Accounting
Accounting for Interior Design Firms in the UAE
· 5 min read · By Aureus Worldwide
Interior design and fit-out firms, designing and delivering residential, commercial, retail and hospitality spaces across the UAE, sit at an interesting intersection: part professional services (design and consultancy), part procurement and project delivery (furniture, finishes, fit-out). That dual nature shapes their accounting. They bill design fees like a consultancy, run projects like a contractor, and procure goods on clients' behalf, which raises the question of what is really their revenue. A firm that mixes design income with procurement pass-through, or that lets unbilled work pile up, will misjudge its margins. This guide explains how to account for a UAE interior design firm properly.
Two revenue models in one firm
Interior design firms typically earn through a blend that must be accounted for distinctly:
- Design and consultancy fees, for concept, drawings, specification and supervision
- Procurement, furniture, fittings, materials bought for the client, often at a mark-up
- Fit-out / project delivery, managing or executing the build-out
Each has a different margin profile and recognition basis. Reporting them separately is essential, because a firm can have a healthy design margin and a thin procurement margin, or the reverse, and only see it if the two are split.
Project accounting and WIP
Like construction and consultancy, interior design work is project-based and spans weeks or months, so the firm carries work in progress (WIP), design and project work done but not yet billed. Under IFRS 15, design fees are generally recognised over time as the work is delivered, measured by milestones or progress. The disciplines:
- Budget each project in fees, procurement and hours before it starts
- Capture time and cost against the project as it progresses
- Carry WIP for work done ahead of billing
- Treat stage payments received in advance as deferred revenue
- Review realised margin at completion to price the next job
Unrecorded design time and unbilled WIP are where design firms quietly lose money, if it is not captured, it is not billed.
Principal vs agent on procurement
The defining accounting question is whether procurement is the firm's own revenue. When a designer buys AED 200,000 of furniture for a client, is the revenue AED 200,000 or only the fee/mark-up? Under IFRS 15, it depends on principal vs agent:
| Arrangement | Revenue recognised |
|---|---|
| Firm procures as agent and recharges at cost | Fee / mark-up only |
| Firm buys, controls and resells goods at its own risk (principal) | Gross, with goods cost as COGS |
| Firm's own design fee | Always the firm's revenue |
If the firm merely arranges and recharges procurement, treating the full goods value as revenue inflates turnover and distorts margins. If it genuinely buys and resells at its own risk, gross treatment with cost of goods may be appropriate. Make the assessment, apply it consistently, and document it.
VAT for interior design firms
Interior design, fit-out and related services supplied in the UAE are generally standard-rated at 5% VAT. Areas needing care:
- Procurement of goods, VAT on the goods, with treatment of any mark-up or recharge depending on the agent/principal basis
- Supplier recharges, documented as recharge or, where genuine, disbursement
- Cross-border design, place-of-supply rules where the client or project is overseas
Because the firm mixes services and goods, classify each element carefully and confirm with the FTA. Our VAT on services guide covers the service-side principles, and our construction accounting guide covers the project-delivery side.
An interior design chart of accounts
- Revenue: design fees, supervision fees, procurement (fee/mark-up or gross if principal), fit-out
- Direct costs: design labour, procured goods cost, subcontractors, site costs
- WIP / contract assets: work done ahead of billing
- Deferred revenue: stage payments received in advance
- Operating expenses: studio salaries, software, premises, admin
- Balance sheet: trade receivables, supplier prepayments, VAT control
The metrics that matter
- Margin by stream, design vs procurement vs fit-out
- Project margin, budget vs actual per project
- Utilisation, billable design time across the studio
- WIP days, work done but not yet invoiced
- Net revenue, excluding pure pass-through procurement
An interior design firm that lumps furniture procurement into revenue can look large and earn modestly. Splitting design, procurement and fit-out margins is the only way to see where the profit really comes from.
Our financial KPIs guide explains how to build the dashboard, and the consultancy accounting guide covers utilisation and WIP in depth.
Cash flow, deposits and supplier funding
Interior design cash flow is shaped by stage payments from clients and upfront supplier deposits the firm must often pay to order furniture and materials. The risk is funding large procurement before the client has paid for it. Managing this means aligning client stage payments with supplier order dates, taking sufficient deposits to cover procurement commitments, and treating advance payments as deferred revenue rather than profit. A design firm can be profitable per project yet cash-strained if it bankrolls procurement on its own balance sheet.
Corporate tax for interior design firms
UAE corporate tax is based on accounting profit, so correct revenue recognition, the principal-versus-agent treatment of procurement, accurate WIP and proper deferral of stage payments all feed into the tax computation. Reporting procurement gross when acting as agent distorts ratios; sloppy WIP misstates profit across periods. Smaller studios may fall under the small business relief threshold, subject to conditions. Provide for the expected charge through the year and confirm specifics with the FTA or your adviser.
How Aureus Worldwide helps
Aureus Worldwide gives interior design and fit-out firms accounting built around separate design, procurement and fit-out margins, the principal-versus-agent treatment of procurement, and disciplined project WIP. Our accounting team keeps project margins, WIP and deferred revenue accurate, our tax service handles the VAT on services and procured goods, our CFO service turns project and stream margins into pricing decisions, and our BPO and payroll service runs payroll and day-to-day bookkeeping for the studio. To make your design firm as profitable as it is creative, contact us.
Frequently asked questions
How should an interior design firm recognise revenue?
Design fees are recognised as the design work is delivered, usually over time by milestones or progress under IFRS 15. Procurement and fit-out elements may be recognised differently depending on whether the firm acts as principal or agent. Stage payments received ahead of work done are deferred revenue, so revenue should be matched to delivery, not to billing dates.
Should an interior designer report furniture and procurement as revenue?
It depends on the principal-versus-agent assessment under IFRS 15. If the firm procures furniture and finishes on the client's behalf and recharges them, treatment may be limited to the fee or mark-up. If it buys, controls and resells the goods at its own risk, gross treatment may apply. The basis determines whether procurement inflates the top line.
Are interior design services subject to VAT in the UAE?
Yes. Interior design, fit-out and related services supplied in the UAE are generally standard-rated at 5% VAT. Procurement of goods, supplier recharges and any cross-border design work add nuance, and the treatment of marked-up procurement depends on the principal-versus-agent basis, so confirm the position with the FTA.