The UAE government has set up
numerous free zones in all Emirates to facilitate businesses in the UAE. These
zones offer multiple tax concessions and custom duty benefits to investors in
these free zones. These free zones provide business licenses to foreign
investors to operate in the free zone to increase FDI in the UAE and attract
foreign companies to set up their plants in the UAE.
There are more than 30 free zones
in Dubai, including Dubai Airport Free Zone, Dubai World Central, Dubai Multi
Commodities Centre, and the Jebel Ali Free Zone. Each zone is designated to one
or more industries and most of the free zones offer a wide range of services,
trading, and investment options.
Audit Requirements for Companies in Economic
Free Zones of Dubai
Like all other companies
internationally and in the UAE, companies established in Dubai's economic free
zones have some auditing requirements that need to be met for successful
operations. Here is everything you need to know about auditing requirements for
companies in Dubai economic free zones.
No Tax ≠ No Accounts
One of the major benefits of
setting up businesses in the free zone of Dubai and other Emirates is that
there is no tax. Only companies operating in the oil and gas sector or
financial banks in Dubai are subject to corporate tax. Similarly, other
businesses like the hotel,
entertainment facilities, commercial renting, etc. may face municipality taxes.
Other than that, there are no income taxes, etc.
The majority of the companies are
not subject to corporate tax. However, some people and business owners think of
no taxes as zero need for maintaining accounts and financial statements. No
taxes does not mean you don't have to prepare financial reports and documents.
Free zone companies need to
prepare yearly financial accounts and submit their audited copies to the
authorities. Financial statements are necessary because it keeps a record of
all the business's financial activities, including assets, liabilities, and
equity. These financial records and accounts help owners determine the
company's financial health and its overall performance (profit/ loss).
Financial Audit Report Submission – Deadlines
and Penalties
According to the free zone
authorities, all the companies operating in the free zone need to submit
audited financial reports within 90 days of its financial year-end. Similarly,
in Dubai World Central (DWC), companies need to submit these reports as part of
the license renewal process. Without these audited reports, the authorities
will not renew your operating license.
In case of failure to submit
audited financial reports on time, free zone companies will be subject to a penalty of AED 5,000 every month
that the audited report is outstanding. Companies can, however, request an
extension of the deadline for submission of these reports.
If you fail to submit yearly
audited financial reports, you will fail to receive the renewal of your trading
license and you will not be allowed to do business in the free zone. So,
consider contacting top audit
firms in Dubai to ensure that you keep your license and conducting
business without any administrative penalties.
FAQs
1. Do is still need to submit audit reports to
the authorities if it has not yet been a year since the establishment of my
company in the Economic Free Zone?
It might depend on the time of
your incorporation. Company financial years at Free Zones constitute 12 months
from January to December. The first financial year cannot be less than 6 months
or exceed 18 months. For example, if your company was formed in June 2019, you
need to report for 7months, i.e., until December 2019. However, if your company
was formed in July 2019, you can prepare reports in December 2020.
2. Do I need to submit audit reports if my
Free Zone Company was renewed recently?
Usually, the consultants that
help you with renewals submit a letter to the free zone authorities, saying
that the audit report is underway and will be submitted in the near future.
However, sometimes authorities may request audited financial reports, so it is
better to prepare them every year.
3. Do I still need to submit an audited report
if I haven't started trading yet through my free zone company?
Even if you haven't started
trading yet, you need to provide the authorities with the financial records.
Even if your company has not initiated trading, you must have incurred expenses
like office rent, incorporation fees, visa fees, deposits, etc. All these
expenditures need to be recorded in financial statements and presented to the
authorities when asked.
4. Do I still need to submit audited financial
reports if I am closing my free zone company?
If you have decided to close the
company and have already closed the band account, you need to first file for
your company's liquidation. You need to hire a liquidator, and his reports need
to be submitted to the authorities. The liquidator will make sure all company
liabilities are settled, and no asset remains unaccounted for. Therefore, he
will require the previous year's financial reports.
Get Audit Services to Avoid Fines!
All companies operating in the
Dubai's free zones must maintain its own financial records. However, these
companies need to verify these records through an independent auditor to keep working
in the free zone. If you want to keep doing business in the UAE economic free
zones, make sure to consult www.bensauditors.com, the best accounting and audit
firm in Dubai, and get your financial records audited for submission to the
authorities. Economic free zones are created by the UAE government to
facilitate business owners to keep running their businesses under favorable
conditions, including no taxes. That is why these economic zones, especially
those located in Dubai, attract many investment and FDIs.
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