An Essential Audit Guide to Companies incorporated in Dubai Free Zones
Entrepreneurs set up their companies in Dubai free zones to avail unparalleled benefits such as easy approvals, total foreign ownership, tax benefits and quick incorporation at lower costs. However, while enjoying the benefits galore, the investors should also take care not to overlook the mandatory requirements. Many of the free zones have mandated the companies licensed by them to submit annual audit reports to the free zone authority.
Some of the free zones insist that the audit should be conducted by registered and approved auditors in Dubai, UAE. Companies that ignore this requirement often incur penalties or face consequences such as non-renewal of trade license. The mandatory audit requirement exists in reputed free zones, including Dubai Multi Commodities Centre (DMCC), Jebel Ali Free Zone (JAFZA), Dubai Airport Free Zone (DAFZA), Dubai International Financial Centre (DIFC), Dubai South etc.
Also read: An Essential Guide to the Documents Required for a Successful Audit in Dubai
In this article, we provide you with an essential guide for audit in Dubai free zones. This section will enlighten you with the requirements, benefits and also consequences of failing to submit the audited reports to the respective free zone authorities. Read ahead.
Maintaining Books of Accounts in Free Zones
In the UAE, the general requirements for companies are to maintain financial records for at least five years. Many free zones, including the DMCC, have stated this requirement in their implementing regulations. JAFZA Implementing Regulations 2016 states that the Free Zone Companies (FZCO) and Free Zone Establishments (FZE) must retain financial records for six years.
The books of accounts must be kept at the registered office or an equivalent place agreed by the Directors. The financial records should be made accessible to approved auditors in Dubai at the time of the audit. The companies are required to maintain the books of accounts as per UAE Tax Law as well. Companies operating in Dubai free zones can consult with the best audit firms in Dubai for robust advice on record-keeping for audit and tax purposes.
When to Submit the Audit Reports?
Most free zones require the companies to submit the reports to the authorities within 90 days of the company’s financial year-end. Some free zones, such as Dubai South, mandates that the report should be submitted as part of the trade license renewal process (applicable for branches as well).
Traditionally a financial year in the UAE is calculated as a calendar year. The companies operating in the Dubai free zones are allowed to choose their own financial year. However, the financial year they choose must start from the date of incorporation and should not be less than six months and must not exceed 18 months. Approved audit firms in Dubai can help free zone companies to successfully meet the requirements.
Approved Auditors in Dubai Free Zones
Free Zones in Dubai, especially DMCC and JAFZA, mandate that the annual audit should be performed by registered and approved auditors in Dubai or UAE. Free Zones, including DMCC, Dubai South & JAFZA, maintain a list of approved auditors in the UAE and update the list periodically. The approved auditors must be audit firms in Dubai, UAE, with a valid trade license to carry out the activities of auditing accounts.
Consequences of Not Submitting Audit Reports
Annual audit of the financial statements of the companies registered in the Free Zones is mandatory. Free zone companies in Dubai that fail to comply with the regulation may incur hefty penalties. Since most free zones demand the submission of annual audit reports during the time of trade license renewal, the non-compliance may affect the renewal as well. Companies need to hire approved audit firms in Dubai free zones to avoid penalties and non-renewal of trade licenses.
Hire Approved Auditors in Dubai Free Zones
The Auditing of accounts is mandatory for companies licensed by and operating in Dubai free zones. The companies must maintain the financial records for at least five years and get them audited by approved auditors in Dubai, UAE. Most of the free zone authorities maintain a list of approved auditors, which they update periodically.
Jitendra Chartered Accountants (JCA) are approved auditors in DMCC, DIFC, JAFZA, DSO and Dubai South. Our highly qualified auditors will carry out independent investigations to form a true and fair opinion on:
(a) whether the company has kept proper accounting records.
(b) whether the company’s accounts match the accounting records.
(c) whether the company’s accounts have been prepared in compliance with International Financial Reporting Standards (IFRS).
Being in the industry since 2001, JCA has served thousands of companies as a reputed chartered accountant firm in Dubai & UAE. JCA has a dedicated team of external auditors in Dubai free zones who have experience in serving businesses from a variety of industries. JCA’s auditors in Dubai add value to the business by conducting external audits as per the accepted standards.