Introduction
The UAE Corporate Tax regime is moving into a new phase. For many businesses, the initial focus was understandably on registration, understanding the new legislation and filing the first Corporate Tax Returns. As the regime matures, attention is increasingly turning to the records and evidence required to support the positions reported to the Federal Tax Authority (“FTA“).
This makes Federal Tax Authority Decision No. 4 of 2026 on the Rules and Requirements for Maintaining the Information Contained in Accounting Records and Commercial Books (“FTA Decision No. 4 of 2026“) particularly important. The Decision was issued on 2 June 2026 and took effect on 30 July 2026.
The Decision does not create the obligation to maintain tax records. Businesses were already subject to record keeping requirements under Federal Decree Law No. 28 of 2022 on Tax Procedures, as amended (the “Tax Procedures Law“), Cabinet Decision No. 74 of 2023 on the Executive Regulation of Federal Decree Law No. 28 of 2022 on Tax Procedures, as amended (the “Executive Regulation“), and, for Corporate Tax purposes, Federal Decree Law No. 47 of 2022 on the Taxation of Corporations and Businesses, as amended (the “Corporate Tax Law“).
Importantly, FTA Decision No. 4 of 2026 also does not change the existing periods for which records must be retained.
What it does is provide greater clarity on how accounting records and commercial books must be maintained. The Decision focuses on three fundamental requirements: records must be complete, legible and accessible.
For businesses preparing for the possibility of a future Corporate Tax audit, those requirements have important practical consequences.
The Existing Corporate Tax Record Keeping Framework
Article 56 of the Corporate Tax Law already requires a Taxable Person to maintain records and documents that support the information provided in a Tax Return or any other document filed with the FTA and enable the Taxable Person’s Taxable Income to be readily ascertained by the FTA.
An Exempt Person must similarly maintain records that enable its exempt status to be readily ascertained. The Executive Regulation supplements these requirements and identifies a broad range of accounting records and commercial books that must be maintained. These include balance sheets, profit and loss accounts, payroll records, fixed asset records and inventory records.
However, the requirements extend considerably further than accounting ledgers. Relevant records can also include business correspondence, invoices, licences, contracts and documents explaining choices, assessments, determinations and calculations made in relation to a Person’s tax affairs, together with the basis or methodology underlying them.
This distinction is important for Corporate Tax. An accounting record may establish that a transaction occurred. It may not establish why a particular Corporate Tax treatment was adopted.
For example, financial statements may demonstrate that a dividend was received, but they will not necessarily demonstrate that the conditions for the Participation Exemption were satisfied. Similarly, an accounting entry may record a payment to a Related Party without establishing that the transaction complied with the arm’s length standard. Corporate Tax record keeping should therefore be approached as an evidential exercise, rather than simply a document storage exercise.
What FTA Decision No. 4 of 2026 Adds
FTA Decision No. 4 of 2026 provides more detailed requirements governing the manner in which information contained in accounting records and commercial books is maintained. The Decision requires records to be complete and identical to the original documents, clear and easily legible, and accessible to the FTA upon request.
Where information is maintained as an Electronic Copy or Photocopy, the copy must contain all data and details appearing in the original document. All pages must be retained in the same order. Significantly, partial scanning of a document is expressly not accepted. This may have practical implications for businesses using automated accounting systems, document management platforms or technologies that extract selected data from underlying documents.
Capturing the relevant amount, date, supplier and other accounting information from an invoice does not necessarily mean that the underlying record itself has been retained in the manner required by the Decision. Businesses should therefore distinguish between extracting information for accounting purposes and retaining the complete underlying document for tax purposes.
Electronic Records Must Remain Readable
The Decision also addresses the quality of retained records. Electronic Copies and Photocopies must be of sufficient quality and resolution to ensure that the information contained in the original document remains clear and easily legible. For Electronic Copies, the information must remain readable when displayed on a computer screen. For physical Photocopies, the paper and ink must be of sufficient quality to prevent the copy from fading during the applicable record keeping period.
A non-coloured copy of a coloured document is permitted, provided that the information remains clearly legible. The requirement is therefore not satisfied merely because a file continues to exist. The information must remain usable.
This should be considered where businesses migrate between accounting systems, replace document management platforms or maintain records in file formats that may become difficult to access over time.
FTA Access to Electronic Systems
One of the more significant features of FTA Decision No. 4 of 2026 concerns access. The Decision requires access to accounting records and commercial books to be provided to the FTA upon request. This expressly includes access to the system in which the relevant records are stored.
Where Electronic Copies or the systems in which they are maintained are protected by encryption or passwords, the Person must provide the encryption keys or passwords necessary to enable access by the FTA. This is particularly relevant for businesses using cloud-based accounting platforms, enterprise resource planning systems and electronic document management systems.
Businesses should therefore understand where their Corporate Tax records are stored, how historic information can be retrieved and who within the organisation has the necessary authority and technical capability to provide access when required.
The same consideration applies when accounting systems are replaced. Businesses should ensure that historic data remains available following a system migration and that the information can still be retrieved in a complete and readable form. These issues can become particularly important during a Tax Audit, when information relating to a Tax Period several years earlier may need to be produced.
Outsourcing Does Not Outsource Responsibility
Many UAE businesses use external accountants, payroll providers, cloud service providers and other third parties to maintain financial records. FTA Decision No. 4 of 2026 expressly permits this. However, the Person remains legally responsible for maintaining the records and commercial books and ensuring their safety.
The practical consequence is important. A business cannot necessarily rely on the fact that its records were maintained by an external service provider if those records cannot subsequently be produced to the FTA.
Businesses should therefore consider whether their arrangements with third party providers ensure continued access to relevant information throughout the applicable retention period, including after the commercial relationship has ended.
Changes in accountants, expired software subscriptions and migrations between service providers should not result in historic tax records becoming inaccessible.
The Retention Period Has Not Changed
It is important to distinguish between how records must be maintained and how long they must be retained. FTA Decision No. 4 of 2026 addresses the former. It does not introduce a new retention period or alter the existing periods prescribed under UAE tax legislation.
For Corporate Tax purposes, Article 56 of the Corporate Tax Law generally requires the relevant records and documents to be maintained for seven years following the end of the Tax Period to which they relate. The Tax Procedures Law and Executive Regulation also contain record retention provisions, including circumstances in which records may need to be retained for longer.
Businesses should therefore continue to determine the applicable retention period under the existing legislation, including whether any Tax Audit, tax dispute, refund application or other relevant circumstance requires records to be maintained beyond the ordinary period.
The significance of FTA Decision No. 4 of 2026 is different. It specifies the standard that the records must continue to satisfy throughout the applicable retention period.
Tax Groups Require Additional Records
Businesses operating through a Corporate Tax Group should also consider the additional record keeping requirements applicable to them. Although a Tax Group is treated as a single Taxable Person for Corporate Tax purposes, the underlying entities do not cease to be relevant.
Records may need to establish the position of individual Tax Group members, including in relation to pre-grouping Tax Losses, transactions between members, assets and liabilities transferred within the Tax Group, and the consequences of a member joining or leaving the Tax Group. The existence of a single Corporate Tax Return should therefore not be understood as meaning that only consolidated records need to be retained.
Tax Groups should ensure that sufficient entity level information is preserved to substantiate both the consolidated Corporate Tax position and the treatment of individual members where relevant.
Additional Considerations for Qualifying Free Zone Persons
Record keeping is also particularly important for a Qualifying Free Zone Person (“QFZP“). A QFZP may benefit from a 0% Corporate Tax rate on Qualifying Income, but that treatment depends upon continued satisfaction of the statutory conditions. The evidential requirements can therefore extend beyond establishing the amount of income earned.
A QFZP should be able to substantiate why particular income constitutes Qualifying Income, the nature of its activities and transactions, the relevant counterparties, compliance with the de minimis requirement and the other conditions necessary to maintain QFZP status. Where Transfer Pricing requirements apply, the relevant documentation must also be maintained.
This means that the records of a QFZP perform two related functions: establishing the calculation of its Taxable Income and demonstrating why the entity and relevant income are entitled to the Corporate Tax treatment claimed.
Why This Matters for Corporate Tax Audits
The practical significance of FTA Decision No. 4 of 2026 becomes particularly clear when viewed through the lens of a future Corporate Tax audit. A Tax Audit may take place years after the relevant Corporate Tax Return was filed. By that stage, employees may have left the business, advisers may have changed, accounting systems may have been replaced and the individuals responsible for a particular tax position may no longer remember why it was adopted.
A business that has retained only the underlying accounting entries may therefore be able to demonstrate what happened without being able to demonstrate why the Corporate Tax treatment was correct.
For material Corporate Tax positions, businesses should consider maintaining a clear audit trail connecting:
- the underlying transaction and supporting documentation;
- its accounting treatment;
- any adjustment made for Corporate Tax purposes;
- the legislative basis for any material exemption, relief or election; and
- the amount ultimately reported in the Corporate Tax Return.
This is particularly relevant for areas such as Transfer Pricing, the Participation Exemption, Tax Losses, Business Restructuring Relief, Qualifying Group Relief, interest deductions and Free Zone treatment, where the tax result may depend upon conditions that are not evident from the accounting entry itself.
Practical Considerations for Businesses
FTA Decision No. 4 of 2026 provides an appropriate opportunity for businesses to review whether their existing record keeping arrangements are sufficiently robust for Corporate Tax purposes.
Businesses should consider whether complete documents are being retained rather than partial scans or extracted data, whether historic electronic records remain readable and accessible, and whether records can still be retrieved following changes to accounting or document management systems.
Where records are maintained by third parties, businesses should also consider whether contractual arrangements preserve access throughout the applicable statutory period. More fundamentally, businesses should consider whether they are preserving the evidence necessary to substantiate their Corporate Tax positions rather than merely the accounting records underlying those positions. Tax Groups and QFZPs should undertake this exercise with particular care given the additional information that may be required to establish their respective Corporate Tax treatments.
For larger businesses, effective Corporate Tax record keeping may therefore require coordination between tax, finance, legal, information technology and records management teams.
Conclusion
FTA Decision No. 4 of 2026 does not change how long Corporate Tax records must be retained. It changes the level of specificity surrounding how those records must be maintained and made available.
The requirements are clear: records must be complete, legible and accessible. Partial scans are not accepted. Electronic records must remain readable. The FTA must be able to access the relevant records and systems when required. Outsourcing the maintenance of records does not transfer the legal responsibility away from the taxpayer.
For UAE businesses, the Decision should therefore be considered as part of wider Corporate Tax audit readiness. As the UAE Corporate Tax regime matures, the ability to substantiate a tax position may become as important as determining that position correctly in the first place. Businesses should ensure that their records provide a complete evidential trail from the underlying transaction through to the position reported in the Corporate Tax Return.
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Disclaimer
The content provided in this article is intended for informational purposes only and does not constitute legal advice. While every effort has been made to ensure the accuracy and completeness of this information, the article does not offer a guarantee or warranty regarding its content. The matters discussed in this article are subject to interpretation, and legal outcomes may vary based on specific facts and circumstances. We recommend that readers seek individual legal counsel before making any decisions based on the information provided. If you require specific legal advice, please contact us directly.