Cash VS. Accrual Accounting for Freelancers: An Analysis from the UAE Corporate Tax Perspective

Abstract

The introduction of corporate tax in the UAE marks a significant development in the nation's fiscal landscape, prompting freelancers to reassess their accounting practices.  This study explores the critical decision between cash basis and accrual accounting for freelancers operating under the UAE corporate tax regime.  By analysing the impact of different visa categories, including the Freelance Visa, Golden Visa, and Investor Visa, the study evaluates which accounting method aligns best with the financial structure, business goals, and compliance needs of freelancers. The findings suggest that freelancers with irregular cash flows and short-term visas benefit from the simplicity and liquidity management offered by cash basis accounting, which aligns taxable income with actual cash receipts.  Conversely, freelancers with long-term or investment-focused visas are better suited to accrual accounting, which provides a more accurate representation of earnings and expenses over time, crucial for business growth and financial planning. This study contributes to the ongoing discussion on tax compliance and accounting strategies in the UAE, providing valuable insights into how freelancers can optimise their tax obligations and enhance business performance.  The paper concludes by addressing the limitations of the research and recommending areas for further exploration, particularly in relation to quantitative analysis of tax impacts across different freelance industries.