Manufacturing
A manufacturer's result is decided on the factory floor long before it is reported — in what raw materials cost, what work-in-progress is worth, and how much of a machine belongs to this year. An inventory figure that cannot be explained is a Corporate Tax computation that cannot be relied on.
MHBC Finance coordinates the accounting, VAT and Corporate Tax work behind businesses that make, process and assemble goods in the UAE, so the inventory basis holds, the asset register carries through to the computation, and the audit file is ready before the auditor asks for it.
Corporate Tax applies at 0% on taxable income up to AED 375,000 and 9% above it, and VAT registration is mandatory once taxable supplies exceed AED 375,000, with the Corporate Tax return due within nine months of the end of the tax period.
Where this work lands
Free zone plant testing its qualifying income
Producer capitalising a new machinery line
The accounting and tax work behind the production line
The goal is simple: keep the cost of what was made, the VAT return and the Corporate Tax computation telling the same story about the same goods. For a manufacturer, that work concentrates in five areas.
Input and output VAT
MHBC prepares and files the VAT returns covering the 5% output VAT on sales and input VAT recovery on imported materials and machinery, including reverse-charge accounting on imports, so each return reconciles to the production records behind it.
Rather than paying VAT at the border in most cases, you declare the import VAT as output tax and recover it as input tax in the same return, provided the materials and machinery are for taxable business use. The customs declaration and the supplier invoice are what support both sides of that entry.
Inventory valuation and cost accounting
MHBC maintains inventory valuation on a consistent IAS 2 basis using FIFO or the weighted-average method, since LIFO is not permitted under IFRS, and reconciles raw materials, work-in-progress and finished goods to the general ledger.
Under IAS 2, inventory is measured at the lower of cost and net realisable value. The chosen method must then be applied consistently, as an unexplained change in your cost method is a common focus in a Corporate Tax review.
Fixed-asset register and depreciation
MHBC maintains the fixed-asset register, capitalises plant and machinery correctly and schedules depreciation so capital expenditure is reflected consistently across the financial statements and the Corporate Tax computation.
A machine is bought once and carried for years, so the decision taken when it is capitalised sets the reported result for every year that follows. Keeping the register alongside the ledger means the capital expenditure behind that result can be traced from the invoice to the financial statements and on into the Corporate Tax computation.
Corporate Tax computation and filing
MHBC calculates taxable income from the accounts, applies the 0% band up to AED 375,000 and 9% above it, assesses any Qualifying Free Zone Person position and files within nine months of the end of the tax period.
The computation runs off the financial statements, so the accounting decisions taken during the year — the inventory basis, what was capitalised, how production costs were tracked — are what determine the taxable income at the end of it. MHBC prepares both, which keeps the two consistent.
Free zone qualifying income and audit coordination
MHBC assesses the Qualifying Free Zone Person position and prepares the accounts, inventory counts and supporting records for the audited financial statements required where revenue exceeds AED 50 million in the tax period, for every Qualifying Free Zone Person regardless of revenue, and for mainland companies under the Commercial Companies Law, coordinating a Ministry of Economy-licensed auditor, who performs the audit.
Manufacturing and processing of goods is a Qualifying Activity, so a Qualifying Free Zone Person can apply the 0% rate to its qualifying income, with non-qualifying income taxed at 9%. That status depends on maintaining adequate substance in the UAE, meeting the de minimis requirement — non-qualifying revenue must not exceed the lower of 5% of total revenue or AED 5 million — and preparing audited financial statements.
Related service
Accounting & Bookkeeping
Every figure on this page is decided in the ledger first. MHBC keeps the inventory, cost and fixed-asset records that the VAT return, the Corporate Tax computation and the audit file are all drawn from — so a manufacturer is not rebuilding the same year three times.