Ramadan is a month of reflection and peace. However, religious or cultural obligations must not hinder or compromise professional responsibilities. In the UAE, during the month of Ramadan, working hours are reduced, and hence, every business must follow the specified timings. Therefore, business functions, specifically the accounting and tax departments, usually face pressure due to a shortage of working hours. This is because there is no change in statutory deadlines in the UAE. In this blog, we discuss the Ramadan business operations in the UAE and how entities must plan and strategize for this month.
What Operational Changes Typically Affect Finance Teams During Ramadan?
Finance teams of the private sector in the UAE usually have a lower number of working hours during Ramadan. Generally, there is a reduction of 2 working hours per day; however, the actual reduction is confirmed upon moon sighting. The lesser work time will directly impact tax and accounting departments, and as a result, they might face pressure if there is any approaching deadline. A business typically faces the following changes in operations during the Ramadan period.
- Fewer working hours in a workday
- Higher pressure, especially if there is any impending deadline.
- Busy daily schedules to cover up things before the end of the day.
- Slower approval from higher management, as they also face a shortage of time.
- Similarly, slower responses from other stakeholders, such as banks, may halt the accounting and finance function.
These changes will generally impact the overall business management, including bookkeeping, tax filing, etc. However, proper planning can streamline every business process. Check out the UAE’s official Ramadan Portal for further information.
Which Accounting and Compliance Tasks are Most Vulnerable to Delay?
As we know, Ramadan is a religious obligation and it does impact statutory responsibilities; therefore, there is no space for delay in professional responsibilities. In the UAE, there are strict compliance responsibilities concerning taxes and accounting. Noncompliance will result in hefty penalties, and an entity may also face business risk. Entities must be aware of the Ramadan compliance risks.
Tasks that are time-bound are most vulnerable to delay. For instance, tax filing (VAT & corporate tax) has fixed deadlines; therefore, any delay in such responsibilities is not acceptable. Furthermore, if a business has an approaching corporate tax registration deadline, there is no excuse for Ramadan. Delay in corporate tax registration results in a hefty penalty of AED 10,000. Many accounting tasks are vulnerable to delay, including:
- Tasks dependent on external confirmations, such as bank statements for bank reconciliations, accounts receivable and accounts payable follow-up, etc.
- Tasks that need urgent completion for management decision-making, for instance purchase of equipment.
- Tasks that need expert guidance or peer review.
Tasks may vary with the nature of business and other circumstances; however, the business must be proactive to deal with them.
How can Documentation and Approvals Stay on Track with Reduced Hours?
In Ramadan, keeping operations, such as documentation and approvals, on track with the reduced hours is critical for every business. However, this is achievable with proper planning and a proactive approach. Entities must not wait until the start of Ramadan; they must plan well in advance and start working accordingly, even before the start of the month. For instance, if there is any key deadline coming in Ramadan, it is ideal to finish longer tasks and get the key approvals in the preceding month to avoid last-minute panic. A company can follow the checklist for better planning during reduced working hours.
- External documentation might cause a delay compared to internal documentation. Therefore, entities must plan beforehand to seek documents from third parties that are critical during the month of Ramadan.
- For approvals from higher management, it is better to get collective approvals rather than one by one, smaller particulars.
- Management can also encourage digital approvals, especially for tasks or transactions of smaller amounts or repetitive in nature, during this month.
- Enhancing communication between teams to streamline operations also results in time savings and effectiveness. For instance, promoting digital communication if there is no need for personal interaction.
- Firms must prioritize tasks based on urgency and importance.
The key here is that entities must follow proactive practices and plan. Any key tasks should be marked, and relevant teams must start working on them as soon as possible to minimize Ramadan accounting challenges.
What Warning Signs Indicate Compliance Slippage during Ramadan?
Entities must adhere to practices that prevent compliance slippage, especially during Ramadan. However, this might need more smart work rather than hard work. Businesses must be professionally skeptical and alert to any issues that might result in non-compliance. For instance, if there are consistent delays in tasks, this might be an early indicator of compliance slippage. Entities must be attentive and aware of the following occurrences:
- Consistent delays in accounting tasks
- Lack of documentation; promise of documents at a future date might indicate compliance slippage. It is ideal to demand documents at the time of posting transactions.
- Performing tax responsibilities at the eleventh hour. The last-minute panic results in errors and omissions; therefore, slippage is possible.
- Deferring tasks to next month, especially the key tasks.
- Any other delays, such as approvals from higher management.
Summary
During Ramadan, there is a reduction in the number of working hours for most companies in the UAE. The aim is to provide relief to the employees. However, the relaxation may pose compliance risks and accounting challenges. However, with proper planning and a proactive approach, a business can avoid any compliance slippage. Entities must strive to streamline Ramadan business operations and remain alert to any red flags that indicate potential compliance slippage risks. Furthermore, firms in the UAE must ensure the timely execution of key tasks well before time to ensure continuity and compliance. As responsible businesses, every entity must respect the holy month of Ramadan and adhere to the relevant guidelines by the UAE government.
Creative Zone Tax & Accounting (CZTA)
At CZTA, our aim is to keep business operations compliant in Ramadan and beyond. We strictly follow statutory guidelines and regulations, and thus, the number of working hours does not affect our duties. We recommend the same to our clients and work accordingly. From accounting to tax compliance and audit and assurance services, our team ensures smooth working throughout the year. Contact us today.
