Key takeaways
- A UAE Taxable Person can prepare its corporate tax financial statements on the cash basis if its Revenue does not exceed AED 3 million in the Tax Period (Ministerial Decision No. 114 of 2023, checked 1 November 2026).
- The AED 3 million cash basis limit is tested for each Tax Period, so a UAE business whose Revenue passes AED 3 million must move to accrual accounting unless the FTA approves an exceptional-circumstances application.
- A UAE business with Revenue at or below AED 3 million does not need to apply to the FTA to use the cash basis; an application is only needed for the exceptional-circumstances route above the limit.
- Cash basis accounting for corporate tax means income and expenditure count when cash is received or paid, with no balance sheet and no depreciation; a deduction for assets purchased takes depreciation's place.
- Every other UAE Taxable Person applies IFRS, or IFRS for SMEs if Revenue is AED 50 million or less (Ministerial Decision No. 114 of 2023).
- Audited financial statements are required above AED 50 million of Revenue and for Qualifying Free Zone Persons (Ministerial Decision No. 84 of 2025), and the FTA's guidance does not say how that fits with the cash basis.
Can a UAE company use cash basis accounting for corporate tax?
Yes, as long as its Revenue for the Tax Period is AED 3 million or less, or the FTA approves cash basis use in exceptional circumstances. The rule sits in Article 20(5) of Federal Decree-Law No. 47 of 2022 and Article 2 of Ministerial Decision No. 114 of 2023.
The FTA's accounting standards guide (CTGACS1, November 2023) confirms that no application is needed at or below the limit. It defines the cash basis as recognising income and expenditure when cash payments are received and paid.
The default is different. Everyone else must follow IFRS, and businesses with Revenue of AED 50 million or less may use IFRS for SMEs instead. So the cash basis is a narrow concession for the smallest businesses, not a general alternative to accrual accounting.
What is the AED 3 million revenue test and how is it measured?
The test compares your Revenue for one Tax Period against AED 3 million. The FTA's guides define Revenue as the gross amount of income derived during a Tax Period, and say it should be determined on the arm's length principle.
| Point | What the FTA guidance says | Source |
|---|---|---|
| Threshold | Revenue of AED 3 million or less in the Tax Period | Ministerial Decision No. 114 of 2023, Article 2(1) |
| Period | Tested per Tax Period; only certain once the period has ended | CTGACS1, section 4.2 |
| Scope for companies | Income from all Business Activities of the juridical person | CTGACS1, section 4.2 |
| Scope for natural persons | Only certain defined Business Activities count | CTGACS1, section 4.2 |
| Application to FTA | Not needed at or below AED 3 million | CTGACS1, section 4.2.1 |
| Exceptional circumstances | Application to the FTA, which may approve or refuse | Ministerial Decision No. 114 of 2023, Article 2(2) |
Say a SHAMS consulting company invoices AED 3.4 million in a year but collects only AED 2.9 million in cash by 31 December. The FTA's guide says the cash basis is used to test the threshold, so on that reading the company could still be under the limit; confirm the position with an adviser before relying on it, because the guide leaves the edge cases open.
If you expect to cross AED 3 million in only one Tax Period, the FTA's example of an exceptional circumstance is exactly that. Keep written evidence of why you expected the spike to be a one-off, because the FTA decides whether to let you stay on the cash basis.
How does cash basis accounting change your taxable income calculation?
Under the cash basis you start from an income and expenditure statement instead of a full set of financial statements, then apply the normal corporate tax adjustments. The FTA's Determination of Taxable Income guide (CTGDTI1, July 2024) describes this starting point in section 3.1.
| Item | Cash basis | Accrual basis |
|---|---|---|
| When income is recognised | When cash is received | When earned, whether or not paid |
| When expenses are recognised | When cash is paid | When incurred, whether or not paid |
| Balance sheet | None prepared | Required as part of the financial statements |
| Credit sales and purchases | Not recognised at invoice, delivery or service date | Recognised at that point |
| Asset purchases | Deduction for assets purchased | Depreciation over the useful life |
| Cheques | When cashed or cleared | At the transaction date |
| Credit card payments | Buyer: when the card bill is settled; seller: when the bank account is credited | At the transaction date |
Loan receipts and principal repayments are not revenue or expenditure under the cash basis. Interest is taxed or deducted under the normal rules. Exempt income, such as a dividend from a resident person, and restrictions such as the limit on entertainment expenditure still apply, which is why the FTA's Case Study 6 walks through both.
What happens if your revenue goes above AED 3 million?
You must prepare your financial statements on the accrual basis from that Tax Period, unless the FTA approves an exceptional-circumstances application. The FTA's guide says a business that exceeds the limit should switch because it no longer meets the Article 20(5) conditions.
Because the test is only certain after the Tax Period ends, the practical sequence is: track collections monthly, forecast the year's Revenue early, and decide before year-end whether you are heading for an exception. Moving to accrual means building the balance sheet that the cash basis never required: receivables, payables, fixed assets and any opening balances (this is our reasoning from how the two methods work, not a quoted FTA step).
How do you check whether the cash basis is open to you?
Work through the Tax Period's numbers in order; the whole check takes a few minutes if your bank records are tidy.
- Add up all cash received from every Business Activity of the company in the Tax Period, priced at arm's length.
- Compare the total with AED 3,000,000.
- If the total is at or below the limit, keep an income and expenditure statement; no application to the FTA is needed.
- If you expect the total to exceed the limit in only one Tax Period, gather written evidence and consider an exceptional-circumstances application to the FTA.
- If the total is above the limit and no approval is in place, prepare accrual basis financial statements under IFRS, or IFRS for SMEs if Revenue is AED 50 million or less.
If you'd rather not track these dates by hand, the free UAE compliance calendar lists your company's UAE tax and compliance deadlines, personalised from a few questions, as a PDF and calendar file.
AED 3 million: Revenue limit for a Tax Period at or below which a UAE Taxable Person may prepare corporate tax financial statements on the cash basis. Source: Ministerial Decision No. 114 of 2023, Article 2(1), and FTA Corporate Tax Guide CTGACS1, checked 1 November 2026.
What most guides don't tell you
The limit moves with your collections, not just your sales. A late customer payment can push cash into the next Tax Period and a large advance can pull it forward, so one unusual month can decide which method you must use. Watch receipts as closely as invoices.
The FTA guidance does not settle every overlap. CTGACS1 does not explain how the cash basis fits with the audited financial statement rule for Qualifying Free Zone Persons, and it does not describe an election procedure or deadline for adopting the cash basis. If you hold a free zone licence, get a written view before building your whole process around cash accounting.
Cash basis for corporate tax is a separate question from your other filings. Ministerial Decision No. 114 of 2023 applies for the purposes of Article 20(5) of the Corporate Tax Law only. VAT has its own timing rules, so a cash basis business can still owe VAT on invoices it has not been paid for; check the VAT rules, or ask a tax agent, before assuming one method covers both.
Outsiders may still want accrual numbers. A banker, investor or buyer reading a cash basis income and expenditure statement sees no balance sheet. If a raise, a loan or a sale is within two years, it can be cheaper to keep accrual books from the start than to rebuild them later.
Which deadlines apply to your company?
Cash basis or accrual, the corporate tax return and payment dates depend on your company's Tax Period and licence. The free UAE compliance calendar lists them for your company, personalised from a few questions, as a PDF and calendar file.
Frequently asked questions
Do I need audited financial statements for corporate tax?
Only if your Revenue exceeds AED 50 million in the Tax Period, or you are a Qualifying Free Zone Person, under Ministerial Decision No. 84 of 2025 for Tax Periods starting on or after 1 January 2025. A business using the cash basis has Revenue of AED 3 million or less, so the AED 50 million test does not apply to it, but free zone status can still trigger an audit.
Which companies need audited accounts for corporate tax purposes?
Taxable Persons with Revenue above AED 50 million in the Tax Period and Qualifying Free Zone Persons must prepare audited financial statements; Tax Groups prepare audited special purpose financial statements. The FTA's accounting standards guide does not say how this applies to a business on the cash basis, so ask the FTA or an adviser if you are a free zone company.
What accounting standard do I need to use for corporate tax?
A Taxable Person must apply IFRS, and a Taxable Person with Revenue of AED 50 million or less may apply IFRS for SMEs (Ministerial Decision No. 114 of 2023). The cash basis is a separate permitted method for Revenue up to AED 3 million.
What records do I need to keep for corporate tax and for how long?
On the cash basis, keep the income and expenditure statement plus the bank, cash and payment records behind every entry. The retention period comes from the Corporate Tax Law and FTA guidance, so confirm it on tax.gov.ae before you dispose of anything.
How is taxable income calculated from accounting profit?
Taxable income starts from the financial statements, or from the income and expenditure statement if you use the cash basis, and is then adjusted for items such as exempt income, non-deductible expenses and related-party transactions. The FTA's Determination of Taxable Income guide (CTGDTI1) includes a worked case study for a cash-basis business.
About Qawi · Qawi is a corporate services firm licensed in the Sharjah Media City (SHAMS) free zone, handling company formation, visas and PRO, bookkeeping, VAT and corporate tax for UAE businesses. Guides are researched from FTA, Ministry of Finance and free zone sources. Qawi on LinkedIn
Sources
- FTA Corporate Tax Guide: Accounting Standards and Interaction with Corporate Tax (CTGACS1, November 2023)
- FTA Corporate Tax Guide: Determination of Taxable Income (CTGDTI1, July 2024)
- Ministry of Finance: Ministerial Decision No. 84 of 2025 on Audited Financial Statements
- Ministerial Decision No. 114 of 2023 on the Accounting Standards and Methods for Corporate Tax Purposes (text as reproduced by taxo.online and cross-checked against the FTA guide)
- Ministry of Finance: UAE tax legislation, including Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses
Last checked: 1 November 2026
This is general information, not tax or legal advice for your specific situation.