The legal obligations of a company in the Emirates
It is often mistakenly believed that a company in the United Arab Emirates does not need to keep accounting records, file annual returns, etc.
Here are the main obligations applicable to all companies in the United Arab Emirates:
Keep accounting records
Keeping accounting records is mandatory! This means preparing a balance sheet and an income statement every year.
A company in the Emirates must keep its accounts in accordance with IFRS accounting standards.
Article 26 of the "UAE Commercial Companies Law" (Federal Law No. 2 of 2015) stipulates that every company must maintain accounting records that accurately reflect its transactions and financial position at all times, and keep them at its registered office for at least 5 years from the end of the financial year.
This article echoes Article 78 on "Record-keeping" of Federal Decree-Law No. 8 of 2017 on VAT in the Emirates, which requires all accounting records to be kept for 5 years.
In addition to the balance sheet and income statement, the following must be maintained:
- Records of wages and salaries (register of wages paid)
- Records of fixed assets (fixed asset register)
- Inventory records and statements, including quantities and amounts (inventory)
We put you in contact with a third-party accountant, it being understood that we have no access to your accounts, either directly or indirectly, and no control over or insight into the management of your company.
The main annual obligations
Annual audit of the accounts
A company in the UAE must undergo an annual audit of its accounts each year, pursuant to Article 27 of the "UAE Commercial Companies Law" (Federal Law No. 2 of 2015).
The auditor (equivalent in France to a "statutory auditor") is responsible for verifying that the annual accounts are accurate.
The audit report must be issued within 3 months following the annual closing of the accounts.
We connect you with a third-party auditor, it being understood that we have no access to your accounting records, either directly or indirectly, nor any control over or insight into the management of your company.
General Assembly
The company’s Manager must present the company’s balance sheet and income statement, the Manager’s report on the company’s activities, and the Auditor’s report.
This must be done within 3 months of the end of the fiscal year, with the General Assembly itself required to meet at least once a year within 4 months following the end of the fiscal year, in accordance with Articles 87 and 92 of Federal Law No. 2 of 2015.
Corporate Income Tax (CIT)
As of 2024, a 9% tax on profits exceeding AED 375,000 is in effect.
It applies to all companies (Mainland, Free Zone, etc.). Some Free Zone companies may be exempt provided they have "Qualifying Income".
They are therefore required to submit an annual tax return to the authorities. This reinforces the importance of maintaining the company's accounts rigorously.
VAT registration
It is mandatory to register for VAT (or request an exemption where applicable). Thresholds apply based on the company's turnover.
Other obligations to be aware of
Ultimate Beneficial Owners (UBO) Register
Since 2021, companies have been required to keep a Register of Ultimate Beneficial Owners (UBO). In fact, this involves keeping 2 registers:
- Register of Nominee Director / Manager
- Register of Partner / Shareholder
For Free-zone companies, this Register is usually maintained with the Registry. For Mainland companies, it must be kept internally.
ESR report
On October 2, 2024, the government of the United Arab Emirates made significant changes to the economic substance regulations (ESR) through Cabinet Decision No. 98 of 2024.
These changes apply to accounting periods ending on or before December 31, 2022.
Companies whose accounting periods begin on or after January 1, 2023, are no longer required to file an economic substance notification and/or report in the UAE.
It should be noted that, to benefit from the provisions of tax treaties, companies will still need to demonstrate that they have adequate substance in the UAE and will need to indicate this in their UAE corporate tax return (which will be submitted through the Federal Tax Authority’s EmaraTax portal).