FZCO audit

[RTXX]

Hello,

Like many, I was promised by Fred / DSL a no audit company, turned out in the small lines... all the years back have to be audited on the FZCO company closing. There is no way Fred did not know about this, and I insisted back then on this topic, and the other was always "No audit". Of course I have my share of responsibility, should have doubled or tripled checked this. The marketing here was so good, I trusted the guy. Lesson learnt.

Now about trying to fix this mess if I don't want an audit for years up to end of 2023 (and that I am also stopping the activity by end of 2023) :

- There are a lot of mention in the thread "UAE clarification of Free Zone qualifying income" about opting to be treating as a mainland company, but I can't find any legal ground to that. Do you know where I can read about that from official source ? IFZA does not allow a FZCO to be converted into a mainland company, so what is mean to opt to be treated as a mainland company ? Anyone has experience with that?

- Would anyone know an alternative way to avoid the company audit ? Perhaps a service provider who would "buy" the empty company from me or else ? Everything is legal with my company and its activity, but I would really like not to give my accounts away.

Thanks for you input, if any.

 

[Martin Everson]

@EmiratesSetup Do you have any input to the questions here?

 

[BeyondBorders]

Liquidation Audit is required by the IFZA/DSO. Make sure to start Liquidation procedures well ahead renewal date, ideally with a capable advisor/lawyer by your side. Penalties do occur, if Liquidation is not done by renewal date.

 

[JackAlabama]

Hello,

Like many, I was promised by Fred / DSL a no audit company, turned out in the small lines... all the years back have to be audited on the FZCO company closing. There is no way Fred did not know about this, and I insisted back then on this topic, and the other was always "No audit". Of course I have my share of responsibility, should have doubled or tripled checked this. The marketing here was so good, I trusted the guy. Lesson learnt.

Now about trying to fix this mess if I don't want an audit for years up to end of 2023 (and that I am also stopping the activity by end of 2023) :

- There are a lot of mention in the thread "UAE clarification of Free Zone qualifying income" about opting to be treating as a mainland company, but I can't find any legal ground to that. Do you know where I can read about that from official source ? IFZA does not allow a FZCO to be converted into a mainland company, so what is mean to opt to be treated as a mainland company ? Anyone has experience with that?

- Would anyone know an alternative way to avoid the company audit ? Perhaps a service provider who would "buy" the empty company from me or else ? Everything is legal with my company and its activity, but I would really like not to give my accounts away.

Thanks for you input, if any.

So what exactly has been requested from you to do the closing audit?

 

[Barbara Roessle]

Liquidation Audit is required by the IFZA/DSO. Make sure to start Liquidation procedures well ahead renewal date, ideally with a capable advisor/lawyer by your side. Penalties do occur, if Liquidation is not done by renewal date.

there is no need for a liquidation report for the renewal of a company. Only when you liquidate your company, a liquidation report has to be provided. We can get one for you and you dont have to provide audits for that.

Hello,

Like many, I was promised by Fred / DSL a no audit company, turned out in the small lines... all the years back have to be audited on the FZCO company closing. There is no way Fred did not know about this, and I insisted back then on this topic, and the other was always "No audit". Of course I have my share of responsibility, should have doubled or tripled checked this. The marketing here was so good, I trusted the guy. Lesson learnt.

Now about trying to fix this mess if I don't want an audit for years up to end of 2023 (and that I am also stopping the activity by end of 2023) :

- There are a lot of mention in the thread "UAE clarification of Free Zone qualifying income" about opting to be treating as a mainland company, but I can't find any legal ground to that. Do you know where I can read about that from official source ? IFZA does not allow a FZCO to be converted into a mainland company, so what is mean to opt to be treated as a mainland company ? Anyone has experience with that?

- Would anyone know an alternative way to avoid the company audit ? Perhaps a service provider who would "buy" the empty company from me or else ? Everything is legal with my company and its activity, but I would really like not to give my accounts away.

Thanks for you input, if any.

Let me clarify a few things here.

Until recently, the UAE had no corporate tax. It was only announced at the beginning of this year, and at that time, the government implied that it would only be applicable to Mainland Companies, with Freezone Companies being exempt. In May 2023, we received some new information, and now it seems certain that ALL companies, including Freezones (with some exemptions), will be subject to taxation. The discussion about qualifying Freezones and qualifying Freezone companies is still ongoing, and it has not yet been clarified which Freezones will be classified as qualified and what Freezone company owners have to do or which activities they should choose (many have been published, most missing) to fall under the qualified category. We are all awaiting the detailed information.

As of today (October 5th), there is no news in this regard.

Auditing and Bookkeeping: Until now, there has always been mandatory bookkeeping for all companies in the UAE, but it was not enforced. In all these years, we never had a single Freezone company that had to show their books. Therefore, clients were advised that it's not necessary, although it should have been mentioned that it was always mandatory.

Starting from January 2024, most companies will begin their taxable year, and in order to prepare the yearly audit and report, bookkeeping is required. Since auditing firms need to conduct comparative audits, they will require your bookkeeping records for 2023 (or since your company was established).

Converting a Freezone Company to a Mainland Company will not change anything and is not possible anyway.

I would like to point out that it was mentioned in a major newspaper that there may not be extensive audit checks for the next 2-3 years, so I urge you all not to worry too much.

Simply maintain simple bookkeeping and consider giving yourself a salary raise. In addition, you can pay out dividends and have a house and car allowance. By following these simple steps, most businesses will manage to remain tax-free, just as they always were.

NO STRESS
And to answer your question: there is no alternative to avoid the company audit but dont stress yourself. After all there are more than a half million businesses in the UAE and they have never been registered in the System as there was no corporate Tax so far. Imagine the manpower and systematic needed to sort through this huge volume of information and audits.

 

[PiersBlack]

there is no need for a liquidation report for the renewal of a company. Only when you liquidate your company, a liquidation report has to be provided. We can get one for you and you dont have to provide audits for that.


Let me clarify a few things here.

Until recently, the UAE had no corporate tax. It was only announced at the beginning of this year, and at that time, the government implied that it would only be applicable to Mainland Companies, with Freezone Companies being exempt. In May 2023, we received some new information, and now it seems certain that ALL companies, including Freezones (with some exemptions), will be subject to taxation. The discussion about qualifying Freezones and qualifying Freezone companies is still ongoing, and it has not yet been clarified which Freezones will be classified as qualified and what Freezone company owners have to do or which activities they should choose (many have been published, most missing) to fall under the qualified category. We are all awaiting the detailed information.

As of today (October 5th), there is no news in this regard.

Auditing and Bookkeeping: Until now, there has always been mandatory bookkeeping for all companies in the UAE, but it was not enforced. In all these years, we never had a single Freezone company that had to show their books. Therefore, clients were advised that it's not necessary, although it should have been mentioned that it was always mandatory.

Starting from January 2024, most companies will begin their taxable year, and in order to prepare the yearly audit and report, bookkeeping is required. Since auditing firms need to conduct comparative audits, they will require your bookkeeping records for 2023 (or since your company was established).

Converting a Freezone Company to a Mainland Company will not change anything and is not possible anyway.

I would like to point out that it was mentioned in a major newspaper that there may not be extensive audit checks for the next 2-3 years, so I urge you all not to worry too much.

Simply maintain simple bookkeeping and consider giving yourself a salary raise. In addition, you can pay out dividends and have a house and car allowance. By following these simple steps, most businesses will manage to remain tax-free, just as they always were.

NO STRESS
And to answer your question: there is no alternative to avoid the company audit but dont stress yourself. After all there are more than a half million businesses in the UAE and they have never been registered in the System as there was no corporate Tax so far. Imagine the manpower and systematic needed to sort through this huge volume of information and audits.

Thank you for sharing these insights.

Do you have a ballpark figure of how much audit costs for an IFZA company? Thanks.

 

[Barbara Roessle]

Thank you for sharing these insights.

Do you have a ballpark figure of how much audit costs for an IFZA company? Thanks.

Yes sure, it depends on the volume of transactions per year. We have Starter, Small, Medium and large Packages. Starting from AED4400 and goes upto AED8500.

Included :
Registration Corporate Tax (one-off)
Tax return 2024
Financial statements 2024

Thank you for sharing these insights.

Do you have a ballpark figure of how much audit costs for an IFZA company? Thanks.

In case you meant the liquidation audit report we can provide for AED2900

 

[Jbb1]

there is no need for a liquidation report for the renewal of a company. Only when you liquidate your company, a liquidation report has to be provided. We can get one for you and you dont have to provide audits for that.


Let me clarify a few things here.

Until recently, the UAE had no corporate tax. It was only announced at the beginning of this year, and at that time, the government implied that it would only be applicable to Mainland Companies, with Freezone Companies being exempt. In May 2023, we received some new information, and now it seems certain that ALL companies, including Freezones (with some exemptions), will be subject to taxation. The discussion about qualifying Freezones and qualifying Freezone companies is still ongoing, and it has not yet been clarified which Freezones will be classified as qualified and what Freezone company owners have to do or which activities they should choose (many have been published, most missing) to fall under the qualified category. We are all awaiting the detailed information.

As of today (October 5th), there is no news in this regard.

Auditing and Bookkeeping: Until now, there has always been mandatory bookkeeping for all companies in the UAE, but it was not enforced. In all these years, we never had a single Freezone company that had to show their books. Therefore, clients were advised that it's not necessary, although it should have been mentioned that it was always mandatory.

Starting from January 2024, most companies will begin their taxable year, and in order to prepare the yearly audit and report, bookkeeping is required. Since auditing firms need to conduct comparative audits, they will require your bookkeeping records for 2023 (or since your company was established).

Converting a Freezone Company to a Mainland Company will not change anything and is not possible anyway.

I would like to point out that it was mentioned in a major newspaper that there may not be extensive audit checks for the next 2-3 years, so I urge you all not to worry too much.

Simply maintain simple bookkeeping and consider giving yourself a salary raise. In addition, you can pay out dividends and have a house and car allowance. By following these simple steps, most businesses will manage to remain tax-free, just as they always were.

NO STRESS
And to answer your question: there is no alternative to avoid the company audit but dont stress yourself. After all there are more than a half million businesses in the UAE and they have never been registered in the System as there was no corporate Tax so far. Imagine the manpower and systematic needed to sort through this huge volume of information and audits.

Isn’t it true that with the small business relief you don’t need to do audits?

 

[RTXX]

Thank you all and Barbara for the detailed explanation.

Jack, I have not contacted an auditor yet so I cannot say. I have been trying to figure out if they are ways around.

So that all thing about a FZCO opting to be treating as a mainland company, that we talked about a while back in ""UAE clarification of Free Zone qualifying income"" does not exist ?

 

[Barbara Roessle]

Isn’t it true that with the small business relief you don’t need to do audits?

Small business relief: Audited Statements are not required as return filing has to be done but simplified.

Thank you all and Barbara for the detailed explanation.

Jack, I have not contacted an auditor yet so I cannot say. I have been trying to figure out if they are ways around.

So that all thing about a FZCO opting to be treating as a mainland company, that we talked about a while back in ""UAE clarification of Free Zone qualifying income"" does not exist ?

I am not aware of this thread - can you send me link?

 

[JackAlabama]

there is no need for a liquidation report for the renewal of a company. Only when you liquidate your company, a liquidation report has to be provided. We can get one for you and you dont have to provide audits for that.


Let me clarify a few things here.

Until recently, the UAE had no corporate tax. It was only announced at the beginning of this year, and at that time, the government implied that it would only be applicable to Mainland Companies, with Freezone Companies being exempt. In May 2023, we received some new information, and now it seems certain that ALL companies, including Freezones (with some exemptions), will be subject to taxation. The discussion about qualifying Freezones and qualifying Freezone companies is still ongoing, and it has not yet been clarified which Freezones will be classified as qualified and what Freezone company owners have to do or which activities they should choose (many have been published, most missing) to fall under the qualified category. We are all awaiting the detailed information.

As of today (October 5th), there is no news in this regard.

Auditing and Bookkeeping: Until now, there has always been mandatory bookkeeping for all companies in the UAE, but it was not enforced. In all these years, we never had a single Freezone company that had to show their books. Therefore, clients were advised that it's not necessary, although it should have been mentioned that it was always mandatory.

Starting from January 2024, most companies will begin their taxable year, and in order to prepare the yearly audit and report, bookkeeping is required. Since auditing firms need to conduct comparative audits, they will require your bookkeeping records for 2023 (or since your company was established).

Why would all these past records be needed?
Just opening balance of 2024 should be enough?

Converting a Freezone Company to a Mainland Company will not change anything and is not possible anyway.

I would like to point out that it was mentioned in a major newspaper that there may not be extensive audit checks for the next 2-3 years, so I urge you all not to worry too much.

Simply maintain simple bookkeeping and consider giving yourself a salary raise. In addition, you can pay out dividends and have a house and car allowance. By following these simple steps, most businesses will manage to remain tax-free, just as they always were.

NO STRESS
And to answer your question: there is no alternative to avoid the company audit but dont stress yourself. After all there are more than a half million businesses in the UAE and they have never been registered in the System as there was no corporate Tax so far. Imagine the manpower and systematic needed to sort through this huge volume of information and audits.

 

[Barbara Roessle]

Why would all these past records be needed?
Just opening balance of 2024 should be enough?

they need it for comparison. Of course it is not necessary if you company was formed recently

 

[uranium]

Corporate tax registration is required and first step you should do.
Accounting either monthly or quarterly is up to you
Tax returns on 2025
Auditing is not required unless your business generates more than 50 Milion AED

The recent Decision (No. 82) specifies that the financial statement of a taxpayer with revenue exceeding AED 50 million (approx. US$ 13.6 million) during the tax period (usually the financial year) and that availing a zero-rate free zone regime (i.e., Qualifying Free Zone Persons) must be audited by external auditors.

 

[Alenka]

Corporate tax registration is required and first step you should do.
Accounting either monthly or quarterly is up to you
Tax returns on 2025
Auditing is not required unless your business generates more than 50 Milion AED

The recent Decision (No. 82) specifies that the financial statement of a taxpayer with revenue exceeding AED 50 million (approx. US$ 13.6 million) during the tax period (usually the financial year) and that availing a zero-rate free zone regime (i.e., Qualifying Free Zone Persons) must be audited by external auditors.

Could you give the source where stated that audit is required only after exceeding 50m AED threshold?

 

[uranium]

Could you give the source where stated that audit is required only after exceeding 50m AED threshold?

https://mof.gov.ae/wp-content/uploads/2023/04/Ministerial-Decision-No.-82-of-2023-for-the-Purposes-of-Federal-Decree-Law-No.-47-of-2022.pdf

 

[sergeylim88]

do we need to have accounting for year 2023, if our first tax year is 2024?

 

[Barbara Roessle]

do we need to have accounting for year 2023, if our first tax year is 2024?

Yes, the accounting firms will require it as comparison.

do we need to have accounting for year 2023, if our first tax year is 2024?

Yes, the accounting firms will require it as comparison.

 

[JackAlabama]

Yes, the accounting firms will require it as comparison.


Yes, the accounting firms will require it as comparison.

comparison for what exactly?
why cant you simply start with your opening balance of xyz on 1.1.24.

 

[Barbara Roessle]

comparison for what exactly?
why cant you simply start with your opening balance of xyz on 1.1.24.

For accounting of 2024 and financial audit, the opening point is the balances as of 31 December 2023. For the audit report, accountant needs to provide comparative figures from the previous year. If you get the report audited, the report will contain both years as final numbers. In worst case scenario, the accountant has to highlight on the audit report that the 2023 figures are unaudited and that he has no opinion on them.

Reason behind this could be to control sudden salary raises, divident payouts, new allowances, etc. to avoid paying tax on this.

 

[JimBeam]

Reason behind this could be to control sudden salary raises, divident payouts, new allowances, etc. to avoid paying tax on this.

How does dividend payouts affect avoid paying taxes?