This week our team in Dubai met with a UAE holding company that wants to move its accounting and tax to InBusiness. Before choosing a firm, they asked if we had worked with holding companies before, and how we handle their loans, investments and group reporting.
Below are the points they raised, and how we handle each one for our holding company clients.
Why does a UAE holding company need an accounting firm with holding company experience?
A holding company has no daily sales, suppliers or payroll. Some of our holding company clients have only 5 or 10 transactions a month. So the work is less about bookkeeping and more about understanding the contracts behind those transactions.
One transaction can be a loan to a subsidiary, interest charged to the parent company, a dividend from the portfolio, or a bond that changed in value. If the accountant does not understand the contract behind it, the Corporate Tax return can be wrong, even with very few entries in the books.
That is why the client asked about our experience with similar companies first.
How do related party loans affect a holding company's UAE Corporate Tax?
Holding companies often have loan agreements with related parties, such as the parent company, a subsidiary or the shareholder. Under UAE Corporate Tax, these loans need to be on market terms, also called arm's length terms. This means the interest rate and repayment terms should be close to what two unrelated companies would agree. The company also needs to keep documents to show this.
If the related party is in another country, the double tax treaty between the UAE and that country also matters. It can change how the interest is taxed in that country and what documents are needed, for example a UAE Tax Residency Certificate.
So it is important that a professional accountant reviews the loan agreements. This was one of the first topics the client raised in the meeting.
How is a holding company's investment portfolio accounted for?
Many holding companies hold stocks, bonds and ETFs. Some also hold regulated crypto. Each type is recorded under IFRS, and there are several things to track: changes in market value, bond interest, dividends, gains when something is sold, and currency differences.
These numbers go into the Corporate Tax return. Dividends and gains from qualifying shareholdings can be exempt under the participation exemption, but only if the conditions are met and the records support it.
We work from the broker or custodian statements and reconcile them with the books.
Does a holding company need monthly or quarterly reports?
Most of our holding company clients ask for quarterly reports, not monthly. There is not enough activity in a holding company to need a report every month, and quarterly reporting keeps the retainer fee lower for the client.
Each quarterly report still includes bank and broker reconciliations, interest on loans, portfolio values and anything that affects Corporate Tax.
Can the reports follow the group's own template?
Most holding companies in the UAE are part of a group, and the group does its own reconciliation across all its companies. Every group has its own report template.
So at onboarding we always discuss the report format with the client. We can prepare the reports in the group's template, as long as they follow IFRS and UAE Corporate Tax rules.
If your holding company is looking for a new accounting firm, you can book a 30 minute call with our tax team.
FAQ
Why should a UAE holding company hire an accounting firm with holding company experience?
A holding company has few transactions, but each one can affect tax: loans with related parties, dividends and portfolio gains. A firm that already works with holding companies knows how to read the loan agreements, check the arm's length terms and record the investments under IFRS.
How are related party loans treated under UAE Corporate Tax?
They need to be on arm's length terms, meaning close to what two unrelated companies would agree, with documents to support this (transfer pricing). If the related party is abroad, the double tax treaty between the UAE and that country can change how the interest is taxed there.
What documents does a Dubai holding company need for a loan to a related party abroad?
It should keep the loan agreement and documents that show the interest rate and repayment terms are at arm's length. Depending on the double tax treaty with the other country, a UAE Tax Residency Certificate may also be needed.
How are stocks, bonds, ETFs and crypto recorded in a UAE holding company?
They are recorded under IFRS, including changes in market value, bond interest, dividends, gains on sale and currency differences. These numbers go into the Corporate Tax return, for example to check if dividends or gains qualify for the participation exemption.
Can a Dubai holding company use the participation exemption for dividends and gains?
Yes, if the conditions are met. Dividends and gains from qualifying shareholdings can be exempt from UAE Corporate Tax under the participation exemption, but the records need to support it. This is why the portfolio has to be recorded correctly under IFRS.
Does a UAE holding company need monthly accounting reports?
Usually not. Many holding companies have only 5 to 10 transactions a month, so quarterly reports are enough and keep the retainer fee lower. Each quarter should still include bank and broker reconciliations, loan interest and portfolio values.
Can a holding company's reports follow the group's own template?
Yes. The report format is agreed at onboarding and can follow the group's template, as long as it is compliant with IFRS.
About InBusiness
InBusiness is a Dubai-based accounting, tax, and corporate services firm, founded in 2021, that acts as the UAE finance and compliance arm for international businesses. The team provides outsourced accounting, tax advisory, company formation, admin services, and immigration across all Free Zones and Mainland. The team speaks English and Russian.
