Mainland vs Free Zone Audit Requirements

UAE Mainland Audit Requirements

Companies registered in UAE mainland (through Department of Economic Development - DED in Dubai, or equivalent in other emirates) are subject to the UAE Commercial Companies Law (Federal Law No. 32 of 2021). This law makes external audit mandatory for all Limited Liability Companies (LLCs), joint stock companies, and branches of foreign companies, regardless of size or revenue.

Key Mainland Requirements:

• Mandatory Audit: No exceptions or revenue thresholds. Even a startup LLC with minimal revenue must have an annual audit.
• Ministry-Approved Auditor: Auditor must be approved by UAE Ministry of Economy. The approved auditor list is publicly available.
• IFRS Compliance: Financial statements must comply with full International Financial Reporting Standards.
• Filing Deadline: Typically 90-120 days from year-end, though this varies by emirate and DED office.
• Language: Financials can be in English or Arabic. Some mainland authorities prefer Arabic, though English is widely accepted.

Free Zone Audit Requirements

The UAE has over 40 free zones, each with its own regulatory authority and specific audit requirements. Free zones offer benefits like 100% foreign ownership, tax exemptions, and easier business setup, but audit requirements vary significantly.

Major Free Zones Comparison:

DIFC (Dubai International Financial Centre)

• Audit Required: Yes, all DIFC entities must have annual audit
• Auditor: Must be DFSA (Dubai Financial Services Authority) registered auditor
• Standard: Full IFRS mandatory
• Deadline: 4 months from year-end for filing
• Additional: DIFC has stringent corporate governance requirements
• Cost: Typically higher (AED 25,000-60,000+) due to IFRS and compliance complexity

JAFZA (Jebel Ali Free Zone)

• Audit Required: Yes, for companies with revenue over AED 1M
• Auditor: Ministry-approved or JAFZA-approved auditor
• Standard: IFRS or IFRS for SMEs
• Deadline: 6 months from year-end
• Cost: AED 15,000-35,000 typically

DMCC (Dubai Multi Commodities Centre)

• Audit Required: Yes, for most license types
• Auditor: DMCC-approved auditor list
• Standard: IFRS or IFRS for SMEs
• Deadline: 4-6 months from year-end
• Cost: AED 12,000-40,000

ADGM (Abu Dhabi Global Market)

• Audit Required: Yes, all entities
• Auditor: ADGM-registered auditor
• Standard: Full IFRS
• Deadline: 4 months from year-end
• Additional: Similar to DIFC in stringency
• Cost: AED 25,000-60,000+

Other Major Free Zones (RAKEZ, SHAMS, DSO, etc.)

• Audit Required: Often yes, but with revenue thresholds (AED 1-3M common)
• Auditor: Usually accepts Ministry-approved auditors
• Standard: IFRS for SMEs typically acceptable
• Flexibility: More flexible requirements than DIFC/ADGM

Key Differences Explained

1. Mandatory vs Optional Audit

Mainland: Audit is absolutely mandatory for all LLCs and joint stock companies, regardless of revenue. There are no exemptions.

Free Zones: Requirements vary. Financial free zones (DIFC, ADGM) require audit for all entities. Commercial free zones often have revenue thresholds (e.g., AED 1M, AED 3M) below which audit may be optional. Always check your specific free zone requirements.

2. Accounting Standards

Mainland: Full IFRS is mandatory. This can be complex and costly for small businesses, requiring significant accounting expertise.

Free Zones: DIFC and ADGM require full IFRS (like mainland). Most other free zones accept IFRS for SMEs, which is a simplified version of IFRS designed for small and medium enterprises. This reduces complexity and cost.

3. Auditor Selection

Mainland: Must use a UAE Ministry of Economy-approved auditor. The approved list is published online and includes hundreds of firms.

Free Zones: Each zone may have its own approved auditor list. DIFC/ADGM have separate registration systems. Some free zones accept any Ministry-approved auditor. Check your specific zone's requirements.

4. Filing Deadlines

Mainland: Generally 90-120 days (3-4 months) from financial year-end, though Dubai DED has been flexible with extensions in recent years.

Free Zones: Typically more generous - often 4-6 months from year-end. DIFC and ADGM are stricter (4 months). Commercial zones like JAFZA offer 6 months.

5. Cost Differences

Audit costs are generally similar between mainland and most free zones for comparable company sizes. However:

• DIFC/ADGM audits cost more (20-30% premium) due to full IFRS and stricter compliance
• Free zones accepting IFRS for SMEs may have slightly lower audit costs
• Mainland Arabic-language financial statement requirements may add minor translation costs

Corporate Tax Considerations (2023+)

Since June 2023, UAE introduced corporate tax at 9% for profits above AED 375,000. This applies to both mainland and most free zone companies, with some exceptions:

• Mainland: Subject to 9% corporate tax on taxable income
• Free Zones: Qualifying Free Zone Persons may benefit from 0% corporate tax on qualifying income (must meet conditions)
• Both mainland and free zone companies need audited financials for corporate tax filings

Economic Substance Regulations (ESR)

Both mainland and free zone companies conducting "relevant activities" (banking, insurance, investment management, lease-finance, headquarters, shipping, holding/IP) must comply with ESR. This includes:

• Annual ESR notification filing
• ESR report (if conducting relevant activity)
• Often requires auditor involvement in ESR report preparation

Which Jurisdiction for Audit Compliance?