Accounting and auditing are two of the main elements that any entrepreneur would like to know if they are planning to set up business in Dubai. It is crucial for them to be aware of the rules pertaining to these. For accounting rules, it is crucial to bear in mind the following:
Tax year is from January 1 to December 31. The accounting regulation body in the UAE is the UAE Ministry of Economy. There are professional accounting bodies in the UAE namely UAE National Accountants and Auditors Association and the UAE Ministry of Economy. Regarding company reports, companies are required to provide an annual activity report which is audited by an auditor to the Ministry of Finance for trading companies and to the Ministry of Industry for industrial companies. This will serve as the renewal of the company’s license.
Entrepreneurs also need to know about the following business services in Dubai:
The Dubai Tax System
The Dubai tax system exempts all resident companies and individuals from capital gains tax, personal income tax, corporate tax, and withholding tax. Customs duties of 5 percent still apply on imports.
All goods that are imported into the UAE have to undergo customs clearance which can be obtained only after paying customs duty which is 5 percent of the goods’ value plus the cost of freight insurance. When an importer is not able to pay the duties, the customs authorities can sell the goods for them to recover the amount.
Oil, production companies, gas exploration, and petrochemical companies are taxed of up to 55 percent. Foreign bank branches are taxed at a flat rate of 20 percent.
The real property transfer tax is 4 percent and it is borne equally by the seller and buyer. The labor law states that companies that have more than 100 employees have to use a “wage protection system” through the Ministry of Labor.
On Free Zone Companies
For free zone companies in the UAE, each of these states that all the companies under it are required to prepare and file annual audited accounts. These free zones are incorporated in DMCC (Dubai Multi Commodities Centre), DWC (Dubai World Central), and JAFZA (Jebel Ali Free Zone).
The current requirement is to submit the report to the authorities 90 days of the free zone company’s year-end. DWC requires a report to be submitted as part of license renewal.
Free zone companies may also be fined AED 5,000 or approximately $1,400 as penalty for every month of any outstanding audited financial report. Companies may request for extension for the deadline of submission for those reports. The major risk companies bear for failing to submit the reports is non-renewal of their trade license.
Free zone companies can maintain their financial statements. These financial records need to be verified by auditors who are approved by the Free Zone authorities before these documents are submitted.
Even though the free zone company has not traded yet, the shareholders will need to pay for several expenses such as office rents, incorporation fees, consultancy fees, visa fees, visa deposits, etc. All these have to be recorded and reflected on a financial statement.