When it comes to establishing businesses in the UAE, Free Zones always appear on the top of every business’ watchlist whether it is major corporations or startups. The popularity of Free Zones can be attributed to the myriad benefits spanning from tax incentives to 100% foreign ownership.
That said, since Free Zones are governed by respective authorities, it becomes imperative for businesses in the UAE to submit annual audit reports to them. This not only underlines the significance of audits but also addresses the urgent need to seek help from audit services in UAE, approved and renowned for their reliability.
Understanding UAE Free Zones
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Within UAE’s robust business tapestry, there exists an influx of special zones which are commonly known as the UAE Free Zones. Featuring specially designed rules in regard to tax, imports, ownership, operations, and other elements, these regulations serve as the basis for ensuring the proper functioning of different free zones. UAE’s business network encompasses over 40 interdisciplinary free zones, each starring highly efficient infrastructure, and distinct services to facilitate smooth workflows.
Benefit of Business Setup in UAE Free Zones
- Complete foreign ownership
- Swift and Seamless business setup process
- Access to developed business communities
- 100% repatriation of capital and profits
- Easy connectivity with regional and global market
- Diverse options at competitive cost
- Exemption from corporate tax, income tax and customs duty
- Independent laws and regulations
Auditing Is Crucial To Your Dubai Business- Learn Why?
and statements to ensure the respective entity complies with accounting standards and rules set by the concerned authority. This audit is either conducted by an expert auditor or an audit firm by the Free Zone authority. The simple purpose of an audit is to offer assurance to the stakeholders that the financial statements are in order, accurate, and dependable.
All the companies operating and possessing a free zone trade licence are obligated to submit an audited annual financial statement for the renewal of the trade licence. Although companies in the free zone are free to choose their own financial year as per their need, the chosen financial year must begin from the date of incorporation and should neither be less than 6 months nor more than 18 months.
Are businesses in UAE Free Zones obligated to conduct Audits?
Conducting an audit is mandatory for all businesses in the UAE free zones that surpass either a certain turnover threshold or boast a particular number of employees. In tandem, failure to comply with the audit requirements can result in hefty penalties imposed by the respective free zone authority. This underscores the significance of auditing services in UAE, specializing in Free Zones.
Audit requirement as per UAE corporate tax
Qualifying Free Zone Persons must maintain detailed documentation to support arm’s length pricing of transactions with related parties, as mandated by UAE Corporate Tax Law. Additionally, those meeting criteria under Ministerial Decision No. 97 of 2023 must prepare and maintain both a Transfer Pricing Master File and Local File. Ensuring compliance with these requirements is essential for transparency and regulatory adherence.
Failure to Submit Audits and Associated Penalties
In case of failure to submit the required audited statement within the stipulated time frame, businesses operating in the particular UAE Free Zone are required to pay fines, penalties, and in certain circumstances even the cessation of trade licence. While the penalty for non-submission depends on the specific free zone authority and the duration of non-compliance, nevertheless the fines can vary from AED 2500 to AED 5000.
To avoid and altogether stay ahead of the auditing legal penalties, it is paramount to seek assistance from A&A Associates, the leading accounting and auditing firm in Dubai, UAE.
Meet A&A Associates- Trusted Provider of Auditing Services in UAE
As the registered and approved accounting and auditing firm in Dubai and all other free zones, we offer upto the mark audited financial statements in accordance with regulations imposed by the respective Free Zone. Not only do we offer exceptional and unique audit services, but also cater to each and every business’s unique requirements.
Contact us today as we are here to assist companies with their audit compliance, ensuring smooth and efficient business flow.