Auditing Requirements in the UAE | All you Need to Know

Overview:

In the United Arab Emirates (UAE), the regulatory framework for business has undergone a marked transformation with the adoption of the Commercial Companies Federal Law No. 32 of 2021. Among the critical mandates of the law is the requirement that companies operating in the UAE mainland have to undergo obligatory auditing for financial accounts. This article discusses the highlights of the legal mandate, which aims to promote transparency and compliance on economic matters.

Are business audits mandatory for mainland companies in the UAE?

Yes, in Commercial Companies Federal Law No. 32 of 2021, all UAE mainland businesses are mandated to have their financial statements professionally audited. This provides correct financial reporting, credible financial statements, and encourages fair business practices, protecting stakeholders’ interests.

How many years do mainland companies have to keep financial documents?

Mainland UAE companies must preserve their financial books for at least five years. This provision supports regulatory control, dispute resolution, and internal management processes while ensuring greater transparency and accountability.

Are free zone companies audited on the same basis as mainland companies?

No, auditing requirements vary for free zone companies. As a general rule, free zone companies are not required to conduct a general audit or mandatory reporting submission. There are exceptions, however, like in the case of FZCOs and FZEs, which have their own auditing requirements.

Why would free zone companies still need audit reports?

Although a free zone company is not obliged to file audit reports, they might be requested for immigration. Officials tend to require audit reports for valid financial documentation purposes, emphasizing the necessity of having proper financial records regardless of audit mandates.

How can Commercial Companies Federal Law No. 32 of 2021 be useful to businesses?

The law encourages an open and responsible business culture in the UAE by: Requiring mainland firms to be audited. Ensuring maintenance of financial records for regulatory and management of business.
This provides a standard for fiscal integrity and spurs companies toward adopting a strategic vision for effective management.

Is it allowed to collect advance audit fees on a quarterly basis in the UAE?

Yes, it is possible to collect advance audit fees on a quarterly basis in the UAE, provided it is mutually agreed upon by the auditing firm and the client. Unlike India, where specific restrictions might exist, such arrangements in the UAE are governed by the terms of the contract between the two parties.

Is a particular individual or firm licensed to conduct audits in the UAE?

Licensed auditors or registered audit firms alone are allowed to conduct audits in the UAE. These auditors should be approved by the concerned regulatory authorities and hold the necessary qualifications and certifications to conduct audits as per UAE laws.

What is withholding tax (WHT)?

Withholding tax is a tax withheld at source by the payer on payments made to non-residents for services, interest, or royalties. But no withholding tax is levied in the UAE. Contrarily, Saudi Arabia (KSA) charges withholding tax on payments to non-residents for certain services.

On what tax laws are all accounts and accounting governed in the UAE, if any?

Both bookkeeping and accounts in the UAE are mostly governed by the Commercial Companies Law and the Corporate Tax (CT) Law. Companies need to keep adequate financial records and comply with the regulations stipulated in these laws. Corporate tax filings must have annual audits of financial statements, irrespective of revenue volumes.

Is an audit mandatory for all businesses in the UAE, or is it conditional?

There is a mandatory annual audit for corporate tax filing in the UAE, even if a company does not have any revenue. The audit should be carried out by licensed auditors who examine and verify the financial statements. Some entities, though, like free zone companies, can have special audit requirements based on the rules of their respective free zone authorities.

How should businesses view these regulations?

Instead of looking at them as a compliance issue, companies should look at these regulations as a strategic set to improve the efficiency of management and guarantee long-term financial security.

What services does Arnifi provide to UAE and Saudi Arabian businesses?

Arnifi is a company that provides corporate services digitally, helping businesses enter and scale in the Middle East, with a focus on the UAE and Saudi Arabia. The professionals come from top organizations such as Amazon and Souq and provide bespoke solutions for startups. Find out more at www.Arnifi.com.

Where can I get more information on company formation in the UAE?

You can find more information on selecting Mainland vs. Free Zone companies and other business setup facts on the Arnifi website.

About Arnifi

Arnifi is a digital-first Corporate service provider helping companies enter the Middle East region, starting with the UAE and Saudi Arabia markets. Founded and backed by professionals from Amazon, Souq, and other large companies operating in KSA – the team understands what it takes to succeed as a startup in both UAE and Saudi Arabian markets, apart from going through the setup process multiple times. Arnifi will provide a truly digital experience for the entry and scale-up of companies in both the UAE and Saudi Arabia. Discover tailored solutions and strategic partnerships that propel your business forward. Check out at – www.Arnifi.com for more details.

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Also Read: Choosing Your UAE Company: Mainland vs. Freezone