Tour Operator Accounting for UAE Companies in 2025

IFRS, IFRS for SMEs, Client Money, VAT, Corporate Tax, and Licensing Requirements

This article has been adapted specifically for the UAE market from our US article available here - Tour Operator Accounting: Deposits, Client Money, and Revenue Recognition

The UAE’s tourism sector continues to expand at pace, with the World Travel & Tourism Council projecting 27.6 million visitors in 2025, an increase of roughly 8.5% on 2024. The country’s tourism contribution is expected to reach AED 267.5 billion, reflecting the breadth of the sector across inbound operators, DMCs, niche experience providers, and large travel groups. In this environment, tour operators must work within a regulatory framework that blends international accounting standards with federal tax rules, emirate-level licensing, AML obligations, and a phased e-invoicing regime that begins rolling out in 2026.

The UAE does not maintain a local GAAP. Instead, companies apply full IFRS or IFRS for SMEs, depending on size thresholds under Federal Law No. 32 of 2021. Revenue recognition follows IFRS 15, while federal tax is administered by the Federal Tax Authority (FTA) through the 5% VAT regime and the 9% Corporate Tax introduced in 2023. Tourism licensing remains decentralised through the Dubai Department of Economy and Tourism (DET), Abu Dhabi DCT, and other emirate authorities. AML oversight has been strengthened under Federal Decree-Law No. 10 of 2025, which replaces the previous 2018 framework.

Unlike the UK’s ATOL or the U.S. seller-of-travel rules, the UAE imposes no statutory trust accounts for client funds. However, strong governance around deposits, agency arrangements, and segregation of funds is increasingly expected as part of compliance, especially as free-zone groups face stricter transfer pricing documentation.

This guide outlines the 2025 requirements for UAE tour operators, covering IFRS, IFRS for SMEs, VAT, Corporate Tax, AML, licensing, and disclosures.

1. Revenue Recognition under IFRS and IFRS for SMEs

All UAE operators apply either full IFRS or IFRS for SMEs. Under IFRS 15 (and Section 23 of IFRS for SMEs), revenue reflects the consideration expected for services supplied. Contracts must be enforceable, have commercial substance, and be collectible.

1.1 Performance obligations

For most UAE tour operators and DMCs, packaged itineraries, such as a three-day AED 5,000 desert safari, form a single performance obligation. Transport, accommodation, and activities create a combined output that the customer receives as an integrated experience.

Revenue is recognised over time if the customer simultaneously receives and consumes the benefits. Practical methods include:

• Time-elapsed, such as recognising one-third of the price per day.

• Output benchmarks, such as recognising a percentage of revenue upon completing major components (for example, 40% after transport to camp, 60% during activities).

Add-ons that are separately priced, such as an AED 500 dhow cruise booked independently, are recognised at a point in time, once delivered.

IFRS for SMEs follows the same principles but with fewer technical adjustments: immaterial financing components and minor variable considerations do not require extensive modelling.

Breakage (for example, unused activities) is recognised only when the operator is entitled to retain the amount and has no remaining obligation, based on historic utilisation patterns.

2. Advance Deposits and Contract Liabilities

Deposits are common in inbound UAE tourism, often representing 50–70% of the itinerary price. Under IFRS 15.55 and IFRS for SMEs Section 23, deposits are contract liabilities, not revenue.

A non-refundable deposit is still deferred until either:

1. The relevant service has been delivered, or

2. The customer cancels and forfeiture is permitted with no material right to future services.

Example: A AED 3,000 deposit for a five-day Abu Dhabi cultural itinerary is treated as a liability at receipt and recognised at AED 600 per day. Non-delivery or uncertainty in collectibility triggers reassessment but does not accelerate revenue.

Financial statements must show movements in deferred income, for example: opening balances, cash received, revenue recognised, and closing balances.

3. Principal vs Agent in UAE DMC and Resale Structures

UAE operators frequently combine hotel stays, excursions, transfers, and tickets purchased from multiple suppliers. Whether the operator acts as principal or agent determines whether revenue is recognised gross or net.

An operator is typically principal when it:

• Controls access to the service before transfer

• Sets pricing

• Bears cancellation or no-show risk

• Manages itinerary substitutions and customer complaints

Agent status applies where the operator only arranges a service and earns a commission.

This distinction is critical in the UAE, where DMC models often indicate principal status for integrated packages. Documentation is essential, especially for free-zone structures and related-party arrangements where transfer pricing scrutiny is increasing.

Past references to VATP008 are obsolete. The correct FTA reference for the tourism sector is Public Clarification VATP010 (2024), which remains valid for 2025 and supports the principal–agent analysis for VAT treatment.

4. VAT Requirements for UAE Tour Operators

VAT in the UAE is governed by Federal Decree-Law No. 8 of 2017. Key points for tourism operators include:

4.1 Standard rating and zero rating

• 5% VAT applies to UAE-based services such as hotels, local transport, and excursions.

• Zero rating applies to certain outbound supplies consumed outside the UAE when provided to non-residents (depending on supply rules and place-of-enjoyment principles).

4.2 Reverse Charge Mechanism

Imported services, such as fees from foreign DMCs, are subject to the reverse charge, requiring self-assessment once the registration threshold (AED 375,000) is met.

4.3 VAT and revenue timing

VAT does not follow IFRS timing. VAT becomes due based on the tax point, usually when the invoice is issued or when payment is received. This means VAT on deposits may be due before revenue is recognised under IFRS.

4.4 E-invoicing

Under Ministerial Decisions 243 and 244 of 2025, e-invoicing enters pilot phase in Q3 2026 and becomes mandatory in 2027 for businesses above AED 375 million turnover. SMEs follow in 2028. Operators should begin system preparation in 2025.

5. Corporate Tax and Transfer Pricing

Corporate Tax applies from financial years beginning on or after June 1, 2023, under Federal Decree-Law No. 47 of 2022.

• 9% CT applies to taxable profits above AED 375,000.

• Small Business Relief applies to entities below AED 3 million revenue.

• Deductible expenses include marketing, travel, depreciation, and staff costs.

5.1 Transfer pricing

The UAE applies the Arm’s Length Principle through Cabinet Decision No. 48 of 2023, with effect from 2025 for documentation enhancements. For groups with revenues above AED 200 million, master and local files are mandatory, supported by FTA guidance (CTGTP1).

Decision No. 7 of 2025 does not introduce TP rules; it covers special purpose financial statements for tax groups, so references must be kept separate.

Intercompany DMC arrangements, markups, and rebates require robust benchmarking and documentation.

6. Licensing, Guarantees, and Client Money

Tourism licensing is overseen by emirate authorities:

• Dubai DET

• Abu Dhabi DCT

• Sharjah and other emirate economic departments

Fees typically range from AED 15,000–100,000, depending on the licence category and emirate. Bank guarantees vary between AED 50,000 and AED 300,000, scaling with business activity and annual turnover.

There is no federal requirement for trust accounts equivalent to the UK’s ATOL. However, operators increasingly use voluntary restricted accounts for governance and AML purposes, particularly given the updated framework under Federal Decree-Law No. 10 of 2025, which replaces the 2018 AML law. Cash declarations apply above AED 55,000.

IATA-accredited agents follow their own bonding requirements for BSP ticketing.

Customer rights under Consumer Protection Law No. 15 of 2020 mandate clear refund and cancellation terms. Operators must reflect these in contracts and ensure that disclosures match accounting treatments.

7. Disclosures under IFRS and IFRS for SMEs

Under IFRS, tour operators must disclose:

• Revenue policies and judgements, including the basis for single vs multiple performance obligations

• Principal vs agent assessments

• Disaggregation of revenue by geography or activity

• Movements in contract liabilities

• Cash restrictions relating to licensing guarantees or voluntary client-money segregation

IFRS for SMEs requires similar policies with streamlined note requirements, though material segments must still be disclosed.

Summary for UAE Tour Operators in 2025

A compliant UAE tour operator in 2025 must:

• Apply IFRS or IFRS for SMEs correctly

• Treat deposits as liabilities until services are delivered

• Assess principal vs agent status with written support

• Apply VAT correctly across standard-rated, zero-rated, and imported services

• Prepare for phased e-invoicing from 2026

• Meet Corporate Tax and enhanced transfer pricing documentation requirements

• Maintain valid DET/DCT licensing and appropriate guarantees

• Strengthen AML controls under Federal Decree-Law No. 10 of 2025

• Present clear, transparent disclosures in financial statements

This approach gives operators a solid financial foundation in a sector contributing AED 267.5 billion to the UAE economy.

References

• IFRS 15 Revenue from Contracts with Customers: https://www.ifrs.org/issued-standards/list-of-standards/ifrs-15-revenue-from-contracts-with-customers/

• IFRS for SMEs Standard: https://www.ifrs.org/issued-standards/ifrs-for-smes/

• UAE VAT Guide for the Tourism Sector (VATP008): https://tax.gov.ae/DataFolder/Files/Pdf/Public%20Clarifications/VAT/VATP008%20-%20Tourism%20Sector.pdf

• UAE Corporate Tax Guide (CTGCOM1): https://tax.gov.ae/DataFolder/Files/Pdf/Guides/CT/CT%20Guide%20-%20General%20Rules%20for%20Corporate%20Tax%20(CTGCOM1).pdf

• Dubai DET Licensing Requirements: https://www.dubaitourism.gov.ae/en/licensing

• Federal Decree-Law No. 10 of 2025 on AML: https://www.moec.gov.ae/en/-/ministry-of-economy-and-tourism-announces-h1-2025-inspection-results-on-private-sector-compliance-with-anti-money-laundering-laws

Disclaimer

This article is for general informational purposes only and does not constitute legal or financial advice. Regulations and fees can change; always verify details directly with the Dubai Department of Economy and Tourism before applying.