
- Effectiveness of approval workflows
- Compliance with documentation retention policies
These reviews not only prepare companies for external audits but also help in identifying process gaps before they escalate into major compliance issues.
8. Staff Training and Tax Governance
Internal controls are only as strong as the people who implement them. Businesses must invest in training their finance and tax teams on:
- Corporate Tax laws and recent updates
- Filing processes and reporting standards
- Transfer Pricing documentation and audit handling
- Role-specific responsibilities in tax compliance
Building a culture of tax awareness at all levels of the organization ensures long-term readiness and reduces the risk of non-compliance.
9. How PEAK BCS Supports Ongoing Compliance
PEAK Business Consultancy Services provides more than just one-time support. Their tax experts offer ongoing compliance services including:
- Periodic internal control evaluations
- Documentation audits and archiving strategy
- Preparation of audit defense files
- On-demand advisory on complex transactions
They ensure businesses stay ahead of changing tax regulations and maintain a strong compliance posture. Partner with PEAK BCS to build and maintain a resilient corporate tax framework.
Visit https://www.peakbcs.com/ for expert assistance today.
10. Preparing for FTA Audits
Being audit-ready is a key element of tax compliance. The FTA has the authority to conduct audits to verify the accuracy of corporate tax returns and the underlying records. Businesses must be prepared to present:
- All supporting documentation for revenues and expenses
- Contracts and agreements
- Board meeting minutes and tax strategy documents
- Correspondence with tax advisors
- Evidence of tax computations and filing acknowledgments
Having these records properly archived and accessible can significantly reduce audit disruptions and ensure smoother interactions with tax authorities.
11. Conclusion
With the implementation of Corporate Tax in the UAE, having robust internal controls and comprehensive documentation is not a luxury—it is a necessity. From accurate financial reporting and compliance workflows to Transfer Pricing documentation and audit preparedness, businesses must take a structured approach to tax readiness.
Partnering with a trusted advisor like PEAK Business Consultancy Services enables companies to implement best-in-class compliance systems and avoid costly penalties and legal exposure. Whether you’re a small business or a multinational group, PEAK BCS is equipped to help you achieve full Corporate Tax readiness.
Take control of your tax future with expert support from https://www.peakbcs.com/.
