Financial Due Diligence Services in Dubai
Know what you are buying before you sign
For buyers, investors and lenders looking at a company in Dubai or elsewhere in the UAE. Before you agree a price, you need to know three things: whether the profit is real, what debt sits behind it, and what the business owes the Federal Tax Authority.
DirhamWise carries out financial and tax due diligence on UAE targets. We rebuild earnings from the ledgers, set out net debt and working capital, and test VAT and corporate tax compliance. You then get a clear report on the findings that should change the price, the sale agreement or your decision to proceed.
What's included
What financial due diligence covers in a UAE deal
Financial due diligence is an independent review of a business, carried out for the party about to buy it, invest in it or lend to it. It is not an audit. An audit gives an opinion on whether the financial statements are fairly presented. Due diligence asks whether the numbers support the deal you are about to sign, and what they leave out.
We scope every engagement to the transaction. Buying a single trading LLC calls for a different review from taking a minority stake in a free zone technology group. The core workstreams are:
| Workstream | The question it answers | What you receive |
|---|---|---|
| Quality of earnings | Is the reported profit sustainable? | An adjusted EBITDA bridge for each period reviewed |
| Net debt | Which debts and debt-like obligations sit in the business? | A net debt schedule to deduct from enterprise value |
| Working capital | How much cash does the business need to trade normally? | Monthly working capital analysis and a suggested peg |
| Tax exposure | Has the company met its VAT and corporate tax obligations? | A schedule of exposures, penalties and recommended protections |
| Balance sheet | Are the assets real and the liabilities complete? | Findings on receivables, inventory, fixed assets and provisions |
| Cash and forecasts | Does profit turn into cash, and is the business plan credible? | Cash conversion analysis and comments on the forecast |
If you also need a view on price, our business valuation work starts from the adjusted numbers the review produces. For the wider case for doing this work, read our article on the benefits of due diligence for Dubai investors.
Quality of earnings: the profit you are paying for
Most UAE acquisitions are priced as a multiple of EBITDA, so any overstatement of profit is multiplied into the price. Owner-managed companies in Dubai often keep accounts for licence renewal or the bank, not for a buyer. The reported profit and the recurring profit are rarely the same figure.
We work from the trial balances and general ledger rather than the summary statements, and test the adjustments that most often matter in UAE businesses:
- Owner and family costs: shareholder salaries set above or below market rates, personal expenses paid by the company, relatives on the payroll.
- Related-party trading: sales to, purchases from or rent paid to companies owned by the same shareholders, and whether those terms will survive completion.
- One-off items: a large contract that will not recur, insurance receipts, gains on asset disposals, legal settlements.
- Revenue recognition and cut-off: project revenue booked ahead of the work, invoices raised early at the year end, credit notes issued after it.
- Missing accruals: end-of-service gratuity not fully provided, bonuses, leave pay, supplier costs not yet invoiced.
- Customer concentration: how much revenue and margin depend on a handful of customers or a single contract.
The output is an EBITDA bridge from reported to adjusted profit for each period, with every adjustment explained and supported. Your lawyers, lenders and co-investors can follow it line by line.
Net debt, debt-like items and working capital
Most deals are agreed on a cash-free, debt-free basis: the buyer agrees an enterprise value and the seller’s net debt is deducted from it. The negotiation usually turns on what counts as debt. In UAE targets we look closely at these items:
| Item | Why it matters |
|---|---|
| End-of-service gratuity | Under the UAE Labour Law, an employee with at least one year’s continuous service is entitled to 21 days’ basic wage for each of the first five years and 30 days for each year after that, capped at two years’ wage. Many SMEs do not provide for it in full, and the unprovided amount is a real liability. |
| Unpaid VAT and corporate tax | Tax due for periods before completion, plus penalties. Since 14 April 2026, late payment of VAT carries a penalty of 14% a year, charged monthly. Late payment of corporate tax is also charged at 14% a year. |
| Shareholder and related-party loans | Often undocumented, sometimes interest-free, and frequently expected to be repaid at completion. |
| Customer advances and deferred revenue | Cash already received for work the new owner will have to deliver. |
| Post-dated cheques and supplier arrears | Commitments that do not always appear as liabilities in the ledger. |
| Leases and fit-out obligations | Rent commitments on offices and warehouses, and reinstatement costs when a lease ends. |
Working capital is the second price mechanism. We analyse receivables, inventory and payables month by month and remove seasonal swings and one-off movements. From that we propose the normal level of working capital the business needs. If less than that level is delivered at completion, the price comes down. Receivables ageing matters here. Balances that are old, disputed or owed by related parties are adjusted out of the calculation.
Tax due diligence: VAT and corporate tax exposure
When you buy the shares of a UAE company, you inherit its tax history, including periods before you owned it. Corporate tax applies from financial years starting on or after 1 June 2023, so most targets now have one or more corporate tax periods alongside several years of VAT returns. We review both.
Corporate tax
| Check | What we look for |
|---|---|
| Registration | Companies incorporated on or after 1 March 2024 must apply within three months of incorporation. The late registration penalty is AED 10,000. Under a current FTA initiative, it is waived or refunded for the first tax period if the first return is filed within seven months of that period ending. |
| Returns and payment | Each return and payment is due within nine months of the end of the tax period, so a 31 December 2025 year end has a deadline of 30 September 2026. A late return costs AED 500 a month for the first 12 months, then AED 1,000 a month. |
| Rate and Small Business Relief | Taxable income above AED 375,000 is taxed at 9%. If the company elected Small Business Relief, we test whether it was entitled to: revenue must not exceed AED 3 million in the current period or any earlier one, and Qualifying Free Zone Persons cannot use it. The relief now covers tax periods ending on or before 31 December 2029, and losses from relief periods cannot be carried forward. |
| Free zone status | For a Qualifying Free Zone Person, whether non-qualifying revenue stayed within the de minimis limit (the lower of 5% of total revenue or AED 5 million). A company that fails a qualifying condition at any point in a tax period stops being a Qualifying Free Zone Person from the start of that period, so the 0% rate is lost for the whole period. |
| Audited financial statements | For tax periods starting on or after 1 January 2025, audited statements are required where revenue exceeds AED 50 million, for every Qualifying Free Zone Person and for every tax group. |
| Tax losses | Losses can reduce taxable income by no more than 75% in any period. Where more than 50% of the ownership changes, carried-forward losses stay usable only if the company continues the same or a similar business. The deal itself can therefore affect what the losses are worth. |
| Related parties | Whether transactions with shareholders and group companies meet the arm’s length standard, and whether payments to connected persons, such as owners and directors, reflect market value. |
| Earlier group transfers | Assets moved between group companies with at least 75% common ownership, or transferred under business restructuring relief, lose that relief if, within two years of the transfer, the asset leaves the group, the companies stop being members of the same group, or the shares or business are sold outside the group. The transfer is then treated as made at market value, so your purchase can itself trigger a tax charge. |
| Records | Corporate tax records must be kept for seven years after the end of the tax period they relate to. |
VAT
| Check | What we look for |
|---|---|
| Registration timing | Registration is mandatory once taxable supplies and imports exceed AED 375,000 over the previous 12 months, or are expected to in the next 30 days. We compare the date the target crossed the threshold with the date it registered. Late registration costs AED 10,000. |
| Returns and payments | Returns and payment are due within 28 days of the end of each tax period. Since 14 April 2026, a late return costs AED 1,000, or AED 2,000 if repeated within 24 months. |
| Output tax | Correct treatment of standard-rated, zero-rated and exempt sales, and a reconciliation of declared sales to the ledger and bank statements. |
| Input tax | Recovery supported by valid tax invoices, with blocked items excluded. From 1 October 2026, amendments to the VAT Executive Regulation also block input tax on supplies above a value to be set by the Minister where they are paid, or meant to be paid, in cash. Cash-heavy targets need a closer look. |
| Errors and disclosures | Where an error means tax was underpaid by more than AED 10,000, a voluntary disclosure is due within 20 business days of the business becoming aware of it. Smaller differences can be corrected in the next return. If the error is not disclosed before the FTA notifies a tax audit, the penalty is 15% plus 1% a month. We identify errors the buyer would inherit and the cost of correcting them. |
| Credit balances | Refundable balances must be claimed within five years of the end of the relevant tax period. Older balances have a transitional window that closes on 31 December 2026. A VAT receivable on the balance sheet may already be time-barred. |
| E-invoicing | Businesses with revenue of AED 50 million or more must appoint an accredited service provider by 30 October 2026 and go live by 1 January 2027. Businesses below that level must appoint by 31 March 2027 and go live by 1 July 2027. |
Where we find a problem, we quantify it as far as the records allow and suggest how to deal with it: a price reduction, a specific indemnity, a retention, or a correction made before completion. After the deal, our VAT voluntary disclosure, corporate tax and e-invoicing teams can put it right.
Red flags we look for in UAE targets
Some issues appear again and again in UAE transactions. We test for each of them:
- Accounts that do not reconcile to bank statements, or sales on VAT returns that do not match the ledger.
- Cash sales with weak controls, particularly in retail, food service and general trading.
- Revenue that depends on one customer, or on related parties whose terms will end after the sale.
- Licensed activities that do not match what the business actually does, or trading run through a different entity.
- Free zone companies with significant mainland revenue that still claim qualifying status.
- Ownership that differs from the trade licence, nominee arrangements, or an outdated beneficial owner register. Anyone holding 25% or more of the capital or voting rights is a beneficial owner, and changes must be recorded within 15 days.
- Bank facilities with change-of-control clauses, personal guarantees from the seller, or security over key assets.
- Unpaid salaries, unprovided gratuity, or open labour disputes.
- Large balances owed by shareholders that are unlikely to be repaid.
A red flag does not always end a deal. Most can be priced, covered in the sale agreement or fixed before completion, provided you find them before you sign. Anti-money laundering checks on the seller or counterparty are a separate exercise, covered by our AML compliance service.
Documents we ask for
The request list is tailored to each deal. A typical review of a UAE company draws on the following:
| Area | Typical documents |
|---|---|
| Corporate | Trade licence, memorandum and articles of association, shareholder register, beneficial owner register, board and shareholder resolutions |
| Financial | Audited or management accounts for the last three years, trial balances, general ledgers, bank statements, fixed asset register, current-year management accounts |
| Revenue and customers | Sales listings by customer, key contracts, aged receivables, credit notes issued after the year end |
| Costs and suppliers | Major supplier contracts, aged payables, related-party agreements, tenancy contracts |
| People | Employee list with joining dates and basic salaries, payroll records, gratuity calculations |
| Tax | VAT and corporate tax registration certificates, filed returns, FTA correspondence and penalty notices, related-party pricing support, free zone qualifying income analysis |
| Debt and security | Facility letters, loan agreements, guarantees, security documents |
| Forecasts | Budget, business plan and the assumptions behind them |
We work from the virtual data room if there is one. If there is not, we issue a structured request list and track each item. A confidentiality agreement is signed before any information is shared.
How the review runs and what the report contains
- Scoping. We discuss the deal structure, price mechanism, areas of concern and timetable, then agree the scope and a fixed fee.
- Information request. A tailored list goes to the seller or its advisers, and we get access to the data room.
- Management meetings. Sessions with the owner, finance manager and key staff to understand how the numbers are produced.
- Analysis. Quality of earnings, net debt, working capital, tax and balance sheet work run in parallel.
- Red flag update. Once the main issues are clear, we brief you so you can renegotiate, or stop before spending more.
- Draft and final report. We issue a draft, walk you through it and finalise it after your questions.
- Transaction support. We comment on the sale agreement, completion accounts and the price adjustment.
Timing depends on the size of the target, the quality of its records and how quickly information arrives. A focused review of a single-entity SME takes less time than a group with mainland and free zone companies. We set the timetable at scoping and report progress to you each week.
The due diligence report contains:
- An executive summary of key findings and their effect on price.
- The adjusted EBITDA bridge for each period.
- A net debt and debt-like items schedule.
- A working capital analysis and proposed peg.
- A tax exposure schedule covering VAT and corporate tax.
- Balance sheet findings.
- Recommendations for the sale agreement: specific indemnities, warranties, price adjustments and conditions to completion.
Buy-side, vendor and investor due diligence
| Type | Commissioned by | Purpose |
|---|---|---|
| Buy-side due diligence | The acquirer | Test the target before signing and support the price and sale agreement negotiation |
| Vendor due diligence | The seller | Find and fix issues before going to market, and give buyers a report to work from |
| Investor due diligence | Private equity, family offices, angel investors | Earnings quality, use of cash and governance before a funding round |
| Lender due diligence | Banks and private credit providers | Cash flow, debt capacity and security |
| Partner due diligence | A company entering a joint venture | The partner’s financial health and obligations |
If you plan to sell within the next year or two, vendor due diligence is worth considering. Clearing up gratuity provisions, related-party balances and tax filings before a buyer finds them protects your price. If the gaps are in the underlying books, our accounting and bookkeeping team can fix them first. If the audited accounts are out of date, see our audit and assurance service.
Frequently asked questions
What is financial due diligence?
It is an independent review of a company’s financial position, carried out for a buyer, investor or lender before a transaction. It tests whether reported profit is sustainable, sets out net debt and working capital, and identifies tax and other exposures that should affect the price or the terms of the deal.
How long does due diligence take in Dubai?
It depends on the size of the target, how many entities are involved, the quality of the records and how quickly the seller provides information. A focused review of a single SME is shorter than a full review of a group. We agree the timetable at scoping and give you a red flag update before the full report, so you can act on the main issues early.
What is the difference between due diligence and an audit?
An audit gives an opinion on whether the financial statements are fairly presented, and is often a legal requirement. Due diligence is commissioned for a specific transaction and looks forward: sustainable earnings, debt, cash needs and exposures that affect price. An audited set of accounts is a useful starting point, but it does not replace due diligence. See our audit and assurance page for statutory audits.
What is vendor due diligence?
Vendor due diligence is commissioned by the seller before the business goes to market. It surfaces problems while there is still time to fix them, gives prospective buyers a report to work from, and usually shortens the negotiation. Buyers will often still carry out their own confirmatory review.
What is included in a due diligence report?
Our report includes an executive summary of key findings and their price effect, an adjusted EBITDA bridge, a net debt and debt-like items schedule, working capital analysis with a proposed peg, a VAT and corporate tax exposure schedule, balance sheet findings, and recommendations for the sale agreement.
How do you do due diligence on a private company in the UAE?
Most private UAE companies do not publish their accounts, so the work relies on information the seller provides: ledgers, bank statements, contracts, payroll and tax filings. We reconcile those records to each other and to the bank, meet management, and test the figures that drive the price. Corporate documents such as the trade licence and beneficial owner register are checked against the ownership you are buying.
Do you review the target’s corporate tax and VAT position?
Yes. Tax is a core part of every review. We check registration dates, filed returns, payments, Small Business Relief or free zone claims, related-party pricing, tax losses and VAT treatment, and quantify exposures where the records allow. More detail is on our corporate tax and VAT services pages.
How much does financial due diligence cost?
The fee depends on the scope: the number of entities and years covered, the workstreams you need and the state of the records. We quote a fixed fee once we have discussed the deal with you, so you know the cost before work starts. Contact us for a quote.
Get a fixed-fee quote for your due diligence
Tell us about the target, the deal structure and your timetable. We will scope the review and send you a fixed-fee proposal.
+971 56 500 6694 · info@dirhamwise.com · Contact form
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