Accounting for Trading Companies in UAE: Inventory, Landed Cost, FX and Audit-Ready Books

What accounting rules apply to UAE trading companies?

Every trading company registers for Corporate Tax and files a return each year, registers for VAT once taxable supplies plus imports pass AED 375,000, and needs audited statements if it claims free zone 0% or exceeds AED 50M revenue. Imports count towards the VAT threshold from the very first container.

A free zone company that fails any Qualifying Free Zone Person condition pays 9% for that period and the next 4, so the revenue split is not optional bookkeeping. Free zone authorities also set their own audit rules, which should be confirmed with yours.

How do you calculate landed cost per shipment?

Landed cost is the supplier price converted to AED plus the costs of bringing the goods to your warehouse: freight, insurance, customs duty you cannot recover and clearing charges, spread across the units received. Accounting standards for inventory include these in stock value; recoverable import VAT stays out of it.

Freight and duty invoices often arrive weeks after the goods, so open a shipment file per container, accrue expected costs on arrival and true them up when the bills land. Import VAT and the reverse charge are explained in UAE VAT on imports.

Which inventory method and count routine should a trader use, and how is FX revalued?

Choose FIFO or weighted average cost, apply it to every product and location, count stock at least quarterly with a full count at year end, and revalue foreign currency receivables, payables and bank balances at the month-end rate. Together these decide gross margin and the profit your Corporate Tax return starts from.

Stock counts that stand up to an auditor

Cycle-count fast movers monthly, freeze movements during the year-end count, and investigate differences before adjusting. Slow-moving and damaged items are written down to what they can realistically be sold for. Valuation rules are covered in UAE inventory accounting.

FX revaluation at month end

When the customer pays, the difference between the booked and received amount is a realised gain or loss. Both flow into accounting profit, the starting point for taxable income, so skipping revaluation misstates the CT figure.

How should letters of credit, trade finance and customer credit be recorded?

Record LC margin deposits as restricted cash, bank charges as finance costs, and trust receipt or import loans as liabilities with their own interest, then control customer credit with limits, ageing and documented follow-up. Traders with thin margins lose more to unmanaged credit and finance costs than to tax.

Letters of credit and trade finance

Goods under an LC may be in transit at month end, so decide ownership by the agreed Incoterms and record stock in transit where title has passed. Reconcile each trade finance facility to the bank statement monthly. Financing options are outlined in the UAE business loan guide.

Customer credit control

Set a credit limit per customer, age receivables every month, stop supply above the limit and provide for doubtful debts on evidence. Issue tax invoices within 14 days of each supply even when payment is on 90-day terms. Routines are in managing payables and receivables.

What does a trading company's monthly close look like?

A trading close finalises shipment costs, reconciles stock and FX, reviews credit and locks the month within 10 working days. The quarterly VAT 201 and yearly Corporate Tax return are prepared from those locked figures.

Books in order but the return not started yet? File your Corporate Tax return on time with a fixed quote in 24 hours.

Which records must a trading company keep?

Keep trade and tax documents for 7 years; customs and shipping papers are what prove both stock cost and VAT treatment.

• Supplier invoices, purchase orders and proforma invoices
• Bills of lading, airway bills and customs declarations
• Freight, insurance and clearing agent invoices per shipment
• Stock ledgers, count sheets and write-down approvals
• Export evidence for zero-rated sales
• LC documents, trade finance statements and bank charges
• Customer credit applications, statements and ageing reports

Which deadlines matter most for trading companies?

Traders with a 31 December 2025 year end must file and pay Corporate Tax by 30 September 2026.

What penalties can a trading company incur in 2026?

Records failures cost AED 10,000 for a first violation, and each tax invoice not issued costs AED 2,500, which adds up fast for a trader with many B2B dispatches.

How a trader’s penalties pile up: a new company counts only sales towards the VAT threshold, crosses it through imports and registers late (AED 10,000 plus backdated VAT), then the first return misses reverse-charge sales (AED 500) and 15 dispatches have no tax invoice (15 x AED 2,500 = AED 37,500). That is AED 48,000 before the tax itself.

6 accounting mistakes trading company owners make

• Duty and freight expensed instead of added to stock. Closing stock is undervalued, profit is understated and the CT return is built on the wrong figure.
• Stock counted once a year, if at all. Losses and obsolete items stay hidden until an auditor or buyer finds them.
• No FX revaluation. Foreign balances sit at old rates and gains or losses land in the wrong year.
• Imports ignored in the VAT threshold. Late registration costs AED 10,000 plus backdated VAT.
• Reverse-charge electronics sales coded as standard-rated. The VAT return is incorrect and customers are invoiced wrongly.
• Free zone 0% assumed without the conditions. Failing one means 9% for that period and the next 4.

More general errors are listed in UAE bookkeeping errors and fixes.

How can a trading company avoid FTA penalties?

• Per shipment: landed cost file closed with freight, duty and clearing invoices
• Monthly: separate business bank and trade finance accounts reconciled
• Monthly: stock ledger matched to warehouse reports and FX revalued
• Monthly: tax invoices confirmed for every dispatch and month locked within 10 working days
• Quarterly: accountant review of VAT codes, imports and exports before the 28th
• Annually: full stock count, write-down review and audit pack prepared
• Always: records kept 7 years and translatable into Arabic on request

Books behind or holding an FTA notice?

For a trader, catch-up starts with customs declarations, supplier invoices and bank statements, which let you rebuild stock movements and landed cost before correcting any return.

1. Rebuild shipments, stock and receivables following our catch-up bookkeeping guide, and agree opening stock, FX and VAT balances.
2. File overdue returns promptly; missed the Corporate Tax deadline? explains the next steps.
3. Correct miscoded VAT through a voluntary disclosure, charged at 1% a month on the difference before an audit notice and 15% plus 1% a month after one.
4. Challenge a penalty through reconsideration within 40 business days, then the Tax Disputes Resolution Committee, as set out in our FTA reconsideration guide.

Worked example: a trader that expensed its import costs

An illustrative Dubai mainland general trading company had AED 9.5M revenue in 2025 and expensed every freight, duty and clearing bill as it arrived. Adding AED 140,000 of those costs back into closing stock, plus FX revaluation, gives taxable income of AED 1,040,000.

Without the stock adjustment, the company would have filed on profit understated by AED 140,000 and carried that error into the next year’s opening stock.

Bookkeeper, freelancer or accounting firm for a trading company?

A trader with a few local suppliers can manage with an in-house bookkeeper; importers dealing in several currencies, trade finance and audits usually need an accountant overseeing the close.

Read what to check before outsourcing, then see how our accounting and bookkeeping service handles landed cost, stock and FX.

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