In UAE’s growing economic landscape, regulatory obligations such as Auditing for Mainland Company in UAE (Limited Liability Companies) and all the businesses operating in UAE free zones. Playing a significant role in verifying financial records, assessing internal control, and ensuring adherence to local regulations, annual audits are a must-do for all businesses in the UAE.
While both Mainland and businesses in the free zone are mandated to uphold strict reporting standards to ensure financial transparency, certain aspects create a distinction between the two. In the context of auditing for Mainland companies in the UAE, all companies operating in the mainland are obligated to undergo a comprehensive audit of their financial accounts in accordance with the protocols outlined in the Federal Decree Law No.32 of 2021.
Against the said backdrop, there is a significant distinction that demarcates the audit compliance for Mainland and Free Zones, being none other than the administrative authorities heading them. Adhering to strict procedures, the Mainland fall under the oversight of the Department of Economic Development (DED), while the Free Zones work under the jurisdiction of specific FreeZone Authorities.
However, it is important to note that both these entities maintain the obligatory annual financial audit, which is the bedrock of financial accountability.
Overview of Audit Obligations for both Mainland and Free Zones in the UAE
| Element | Mainland | Free Zone |
|---|---|---|
| Legal Authority | Assigned by UAE Commercial Companies Law. | Works under the respective Free Zone authority. |
| Documents | From balance sheet, and cash flow to income statements. | From balance sheets to review of the financial statements. |
| Scope | Complete assessment of financial records to ensure compliances.. | Involves tailored audits that address free-zone explicit regulations. |
Special Considerations for Qualifying Free Zone Persons (QFZPs)
The UAE has a network of free zones that offer various incentives to attract businesses. Qualifying Free Zone Persons (QFZPs) operating within designated free zones may enjoy different rules. We at A&A Associate can guide you further to comply with specific free zone legislation and laws.
QFZPs can benefit from a 0% corporate tax rate on their “qualifying income” derived from activities within the free zone and transactions with other free zone businesses. However, any income generated outside the free zone or classified as “non-qualifying income” might be subject to the standard 9% corporate tax rate.
Benefits of Maintaining Books of Accounts by Mainland and Freezone Companies in the UAE:
For Mainland Companies:
- Compliance with UAE Commercial Companies Law requirements.
- Facilitates accurate financial reporting for regulatory purposes.
- Enables better financial management and decision-making.
- Enhances transparency and accountability to stakeholders.
- Supports smooth auditing processes and reduces audit risks.
- Helps in demonstrating financial credibility to investors, lenders, and partners.
- Ensures smooth business operations by tracking income, expenses, and cash flow effectively.
For Free Zone Companies:
- Meets regulatory requirements of the respective free zone authority.
- Enables efficient management of finances and resources.
- Facilitates compliance with international accounting standards.
- Enhances credibility and trustworthiness among clients and partners.
- Provides clear insights into the financial health and performance of the company.
- Supports strategic planning and growth initiatives.
- Simplifies tax compliance and reporting obligations.
Understanding the Audit Periods and Timelines for Auditing for Mainland Company in UAE and Free Zones
| Mainland | Free Zones | |
|---|---|---|
| Period of Audit | For Mainland , the audit period usually tends to align with the financial year. | For businesses in the Free Zones, the audit period follows the financial year. |
| Timeline | Annual audit report must be submitted within 6 months of the end of the financial year | Annual audit report must be submitted within 6 months of the end of the financial year |
| Regulatory Compliance | Governed by UAE Commercial Companies Law with specific reporting requirements | Governed by respective free zone authority regulations, with unique standards and timelines |
Conclusion
In summary, understanding the audit periods and timelines for businesses in Dubai, whether mainland or free zone, is crucial for compliance and financial transparency. Mainland companies operate under UAE Commercial Companies Law, with audits overseen by the Department of Economic Development (DED), while free zone companies follow regulations set by their respective free zone authorities. Both types of companies must undergo annual audits, with timelines typically aligned with the financial year and reports due within six months afterward.
Auditing serves as the cornerstone for ensuring adherence to compliance standards and promoting financial transparency. With A&A Associate ensure a seamless audit experience in the UAE.
For more details, get in touch with us today.