Is Audit Mandatory for Free Zone Companies in the UAE?

An audit is Mandatory for Companies in the UAE

Most companies throughout the world must perform audits. However, some companies are exempted from these audits based on their selected jurisdiction. Regarding the UAE Free Zones, you can enjoy countless benefits by starting your business in these profitable jurisdictions. Therefore, a common doubt arises about whether the audit is mandatory for Free Zone Companies in the UAE. Companies in the Mainland UAE are mandated for audits while those businesses located in the Free Zones may required for audits based on several factors. So, let us try to clarify this confusion by understanding UAE free zone audit requirements. 

Auditing in Free Zone in the UAE

We know you might be looking for the Free Zone company audit rules in UAE, but our main motive is to clear all your doubts about Auditing in Free Zone in the UAE. Therefore, we recommend you understand the basic meaning of auditing before diving into the rules for audits in Free Zone Company in the UAE. So, let us understand the basics of auditing in the free zone in the UAE.

An audit in a free zone in the United Arab Emirates (UAE) is an examination and review of your business’s financial records and statements in order to comply with the accounting standards set by the authority. Auditors or audit firms, like Flyingcolour Auditors, conduct these audits in the UAE's free zone. The purpose of these audits is to give assurance to the stakeholders that the financial records are accurate and reliable. 

So, we hope you have now understood the basics of audits in the Free Zone in the UAE. Now, let us move forward to the requirements for audits in the Free Zone in the UAE. 

Audit Requirements in the Free Zone in the UAE

There are many requirements regarding conducting audits in the Free Zone in the UAE. We have outlined the most essential audit requirements for the Free Zone in the UAE below:

• Companies in the UAE's free zone, such as yours, are not audited and are required to submit audit reports. However, some entities like Free Zone Company (FZCO) and Free Zone Establishments (FZE) must deal with mandatory auditing. 
• Auditing is also necessary for most Free Zone Companies, especially those companies registered with the DMCC, Meydan Free Zone, DWC, and JAFZA.
• As per the law, the Free Zone Companies should hire a professional auditor approved by the Free Zone Authority. In practice, an auditing service should only be delivered by auditing firms with a valid professional license under the Ministry of Economy
• Eligibility of the auditing firm should be the key factor to consider when hiring an auditing firm. In case, you work with an auditing company that is not eligible, you must face the full force of the law. Therefore, you should hire Flyingcolour Auditing Firm because we are an eligible auditing firm for auditing in the free zone in the UAE. 
• Companies registered with Free Zone must submit their audited financial statements to the relevant Free Zone authority. This is because some free zone authorities will ask you to give the audited financial statement at the time of the trade license renewal of your company. If you ignore this requirement, you might often incur penalties or face consequences like non-approval of your trade license. If you want to avoid being penalized, you should keep your book of accounts properly and get them audited. 

Mandatory audit requirement for a Free Zone Company under Corporate Tax Law

Free Zone Companies are mandatory to get audited to obtain the status of Free Zone Person. Do you know the benefits of being a Free Zone Person in the Free Zone in the UAE? If so, you may feel happy after learning that the Free Zone Person is subjected to 0 percent of Corporate Tax on the profit of their free zone company, subject to conditions. Therefore, you should get your books of accounts audited because it is among the mandatory requirements to be a Free Zone Person in order to get 0% Corporate Tax. 

Are audits compulsory for Free Zone Companies or FZCO in the UAE?

Audits of accounts are mandatory for your company if your company is a Free Zone Company (FZCO) or Free Zone Establishments (FZE). However, it may not be compulsory for some foreign or local companies in the Free Zone in the UAE. Still, the companies must maintain the accounting reports and documents to finalize the audits.

As we discussed in the previous section, auditing for Free Zone Company (FZCO) is also mandatory to become a Free Zone Person and enjoy the benefit of 0 percent of Corporate Tax according to the Corporate Tax law. 

When should you submit the audited financial statement?

As you have understood now the Free Zone Companies (FZCO) must conduct and submit audits within their organization. However, you should submit the audited financials at the right time. The top free zones and their due dates for submitting the audited financial statements are mentioned below:
 

The dates mentioned in the table above may differ based on the decision of the respective free zone authority. Therefore, you should contact the free zone authority and reconfirm the final date before you take any decision. However, Flyingcolour Auditors can also help you determine the final date for submitting the audited financial statements. 

How can Flyingcolour Auditing Firm help you?

Most free zone companies are required to be audited in the UAE. However, some of them might not need to go through these audits compulsorily. Flyingcolour Auditing Firm can help you determine whether your free zone company is required to submit and conduct the audit. In addition, our experts will conduct audits in your company if you want. Plus, we will clear your doubts about UAE free zone audit requirements.

To learn more about Is Audit Mandatory for Free Zone Companies in the UAE?, book a free consultation with one of the Flyingcolour team advisors.

Disclaimer: The information provided in this blog is based on our understanding of current tax laws and regulations. It is intended for general informational purposes only and does not constitute professional tax advice, consultation, or representation. The author and publisher are not responsible for any errors or omissions, or for any actions taken based on the information contained in this blog.