Audit Requirements for JAFZA Firms
JAFZA short for Jabel Ali Free Zone Authority is known as the earliest free zone in the United Arab Emirates (UAE) established intending to attract foreign investors and support multiple businesses across seven Emirates. It has consistently ensured expansion, delivered best-in-class service to free zone members, and managed high quality along with compliance with regional laws and regulations.
External auditing report provides companies shareholder and stakeholders with the valuable and accurate information that they need to decide about future investment decisions. All the members of JAFZA are required to present this accounts audit report at the end of each fiscal year to renew their trading/business licenses; however, non-compliance with this requirement will lead to serious fines and penalties.
An external auditor gives an unbiased and fair depiction of the company’s financial position after a thorough assessment and evaluation of business operations. Thus firms must keep a record of their financial strength (assets, liabilities, and shareholder equity), Profit and Loss, and Cash flow activities. This information will assist vendors and banks to gauge the borrowing capacity of the company.
According to authorities, JAFZA firms are given 90 days (3 months) after the end of the fiscal year to submit and present the Audited Financial Statements and a summary sheet signed and approved by the auditor as part of the license renewal process. In case of failure to present a report, companies are not only subject to AED 5000 financial penalties but also non-renewal of business licenses.
If JAFZA firm has not started making business after the first year of incorporation and only incurred expenditure like registration fees, office rent, visa and consultancy fees, and more, the company is still obligated to record all the receipts and expenses and present it in the annual financial statement. This is to give investors a true depiction of the financial strength of the business and the way it has progressed over the period of time.
It is essential that Auditors who audit the Free Zone Company are approved and registered by concerned authorities and that they stay independent, professional, and impartial in highlighting the wrongdoings of the business and stating anything that does not adhere to industry standards.
Value Added Tax Requirement
All the goods supplied for consumption within JAFZA are subject to tax at a pre-determined rate. However, taxation on service will be done in the same way as in other parts of the UAE, unless the service is being exported/delivered outside JAFZA free zone, then the tax percentage rate will be zero.
Documents Required For Auditing
Local authorities of Dubai and Abu Dhabi which are responsible for overseeing auditing require the JAFZA members to ensure the provision of proper, factual, and accurate books of accounts to registered auditors on time. Major documents essential for auditing are listed below:
- An income statement, Balance sheet, Cash Flow Statement
- Invoices, Vouchers, or any contract supporting company transactions
- Memorandum Of Association (MOA)
- Articles Of Association (AOA)
- Copy of Trade license
- Certificate of Share
- Certificate of Incorporation
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