IFRS for SMEs in the UAE: Practical Guide for Businesses

With UAE corporate tax now live, IFRS for SMEs has become more relevant for qualifying businesses preparing financial statements in the UAE.

In the UAE, corporate tax calculations are based on financial statements prepared under IFRS or IFRS for SMEs, subject to Federal Decree-Law No. 47 of 2022 and Ministerial Decision No. 114 of 2023.

Many Free Zones require audited financial statements for licence renewals and to support Qualifying Free Zone Person status, so correct application of the standard is important for both compliance and tax.

What IFRS for SMEs Covers

The standard is a simplified version of full IFRS with reduced disclosures and simpler measurement rules.

In the UAE, taxable persons deriving revenue up to AED 50 million may use IFRS for SMEs for corporate tax purposes, subject to Ministerial Decision No. 114 of 2023 and related Ministry of Finance guidance.

Who IFRS for SMEs applies to in the UAE

The standard applies to mainland and Free Zone entities that prepare financial statements for corporate tax, audit, banking, or investor reporting. That includes taxable persons under UAE corporate tax law and Qualifying Free Zone Persons, where IFRS-based reporting is often required for tax and regulatory purposes.

Typical mistakes seen in the UAE

• Assuming IFRS for SMEs is light-touch bookkeeping method rather than a full accounting standard that must be applied consistently.
• Using the standard when revenue exceeds the AED 50 million threshold set in Ministerial Decision No. 114 of 2023.
• Failing to plan for transition to full IFRS as the business grows, especially for bank covenants and investor expectations.

Key disclosures UAE companies must get right

• A complete set of financial statements including the statement of financial position, profit or loss and comprehensive income, changes in equity, cash flows, and notes.
• Clear accounting policies covering revenue, financial instruments, inventory, and property, plant and equipment.
• Information about related-party transactions, owner-manager remuneration, and key estimates that lenders and the Federal Tax Authority focus on for SMEs.

Practical next steps for UAE businesses

• Check your revenue level and eligibility to use the standard under Ministerial Decision No. 114 of 2023.
• Decide whether IFRS for SMEs or full IFRS better suits your growth plans, banking needs, and investor expectations.
• Update your chart of accounts, policies, and templates so bookkeepers, accountants, and external advisors all work from the same framework.

FAQs

Who can use IFRS for SMEs in the UAE?

A taxable person deriving revenue up to AED 50 million may use the standard for corporate tax purposes, subject to Ministerial Decision No. 114 of 2023 and related Ministry of Finance guidance.

Is IFRS for SMEs recognized by banks and investors?

Many UAE banks accept the standard financial statements for smaller borrowers, but high-growth or larger groups are often expected to move toward full IFRS.

Can we switch from another framework to IFRS for SMEs?

Yes, but you must follow the transition rules, restate comparatives where required, and communicate the change to lenders, investors, and the Federal Tax Authority.