Despite the absence of many traditional taxes commonly found in other jurisdictions, companies registered in the UAE free economic zones are required to comply with established rules on accounting, financial reporting, and tax compliance. In particular, value-added tax (VAT) at a rate of 5% has been in force since 2018, and a federal corporate tax has applied since 2023 to certain categories of companies.
This overview outlines the key reporting requirements for companies registered in UAE free zones, with a primary focus on VAT and financial reporting obligations.
Tax period and VAT reporting
For VAT purposes, the standard tax period in the UAE is generally three calendar months. The specific tax period dates and VAT return filing deadlines are determined individually by the UAE Federal Tax Authority (FTA) for each registered taxpayer.
In certain cases, the FTA may assign a shorter or longer tax period if justified by the nature of the taxpayer’s activities or other relevant circumstances.
VAT returns must be submitted exclusively in electronic form through the FTA portal. They must be filed no later than the 28th day of the month following the end of the tax period, or on another date explicitly specified by the tax authority.
VAT payment and refund of overpaid VAT
A VAT-registered person is required to:
- submit VAT returns on time;
- pay the calculated VAT amount so that the payment is credited to the FTA’s account no later than the prescribed deadline.
If the amount of recoverable input VAT exceeds the output VAT charged for the reporting period, a VAT credit balance arises. This amount may be:
- carried forward and offset against future VAT liabilities, or
- refunded to the taxpayer upon submission of a refund request through the FTA system.
Contents of a VAT return
A VAT return must contain sufficient information to allow for an accurate assessment of tax liabilities. In particular, the return includes:
- the name, address, and Tax Registration Number (TRN) of the VAT-registered taxpayer;
- the relevant tax period;
- the date of submission of the return;
- the value of taxable supplies made during the period, inclusive of VAT;
- the value of zero-rated supplies;
- the value of VAT-exempt supplies;
- the value of imports of goods and services subject to VAT;
- the amount of input VAT claimed for recovery;
- the total amount of output VAT and recoverable VAT;
- the final amount of VAT payable or refundable.
Financial reporting and audit requirements in free zones
In addition to tax reporting, most UAE free economic zones require annual financial statements. In a number of free zones, an annual audit is mandatory and must be conducted by a licensed audit firm accredited by the relevant free zone authority.
The purpose of the audit is to confirm the accuracy of the financial statements and the company’s compliance with its licensed activities. Audit requirements, reporting deadlines, and financial statement formats may vary by free zone.
Retention of accounting and tax records
Companies are required to retain accounting and tax documentation, including tax invoices, contracts, bank statements, and VAT calculations, for a minimum period of 5 years. In certain cases, a longer retention period may apply if required by legislation or by the rules of the relevant free zone.
Professional support
Given the complexity of VAT requirements, corporate taxation, and free zone regulations, many companies engage professional accountants and auditors to ensure proper reporting and full compliance with FTA and regulatory requirements.
If you require assistance from a certified accountant or a licensed auditor in the UAE – including VAT registration, VAT return preparation, financial reporting, or audit services – please contact us. We provide comprehensive support and ensure full compliance with the UAE legislation.
