Free zones in the UAE are popular among global companies due to their unique tenfold benefits. These benefits contain tax benefits and fast incorporation at low costs as compared to mainland firms and many more. It is essential for corporations to enforce auditing standards and to stay compliant with the set auditing regulations in Dubai-free zones. Free zones offer specialized tax and customs.
What Is a Free Zone?
Free zones are financial areas where goods and services trade occurs. These areas are also known as free trade zones or free zone authority. Free zones are declared as defined areas within the UAE permitting 100% foreign ownership. In most cases, it is dedicated to a specific industry. It serves as a national economic growth driver by encouraging foreign direct investment (FDI).
In particular, by offering less ruling and government “red tape.” Dubai offers financiers more than 40 multidisciplinary free zones. In these, refugees and foreign investors can have full ownership of companies.
Is Auditing Compulsory in Dubai (UAE)Free Zones?
According to the new UAE Commercial Dubai Law, Federal Law No. 32 of 2021, Chapter 2, Article 27 states that every firm must have one or more auditors to audit the accounts every year. The firm must prepare yearly financial audit accounts including the profit and loss account and the balance sheet.
So, firms must conduct audits in the free zone to avoid redundant fines and penalties.
Why Must Free Zone Firms Submit Audit Reports?
Entities operating in the free zones must provide a compulsory audit of accounts. This contains company types, such as FZE and FZCO, to submit audit reports. If they don’t do so, they face the risk of non-continuation of the firm license.
When to Submit the Audit Statements?
Most free zones ought to submit the reports to the authorities within 90 days of the financial year-end. Some free zones, such as Dubai South, direct that the report should be submitted as part of the trade license renewal process.
Usually, a financial year in the UAE is intended as a calendar year. The top audit firms in Dubai operating in the Dubai-free zones are permitted to choose their financial year. However, the selected financial year must start from the date of incorporation. It should not be less than 6 months and must not exceed 18 months. Approved audit firms in Dubai can support free zone companies to meet the requirements.
Where to Submit Audited Reports?
As we stated above, some Free zone firms must prepare and submit their Audited Financial Statements. These Financial Statements are submitted to the judicial authorities as per the free zone dominion.
Reasons for Conducting Audit in Dubai, UAE Free Zones
The major reasons for auditing are;
- To ensure records are reliable.
- To avoid deliberate misstatement of fact.
- To confirm that the disclosure is comprehensive.
- To ensure the verdict decisions are not biased in favor of management.
- To ensure generally accepted accounting principles (GAAP) are ensured.
Firms in Free Zones Enjoy Some Exemptions
The major exemptions are;
- 100% return on capital and profits
- Trade tax exemptions for up to 50 years
- 100% foreign ownership of the initiative
- Personal income tax-free
- Full of import and export tax exemptions
- Help with labor employment and extra support services
Why Audit Firms in Dubai, UAE?
Audit firms in Dubai are partners of all the approved auditors in the Free Zone UAE. We provide audits in free zones UAE as conferred by the set regulation. In the UAE, there are many special zones which are known as free zones. Free zones have special laws, rules, and regulations regarding tax, operations, imports, and many others. They are designed and prepared for the functioning of these free zones.
Our internal audit services provide;
- Support to current Internal Audit Function
- Setting up internal Strategical and Planned Audit Function
Our external audit services provide;
- Financial reports audits
- Guidance on the applicable accounting policies and auditing standards in UAE
The free zone authorities maintain that the company audit is conducted by disclosed and Approved Auditors in the UAE. The free zone audit firms in Dubai that ignore this constraint will usually suffer fines and penalties. They can be non-renewal of annual trade licenses, confining company operations in the UAE Free zones. The obligatory company audit rule is in force in all reputed free zones of the UAE.
The approved auditors must be competent audit firms based in the UAE with a valid trade license. Many free zone authorities demand the submission of annual audit reports at the time of trade license renewal. Any non-compliance with the requirements may disturb the license renewal.
Umapathy Anuruthan, is a Senior Auditor at the firm, holds a Business Management Degree and carries with him an experience of 6+ Years, having worked in two of the Big 4 audit firms. He has a ‘hands-on’ understanding of external audits and financial reporting and is well-known for his approach to ensuring the highest quality and accuracy in audits for clients of numerous industries.