Accounting for Agencies
UAE 2026
How UAE agency accounting teams — digital, marketing, advertising, dev, staffing, consulting, legal, real-estate — run their bookkeeping in Zoho-stack software and recognise revenue across four engagement models.
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Frequently Asked Questions
How do you do accounting for a service business in the UAE?
Services businesses like marketing agencies, dev shops, consultancies, law firms, recruiters, and real-estate brokerages must track four moving parts, which are time, costs, revenue, and reconciliation. By time, we mean hours logged per project against per-role internal cost rates. Costs must be tracked by splitting bills by project, subcontractors, and billability. Similarly, revenue must be categorized by the engagement model, which can be the success fee, milestone billing, prepaid retainer, or time and materials (T&M). Finally, you must also reconcile books with bank accounts and payment gateways. This also involves sweeping untagged bills monthly and deciding which unbilled hours to invoice, write off, or roll forward. The flow chart above shows the ‘moving part’ in which each transaction falls and who owns each step.
How do Retainer Invoices work in Zoho Books, and when is VAT due?
For any upfront retainer or deposit, use the Retainer Invoice module in Zoho Books instead of the standard invoice. In the UAE, VAT is due at the earliest of the tax-invoice date, payment receipt, or date of supply. So, Retainer Invoices must carry 5% VAT. Any cash related to retainers sits in the Unearned Revenue Liability account and not the Revenue. As work is delivered, you must raise project invoices and apply the retainer credit. This will draw down the Unearned Revenue into the Revenue account. At this stage, no new VAT is charged. Recording a retainer as a standard invoice means recognizing revenue immediately, completely ignoring the deferral mechanism, and misstating every monthly P&L until the retainer runs out.
When can a UAE agency zero-rate a service export?
Service exports are zero-rated when the recipient is outside the UAE, and no special place-of-supply rules apply. You must also note that, after the November 2024 amendments, real estate-related services, in-UAE training, in-UAE event work, or any service performed on UAE soil are treated as standard-rated supplies carrying 5% VAT even when invoiced to a foreign client. Pure remote work for a foreign client can be zero-rated. However, even in such cases, it is important to document things like the engagement letter, contractor location, and proof of the recipient’s establishment. When in doubt, charge 5% VAT.
How is media spend handled? Is it a pass-through expense or revenue?
The accounting treatment for media spend depends on the agency’s role. When the agency acts as the merchant of record, it receives the media bill in its own name, pays it, and rebills the client. Such bills are billable expenses on a project. When you rebill the client, it appears as revenue. When the agency is a merchant of record for a foreign client, you must apply the Reverse Charge Mechanism (RCM). Here, you self-assess 5% input VAT and apply 5% output VAT on invoices raised to re-bill clients. If the client directly pays for the media spend (agency as facilitator), on the agency side, there’s no bill or revenue from the media spend.
How do you track project profitability in Zoho Books? What about WIP?
Agencies can track project profitability on Zoho Books by opening Reports, navigating to Projects, and finally, navigating to Project Profitability. Here, you can view the logged hours, billable hours, billed hours, billed amount, and unbilled amount. The last column is your service WIP.
How does Corporate Tax apply to free zone agencies? Can they apply for QFZP or Small Business Relief?
Typically, agencies earn revenue from activities like marketing, consulting, legal, recruitment, and software-development services. Unfortunately, these activities are not listed as Qualifying Activities by the FTA. So, free zone agencies pay 9% on taxable income above AED 375,000 on these revenues. However, under the Small Business Relief (SBR) scheme, you can elect 0% corporate tax if your revenue is less than AED 3 million for both the current and the immediately preceding tax period. This scheme expires at the end of 2026 under the current legislation.
What is agency accounting?
Agency accounting is the specialized recordkeeping and financial management applied by professional service firms because their business models have unique elements like the absence of inventory, cost of revenue being largely influenced by labor costs instead of raw materials, and the need to constantly update unearned revenue.
What is the advertising expense in accounting?
Advertising expenses include any expense incurred to promote the company and its products. Digital ad spend, fees paid to marketing agencies, and the cost of purchasing ad space in traditional media are all examples of advertising expenses.
What are the 4 types of accounting transactions?
Sales, purchases, payments, and receipts are the four types of accounting transactions.
Need help with accounting for your agency?
Skrooge runs accounting & tax for UAE agencies — setting up projects, retainer invoicing and per-client profitability is part of the service.
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