Difference between Auditing in Mainland Company and Auditing in Freezone Company
The UAE is a popular investment destination in the world. The government’s business-friendly policies, along with an urban culture, have enabled many entrepreneurs and multinational companies to set up their businesses in Dubai and other UAE emirates. In addition, a robust legal framework in line with international standards and a clearly defined taxation policy has ensured the most minor worries for the businesses already operating in the UAE.
The UAE also provides various types of company formations depending upon the purpose of the company. The company types include Mainland companies, Freezones companies and Offshore companies. Each company types differ in formations structure, subject to different taxation rules, serving other clients. The audit rules vary for each company type. Let’s discuss this in detail.
Mainland Company
Mainland companies are those companies incorporated in the mainland UAE. The mainland companies must have a physical office with a telephone number. These companies came directly under the Federal and Emirati governments’ jurisdictions and were subjected to their rules & regulations. They may need to register for the Federal Tax Authority (FTA) purpose, and the UAE VAT law applies to these companies. They can provide goods and services to the residents of the UAE with applicable VAT charges. Mainland companies are required to get their books of accounts audited by a qualified auditor. The audit reports may be necessary to submit to few government authorities.
Freezone Company
UAE is home to many Freezones. Each Freezone caters to the needs of companies in a particular sector. To incorporate a Freezone company, they need to register with the specific Freezone authority. Different rules apply to companies operating in a specific Freezone. For example, the UAE VAT law does not apply to Freezone companies. At the same time, the Freezone companies cannot service the UAE mainland residents.
Many Freezone companies do not necessarily get audited. Freezone authorities do not require Freezone businesses to submit an audit report. Branch of local and foreign companies may not submit their audit reports. But certain entities operating in the Freezone need to deal with a mandatory audit of accounts. The company types such as free zone companies (FZCO) and free zone establishments (FZE) are required to submit audit reports failing to face the risk of non-renewal of company license.
Mainland Audit V/S Freezone Audit
The following are some of the significant differences between the audit of Mainland company and Freezone company:
| Mainland Company | Freezone Company | |
| Audit Requirement | A financial audit is mandatory for all mainland companies | A financial audit is required only for FZCOs and FZEs company types |
| Auditors | Qualified licensed auditors can carry out an audit in the UAE | An audit must be carried out only by qualified licensed auditors approved by the Freezone authorities. They are referred to as Approved Auditors. |
| UAE Company Act | Company Act applies to all the companies operating in Mainland UAE. | The company Act does not apply to the companies operating in eh UAE Freezones. |
| VAT | The audit team will access all the VAT transactions as part of the financial audit. | As VAT does not apply to Freezones, the Audit team may forgo the same.
|
| Financial Penalties | No specified mandatory financial penalties are levied on companies failing to submit an audit report. | Freezone companies may be levied a max fine of AED 5,000 monthly for a particular outstanding financial audit report. |
Why Jaxa?
Jaxa Chartered Consultants have approved auditors for most of the UAE Freezones. We provide accounting and audit services to both mainland and Freezones companies in the UAE. In addition, our services for entrepreneurs and companies incorporated in the UAE include bookkeeping, accounting, audit and tax-related services. Please Contact Us to know more about our corporate financial services. We’d be delighted to help!
Read More About Auditing
Auditing Services in Dubai, UAE
Accounting, Bookkeeping and Auditing in Dubai
Top Reasons to avail Auditing services in the UAE
Difference Between Auditing and Investigation
10 Significant Advantages of Financial Auditing of a Company
Which Companies Require Auditing Services?
Auditing: What to Expect in the Future
Impact of Automation on Auditing Industry
Auditing can help Malls and Shopping Centers
Some Basic Auditing tips for Startups
Different Methods of Error Detection While Auditing
How Can Outsourcing Auditing Services Help in the Growth of the Business?
How Can Auditing Affect the Efficiency of a Business
Facing Financial Challenges? Auditing might be the Answer for you
