Dubai free zone companies are top-rated with investors and companies because of their multiple advantages. However, not everyone is aware that Dubai free zone offers start-ups and businesses many benefits, alongside the tax and permit system.

Many investors have already recognized this potential. Numerous foreign companies have invested in Dubai for the favorable tax environment and conditions, which are once again becoming highly sought after. In fact, the free zones constitute an important segment of the Dubai economy and, due to the strict trade regulations, attract businesses from all over the globe.

Moreover, investors should, however, take care not to forget the necessary criteria when enjoying the various benefits since many free zones have made it mandatory for their approved businesses to file annual reports.

Big time! It’s nearly impossible for anyone to keep up with the new companies and find out what’s good or bad in their business.

An expert team of AEY Auditing of Accounts ensures that your company is 100% compliant with both the UAE and international standards.

Taking Assistance of Approved Auditors in the UAE

If you want to conduct an audit of your company, choosing a reliable firm in the UAE is significant. A E Y Auditing of Accounts is among the top reputed and recognized accounting firms in the UAE. Therefore, it assists with Internal audits, Statutory audits, Freezone audits, and many more. Companies that are not successful in significantly delivering the requirement on time will face penalties and difficulties, such as losing their trade license.

Major Free Zones in Dubai, a Legitimate Obligation

Some of the reputed Dubai free zones strictly demand audits of companies. Some of the Dubai free zones are mentioned below:

• DMCC (Dubai Multi Commodities Centre)
• DAFZA (Dubai Airport Free Zone)
• DIFC (Dubai International Financial Centre)
• JAFZA (Jebel Ali Free Zone)

This article aims to deliver significant information on auditing in Dubai Free zones.

Book-Keeping in Dubai Free Zones

The goal of the startup company is to particularly increase its profit by evaluating business performance. It is the area where accounting and book-keeping play a significant role in its success.

Now, let’s discuss financial record maintenance or bookkeeping services in Dubai free zones regarding auditing.

Firstly, book-keeping is a necessary process in any business. Keeping track of your income and expenses helps you make informed decisions, plan and identify areas where you can reduce costs. Furthermore, it’s important to remember that companies in the UAE are required to keep financial reports for at least five years.

I have specified this condition in several free zones’ implementing regulations. But JAFZA, one of the free zones in Dubai, has stated that the Free Zones companies (FZCO) and Free Zone Establishments (FZE) must maintain financial documents for a minimum of six years.

While book-keeping is essential for your business’s financial health and compliance with rules, keeping track of all your transactions manually is time-consuming and vulnerable to errors. It must be held through registered auditors. During the audit, authorized auditors must have access to the financial statement—meanwhile, the must-have book of accounts according to UAE tax compliance.

Furthermore, companies working in free zones of the UAE will need the assistance of the best audit firm. Among these firms is the A E Y Auditing of Accounts.

What if you don’t Submit an Audit Report?

Businesses registered in the free zones must audit their financial statement each year. If you fail to comply with the free zone compliances in the UAE, you can face severe penalties.

Every free zone company in Dubai must submit an annual audit report. The free zones in Dubai have legislation and regulations that govern activities within the free zone.

They must audit the financial statements of businesses registered in the Free Zones every year. Failure to comply with the regulation by free zone companies in Dubai can result in severe penalties too.

Penalties?

The Free Zone Authority requires all businesses operating within them to submit their financial statements for auditing purposes. Failure to submit the audit report will result in the below penalties:

• A fine not exceeding AED 2,500 per month for late report submission. (Total fine AED 30,000)
• A fine not exceeding AED 5,000 per month for failing to maintain proper records. (Total fine AED 60,000)
• A fine not exceeding AED 10,000 if the company fails to appoint an auditor as the law requires. (Total fine AED 120,000)

It is significant for companies to maintain financial records in the free zone. Furthermore, these companies must take the assistance of an approved auditing firm in the UAE.

You should contact a consultant who can help you with the process or guide you for further queries. We at A E Y Auditing of Accounts have assisted many clients with submitting their audit reports to the relevant authorities.

There is little doubt that when one mentions accounts, one thinks about where income has come from and how funds are being used. This is especially if one refers to over one accountant’s financial audit reports prepared. This article will discuss the best reasons to prepare a financial audit report in the UAE.

It includes statements from the auditor on whether the company’s financial statements are free of material misstatements. These are errors that might mislead an investor into deciding based on incorrect information. The audit report is valuable for those who commonly audit financial reports.

What is Financial Audit?

A financial audit is an examination of the records of a company. Hence verifying the accuracy and completeness of its accounting records. The significant purpose is to ensure that it complies with applicable laws, rules, and regulations.

The Basic Audit Report in the UAE

A basic audit report declares that the auditor has carried out an audit of the firm or organization’s accounts for the financial year based on generally accepted accounting principles. It must contain an opinion from the auditor whether:

• The financial statements give an accurate and fair view of the company’s affairs;
• Financial activities are in line with commercial law and company regulations;
• The information provided in the audit report is accurate;
• Any irregularities or discrepancies have been noted; and
• We have made any adjustments required.

Why Need to Prepare Financial Audit in the UAE?

Free Zone Licensing Authority

The free zone licensing authority requires submitting a financial audit report in the UAE annually. It is an independent report of its financial statements. It would be best if you approved it by an auditor accredited by the administration.

To ensure that they pay all taxes. An audit can help prevent tax evasion and ensure that your business complies with tax laws. It will also give you more confidence when filing tax returns because you know that all information provided is accurate and complete.

Federal Commercial Companies Law

According to the Federal Commercial Companies Law (FCCL), all companies must prepare financial audit reports in the UAE registered within the jurisdiction of this law. Auditors with the approval of the Ministry of Economy and Commerce within the UAE must sign this report. Moreover, auditors qualified by the laws of their country of origin also have the authority to approve the account.

They must also prepare a financial audit report in the UAE for any company required to prepare merged financial statements under this law. The FCCL also requires that an annual balance sheet and profit-and-loss account, audited, must be presented at every Annual General Meeting (AGM) for approval.

Federal VAT Law

In 2018, the Federal Tax Authority (FTA) enacted Federal Decree-Law No. 8 of 2017 on Value Added Tax (VAT Law). This law requires businesses to prepare financial statements for every employee. The reason behind this requirement is that there is always a possibility that an employee may commit fraud or other illegal activities against the company.

In order to protect your company from these types of employees, you need to make sure that you are doing your part by preparing and submitting financial audit reports on time. The law stipulates that all companies must submit a financial audit report in the UAE.

Federal Economic Substance Regulation

This regulation states that businesses must prepare financial reports at least once every six months. It also says that they must submit their accounts within 15 days after the last day of the fiscal year. If you cannot do so, you will face penalties and fines. Therefore, it is best to prepare your reports as soon as possible so that this law will not penalize you.

The Federal Bankruptcy Law

It implemented the Federal Bankruptcy Law to protect the rights of creditors and debtors by providing a system for resolving bankruptcy cases of insolvent individuals and entities. The law provides for both voluntary and compulsory liquidation procedures.

A good reason to prepare financial audit reports in the UAE is that it is a legal requirement for companies and non-profit organizations. The UAE Federal Bankruptcy Law stipulates that all firms and organizations must have their financial statements audited at least once a year by an independent auditor, certified by the Ministry of Finance.

What Top Benefits Does it Bring?

It is essential to get your financial records audited periodically because it helps you:

Evaluate Flaws

Financial auditing services in UAE help organizations find flaws and errors in their financial data and processes. These errors can be unintentional or intentional, but they negatively impact the company’s reputation and its stakeholders. Rectify them before they become more significant problems.

Reduces the Chance of Penalties

Audits help companies reduce penalties by identifying loopholes and vulnerabilities which lead to penalties. This also helps companies ensure that their accounting processes comply with the relevant regulations. Auditors also keep organizations informed about the latest laws and regulations to avoid any penalties or fines resulting from a lack of awareness.

Better Money and Corporate Planning

Audits assist organizations in streamlining their processes through better planning, control, and support. This enables businesses to identify areas where they can improve performance and increase efficiency. It also helps them allocate resources more effectively to achieve.

Show Value-Added Services

Many top-level auditors provide value-added services to their clients. They can help them in their business growth with their expertise and insights. The auditors can easily find out the flaws in your business operations concerning finance and give you suggestions that can help you improve your future performance.

Evaluate Financial Health

It can use these audits as an instrument to do a 360 check of the financial health of an institution. Further, it contains some of the best ways to gauge the budget. Further, it evaluates how it is tracking along with any budgetary controls that may be in impact.

AEY Auditing of Accounts is among the top auditing firms in the UAE that is always in your assistance. We deliver the best financial auditing services in UAE to resolve all of your concerns. Get your Financial Audit Report in the UAE done now and add significant value to your business.

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Economic Substance Regulation, or ESR, is a hot topic on everyone’s mind. It came into existence after the UAE Economic Substance Law of 2018 was enforced by the UAE government. Many people are still unaware of what Economic Substance is and how it proves beneficial for both business owners and the economy of the UAE.

Thankfully, with our guide, you can easily file for Economic Substance Regulation in the UAE. There are thousands of businesses affected by this change, so we wanted to simplify the process for each of them.

It had become quite common for companies in the United Arab Emirates (UAE) to operate from anywhere and everywhere worldwide to register themselves in various jurisdictions with zero economic presence in UAE. They generally did this to avoid paying any taxes in UAE. However, Economic Substance Regulation in the UAE has changed this whole game by requiring businesses to make their presence felt and also have a certain level of economic substance, among the other aspects. This article will explain everything you need to know about ESR and its application to your business.

What is ESR Notification

UAE introduces global compliance that free zone, offshore companies, and the mainland have to provide Economic Substance in listed activities conducted in the UAE.

For ESR’s first part, it is required to file an Economic Substance notification to the respected regulatory body of the UAE within the demanded period.

Why Implement ESR in the UAE?

• Introduction of Value Added Tax
• Introduction of AML compliance

Who need it?

Companies either mainland, offshore, free zone, or the economic zone, conducting related activities and earning, need to file ESR in UAE.

These associated activities are mentioned below:

• Banking business
• Intellectual property business
• Shipping business
• Insurance business
• Holding company business
• Distribution and service center business
• Headquarter business
• Lease-finance business
• Investment Fund management business

It is essential to consider that merged company groups and multiple accounting companies may not file a single notification. Each company is required to file separate applications. We believe consolidated one’s invalid. So, to avoid such a problem, consulting a top auditing firm in Dubai is highly needed, delivering experience in providing ESR services.

Latest Development in ESR Filing

It has introduced a new exemption category by introducing Resolution 57/2020. You need to file an ESR notification coupled with documentary evidence to show the position; here, you will get the exempt status of ESR.

Also, UAE FTA is the authority to lead the charge as a regulatory authority of each licensee; for:

• Evaluation of completing Economic Substance Test by licensees
• Penalizing for non-compliance
• Hearing and delivering decisions on filed appeals of licensees.

Penalties of Failing ESR Compliance

• If you fail to comply with the ESR test, you will face a penalty of AED 10,000 to AED 50,000.
• Moreover, subsequent failure results will cause a penalty of AED 50,000 to AED 300,000.

Step by Step Guide of How to File ESR

Assessment of Eligibility

Firstly, the company must ensure that they fall under the associated activities. The company can get confirmation or updated information through the UAE Ministry of Finance website. You have to file notification within six months from the culmination of the associated financial activity period only if you are a licensee and exempted licensee.

Test Assessment

Afterward, the company has to ensure that they fall within the standard of the Economic Substance Test. Hence, the company can find the template notification and ESR report on the website of the Ministry of Finance before filing for the information. If the company is perplexed to take action, as the result, it can get complete guidance from the MoF website. Further, it can get direction from the authentic ESR filling companies.

Filing

The ending part of the ESR process is to file the notification to a competent authority in the UAE. According to MoF website information, the filing portal has been live since Dec 2020. You can file notices and an Economic Substance Report too for which the company needs to keep annual substance return proofs.

In case the company does not fall under these rules and needs to show the required substance in the UAE. In that case, we assess to verify that the company can satisfy economic sense according to compliance.

Reporting

In the end, companies have to finalize and submit the ESR report to the regulatory authority yearly. In case, the authority demands proof, you must have all of the below documents ready.

Economic Substance Test

Licensees are required to comply with the economic substance test. In this regard, they must be able to show below:

• Firstly, a sufficient level of qualified and experienced employees and adequate physical presence in the UAE;
• Secondly, acceptable expenditure on income-generating activities; and
• Thirdly, the economic substance of relevant activities is in the UAE.

Licensees must, at all times, comply with the following requirements:

• Firstly, the licensee shall carry on a relevant activity directed and managed from the UAE;
• Secondly, the licensee shall carry out core income-generating activities (CIGA) about a relevant training from the UAE;
• Moreover, you must comply with an adequate level of appropriate expenditure, qualified employees, and physical assets in the UAE for conducting CIGAs; and
• Above all, adequate premises are available for carrying on CIGAs.

Is it Applicable to?

The economic substance test is applicable to all businesses operating in UAE under the below licenses:

• Investment fund manager license
• Headquarter license
• Holding company license
• Lease finance license
• Shipping license
• Intellectual Property License

How does AEY Auditing of Accounts Assist?

A company may face many issues during the overall process of ESR filing. It is because of its complication. They publish all the information regarding the notice of ESR and its deadlines on the MoF website.

We must consult such companies with the expert and reputed ESR filing companies in UAE for significant help.

A E Y Auditing of Accounts is a top audit firm in UAE regarding Economic Substance Regulation (ESR) compliance, reporting, and filing. We are in your services to help with ESR. Our professionals significantly evaluate your business activities under new compliances. Also, we deliver the best support throughout navigating the ever-changing UAE regulatory landscape.