UAE companies’ requirement to prepare and maintain audited Financial Statements depends on their status as either a Qualifying Free Zone Company or the amount of their annual revenue. The important points are:

• Qualifying Free Zone Companies are obligated to mandatorily prepare and maintain audited Financial Statements.
• Non-Qualifying Free Zone Companies (Taxable Persons) are required to prepare and maintain audited Financial Statements only if their annual revenue exceeds AED 50 million.
• This means that the obligation to prepare and maintain audited Financial Statements applies to Taxable Persons whose revenue exceeds AED 50 million, provided they are not Qualifying Free Zone Companies.

For instance: If a company’s revenue is AED 49 million and it is not a Qualifying Free Zone Company, it is not required to prepare and maintain audited Financial Statements.

Practical Example:

ABC LLC is a manufacturing company based in Dubai, UAE. They have been in operation for several years and have been actively engaged in the export business within the UAE and to international markets. As the end of the fiscal year approaches, ABC LLC’s management is evaluating its financial reporting requirements and whether they need to prepare and maintain audited Financial Statements in accordance with UAE Corporate Tax Law.

Company Status:

• Revenue: ABC LLC’s total revenue for the fiscal year stands at AED 75 million, indicating significant growth in their business operations.
• Free Zone: ABC LLC doesn’t operates within a Free Zone but is a mainland entity.

Key Questions and Tax Issues:

• Does ABC LLC, with an annual revenue of AED 75 million, have an obligation to prepare and maintain audited Financial Statements?
• Does ABC LLCs non-qualification as a Qualifying Free Zone Company impact its financial reporting obligations?

Solution:

• Revenue Threshold: As per UAE Corporate Tax Law and Ministerial Decision of 82 of 2023 (Concerning Exceptions from Tax Registration), ABC LLC, with an annual revenue of AED 75 million, falls into the category of Taxable Persons whose revenue exceeds AED 50 million. Consequently, the obligation to prepare and maintain audited Financial Statements applies to them.
• Free Zone Status: Since ABC LLC do not meet the specific criteria for being a Qualifying Free Zone Company means that their revenue threshold is still applicable. Therefore, their non-qualification as a Qualifying Free Zone Company does not exempt them from the requirement to prepare and maintain audited Financial Statements due to their revenue exceeding AED 50 million

Conclusion

In this case, ABC LLC, being a Taxable Person, is required to prepare and maintain audited Financial Statements because their annual revenue exceeds AED 50 million, as per UAE Corporate Tax Law and Ministerial Decision.

Are you unsure if your company is required to prepare and maintain Audited Financial Statements? We can help you.