Trust & Foundation in Dubai: Accounting, Compliance, Reporting, and Best Practices

Accounting for trusts and foundations in the UAE requires meticulous attention to detail, adherence to regulatory standards, and implementation of best practices to ensure transparency and compliance. At NH Management, we provide comprehensive guidance on managing trusts and foundations’ financial affairs. This blog will cover the accounting requirements, compliance, reporting, and best practices for trusts and foundations in the UAE.

Accounting Requirements for Trusts and Foundations

Regulatory Compliance

Trusts and foundations in the UAE must comply with specific regulatory requirements to maintain legal standing and ensure transparency. There are two regulatory bodies that regulate trusts and foundations in the UAE: the Dubai Financial Services Authority (DFSA), which regulates trusts and foundations in the Dubai International Financial Centre (DIFC) jurisdiction, and the Abu Dhabi Global Market (ADGM), which oversees trusts and foundations within the ADGM jurisdiction. Notably, trusts and foundations must adhere to international financial reporting standards (IFRS) to ensure consistency and transparency in financial reporting.

Compliance Requirements:

• Registration: Trusts and foundations must be registered with the relevant regulatory authority.
• Annual Audits: Conduct yearly audits by a certified public accountant to verify financial statements and ensure accuracy.
• Financial Records: Maintain comprehensive and accurate financial records, including all transactions, income, and expenses.

Key IFRS Standards:

• IFRS 9: Financial Instruments – Classification, measurement, and impairment.
• IFRS 13: Fair Value Measurement – Framework for measuring fair value and disclosures.
• IFRS 15: Revenue from Contracts with Customers – Principles for recognizing revenue.

Best Practices for Trust & Foundation Accounting

#1 Detailed Record-Keeping

Maintaining detailed records of all financial transactions is essential for accurate accounting and compliance.

• Transaction Logs: Keep detailed transaction logs, including dates, amounts, and descriptions.
• Income and Expense Records: Document all sources of income and expenses, ensuring they are categorized correctly.
• Asset Management: Record all assets the trust or foundation owns, including their valuation and any changes.

#2 Regular Reconciliation

Regular reconciliation of accounts ensures that financial records match bank statements and other financial documents, identifying discrepancies early.

Reconciliation Steps:

• Bank Reconciliation: Match financial records with bank statements to verify accuracy.
• Investment Reconciliation: Ensure investment records align with brokerage statements and valuation reports.

#3 Accurate Financial Reporting

Accurate and timely financial reporting is crucial for maintaining transparency and meeting regulatory requirements.

• Income Statement: Summarizes the reporting period’s revenues, expenses, and net income.
• Balance Sheet: A snapshot of the trust or foundation’s assets, liabilities, and equity.
• Cash Flow Statement: Details the cash inflows and outflows, highlighting liquidity status.

#4 Regulatory Filings

Trusts and foundations must comply with all regulatory filing requirements to maintain legal status and ensure transparency. Filing requirements 

• Annual Reports: Submit financial yearly reports to the relevant regulatory authority.
• Audit Reports: Provide audit reports conducted by a certified public accountant.
• Tax Filings: Ensure timely filing of applicable tax returns, although many trusts and foundations may be exempt from certain taxes.

#5 Transparency and Governance

Maintaining transparency and strong governance practices is essential for building stakeholder trust and ensuring long-term sustainability. Here are some of the good governance practices:

• Board Oversight: Ensure active oversight by the board of trustees or directors to monitor financial activities and compliance.
• Regular Meetings: Conduct meetings to review financial performance, address issues, and make strategic decisions.
• Stakeholder Communication: Maintain open communication with beneficiaries and stakeholders, providing regular updates on financial performance and activities.

Trust and Foundation Accounting Services in UAE with NH Management

Effective accounting for trusts and foundations in the UAE requires adherence to regulatory requirements, accurate financial reporting, and the implementation of best practices. Trusts and foundations can ensure transparency, compliance, and optimal financial management by maintaining detailed records, regularly reconciling accounts, and engaging professional services. At NH Management, we are committed to providing comprehensive support to help you navigate the complexities of trust and foundation accounting.

For more information on how NH Management can assist you with trust and foundation accounting in the UAE, contact us today. Our investments team would love to get in touch and talk about your trust and foundation’s accounting needs.