What are the Accounting Requirements for Free Zone Companies in the UAE?

Running a company in a UAE free zone is attractive—streamlined setup, world—class infrastructure, and proximity to global markets. However, compliance is not optional. To stay bankable, investor-ready, and penalty-free, you must meet clear accounting, tax, and reporting duties. In this practical guide, Sharp Accounting explains the must-do items for Free Zone companies in the UAE, from bookkeeping and audited financial statements to VAT, Corporate Tax (9%), ESR, and UBO. We’ll also show you how to structure your back office so reporting becomes fast, accurate, and stress-free.

1) Bookkeeping basics: what every free zone company must keep

First, every entity should maintain accurate, chronological books of account. Regardless of activity—trading, services, e-commerce, or holding—you’ll need a ledger that supports each figure you present to banks, auditors, and authorities.

Core requirements to observe

• Double—entry bookkeeping with a clean Chart of Accounts mapped to your licence—activities.
• Source documents for every transaction: customer invoices, supplier bills, contracts, delivery—notes, and bank statements.
• Bank reconciliation performed monthly (weekly if transaction—volumes are high).
• Fixed asset register with depreciation policy aligned to IFRS.
• Stock/Inventory controls (FIFO or weighted average), plus evidence of counts and adjustments.
• Record retention for at least the statutory period (keep digital plus original where required).

Because free zone authorities and banks want clarity, you should produce monthly management accounts—P&L, Balance Sheet, Cash Flow, plus A/R and A/P ageing. With consistent reports, you’ll catch errors early and avoid last-minute audit panic. Get details on Accounting for Ajman Freezone.

2) Financial statements and audit: IFRS and free zone expectations

Most free zones now require audited financial statements for licence renewal. Even where “audit-on-request” exists, banks and investors still expect a full set in IFRS format.

What a compliant set includes

• Statement of Profit or Loss, Statement of Financial Position, Cash Flow, Changes in Equity, and Notes.
• Comparatives and accounting policies clearly disclosed.
• Related-party and going-concern notes prepared properly.

Audit timeline tips

• Close your year within 30 days of period end; prepare lead schedules, trial balance, bank letters, and inventory evidence.
• Select an auditor approved by your free zone authority.
• Respond quickly to PBC (Provided-By-Client) lists; accurate, indexed folders save weeks.
• Submit the signed audit to the free zone portal before your renewal deadline.

3) VAT for free zone companies: registrations, returns, and evidence

Although several zones are designated for VAT purposes, “VAT in UAE free zones” is not the same as “no VAT”. The right treatment depends on place of supply, customer location, customs treatment, and whether your zone appears on the Designated Zone list for specific goods flows.

What to put in place

• TRN registration if you meet the threshold or wish to voluntarily register.
• Tax-coded bookkeeping: 5%, 0%, exempt, out-of-scope, and reverse-charge entries separated.
• Valid tax invoices with TRN, correct names/addresses, and sequential numbering.
• VAT returns filed on time with reconciliations back to the ledger.
• Evidence packs: shipping proof, import declarations, customer TRNs, and contracts—kept neatly for FTA review.

Because many free zone firms trade cross-border, you should run quarterly VAT health checks to confirm coding accuracy, especially around reverse charge and zero-rating for exports. Looking to a details on Ajman Freezone Accounting?

4) Corporate Tax (9%): QFZP status, returns, and substance

With the UAE Corporate Tax (9%) regime now live, the most common question is: Can a free zone company be taxed at 0%? The short answer: Often yes—if you qualify as a Qualifying Free Zone Person (QFZP) and meet strict conditions, including substance, qualifying income, audited accounts, and compliance with transfer pricing documentation where applicable.

Action points for free zone companies

• Corporate Tax registration on the FTA portal.
• Assess QFZP eligibility (activities, related-party dealings, and income streams).
• Substance and staffing: maintain adequate people, premises, and costs in the free zone.
• Segregate transactions: track qualifying vs non-qualifying income in your ledger for accurate returns.
• Prepare returns with reconciliations to audited statements; maintain transfer pricing support for connected parties.

Strong bookkeeping underpins QFZP claims. Therefore, map your Chart of Accounts and cost centres so you can defend 0% treatment where it legitimately applies.

5) ESR & UBO: governance filings that protect your licence

Beyond tax and audit, you must also maintain governance compliance:

• Economic Substance Regulations (ESR): determine if you conduct a Relevant Activity (e.g., distribution & service centre, HQ business). If yes, file the ESR— Notification and, where required, the ESR Report with proof of adequate substance.
• Ultimate Beneficial Owner (UBO): maintain accurate ownership registers and file UBO details with your authority. Update promptly after share changes.
• Company registers: keep MOA/AOA, share certificates, and resolution files current and accessible.

Because authorities frequently audit ESR/UBO data quality, maintain a compliance calendar with responsibilities and deadlines pinned to your licence anniversary. Get details on Accounting for Ajman Media City Companies.

6) Payroll, WPS, and EOSB: people compliance that auditors check

If you employ staff, you’ll likely process salaries via WPS (Wage Protection System). In addition, you must accrue End—of—Service Benefits (EOSB) and follow UAE labour rules on leave, overtime, and final settlements.

Build a compliant payroll routine

• Monthly payroll with approvals, secure payslips, and WPS file submission on time.
• EOSB provision calculated and posted monthly; support balances with staff-level workings.
• Leave and overtime policies mirrored in contracts and reflected in payroll journals.
• Confidential records stored safely for audit and HR review.

7) Banking, cash control, and audit-ready documentation

Banks in the UAE expect clean reconciliations and sensible internal controls. Therefore, implement:

• Dedicated business accounts (avoid personal account usage).
• Daily or weekly bank feeds into cloud software and monthly reconciliations.
• Payment approvals: maker–checker controls for vendor payments and payroll.
• Document naming standards so auditors can tie invoices to payments quickly.

Organised evidence shortens audits and speeds up credit lines or trade finance approvals.

8) Systems stack: cloud accounting and integrations that actually help

Modern free zone finance teams run lean with cloud tools: Xero, QuickBooks Online, or Zoho Books paired with OCR for expenses and payment gateways for collections. Consequently, you’ll reduce manual keying, eliminate “missing invoices,” and gain real—time dashboards for decision-making.

Best-practice setup

• Chart of Accounts aligned to VAT/CT reporting and QFZP tracking.
• Automated bank feeds, rules, and expense capture (OCR).
• Inventory modules for landed cost and SKU profitability (if you trade goods).
• Project accounting for service businesses that bill milestones or T&M. Looking to a details on Al Zorah Free Zone Accounting?

9) Deadlines & penalties: why a compliance calendar pays for itself

Free zones publish renewal timetables and audit submission rules. The FTA sets strict VAT and Corporate Tax filing windows. Missing dates can create penalties and stall banking or immigration services.

Create a calendar with

• Monthly: bookkeeping close, bank reconciliation, management pack.
• Quarterly: VAT return & payment, VAT health check, debtor review.
• Annually: audit prep, auditor appointment, IFRS statements, ESR notification/report, UBO update, CT return.

Because teams change, document your month-end checklist and keep it in your shared drive. Consequently, knowledge doesn’t walk out the door during staff turnover.

10) How Sharp Accounting helps free zone companies

At Sharp Accounting, we keep your numbers clean and your compliance on time:

• Monthly bookkeeping and real-time management reports
• VAT registration, returns, and health checks
• Corporate Tax (9%) registration, QFZP assessments, and returns
• ESR/UBO filings and audit support with IFRS statements
• WPS payroll, EOSB provisioning, and HR-grade records
• Catch-up/clean-up projects for backlogs and system migrations (Excel → Cloud)

With us, you get structured processes, fixed fees, and a calm month-end.

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Call +971 6704 7220 for Freezone Accounting in the UAE

Compliance in a UAE free zone isn’t just a box-ticking exercise. With tight bookkeeping, timely VAT/CT filings, strong governance (ESR/UBO), and an annual IFRS audit, your company stays bankable, investor-ready, and confidently renews its licence. If you’d like your finance function to run on rails, Sharp Accounting can design the workflow, implement the cloud stack, and keep you audit-ready every month—so you can focus on growth.