Filing and Compliance Requirements for Trading Companies in the UAE: Mainland vs Free Zones
Introduction
The United Arab Emirates (UAE) is one of the world’s most attractive destinations for trading businesses. Companies can choose to operate either in the UAE mainland or through one of the many free zones. While both options offer strong commercial advantages, they also come with clear filing and compliance obligations that companies must follow to remain in good standing. This article explains, in simple and practical terms, the key regulatory, filing, and ongoing compliance requirements for trading companies in the UAE.
Licensing and Regulatory Authorities
Mainland trading companies are licensed by the Department of Economy and Tourism (or Department of Economic Development) of the relevant Emirate. These companies operate under the UAE Commercial Companies Law and related federal regulations. A mainland license generally allows a company to trade freely across the UAE, subject to the activities listed on the license.
Free zone trading companies are licensed by the relevant free zone authority, such as DMCC, JAFZA, RAKEZ, or DAFZA. Each free zone has its own rules, processes, and activity lists, while still being subject to UAE federal laws. Free zone companies usually trade within the free zone or internationally, and any onshore UAE trading may require additional structuring or local arrangements.
Annual Accounts and Audit Requirements
All trading companies in the UAE are expected to maintain proper accounting records. In practice, this means preparing annual financial statements that accurately reflect the company’s business activities.
Mainland limited liability companies are generally required to have their financial statements audited each year. These audited accounts are often requested during license renewal or by banks and authorities and in some free zones the audit financials are mandatory for company license renewal.
Most free zones also require an annual audit. Free zone authorities typically ask companies to appoint an approved auditor and submit audited financial statements within a set period, usually three to six months after the financial year end. Failure to submit audited accounts on time can result in penalties or delays in license renewal.
Tax Compliance: VAT and Corporate Tax
Trading companies in both mainland and free zones must comply with UAE tax laws.
Value Added Tax (VAT)
VAT registration is mandatory if a company’s taxable supplies exceed AED 375,000 in a 12-month period. Once registered, companies must file VAT returns and pay any VAT due within the prescribed deadlines, usually within 28 days after the end of the tax period. VAT obligations apply to both mainland and free zone companies, with limited exceptions for certain designated zones.
Corporate Tax
Under the UAE Corporate Tax regime, companies are required to register and file annual corporate tax returns. A 0% tax rate applies on taxable profits up to AED 375,000, while profits above this threshold are taxed at 9%. Free zone companies may continue to benefit from a 0% tax rate on qualifying income, provided they meet the required conditions and maintain sufficient substance in the UAE.
Ultimate Beneficial Owner (UBO) Requirements
Most mainland and free zone companies in the UAE are required to maintain and file Ultimate Beneficial Owner (UBO) information. A UBO is typically any individual who owns or controls 25% or more of the company, or who otherwise exercises effective control.
UBO details must be submitted to the licensing authority and updated whenever there is a change in ownership or control. These requirements form part of the UAE’s wider transparency and compliance framework.
License Renewal and Ongoing Obligations
Trade licenses in the UAE are usually issued on an annual basis and must be renewed on time. License renewal often depends on meeting audit, tax, ESR, and UBO filing requirements, as well as payment of the applicable fees.
Companies must also comply with other ongoing obligations, such as maintaining office premises, renewing visas, complying with labour regulations, and keeping proper records. Failure to meet these requirements may result in fines, restrictions, or suspension of business activities.
Conclusion
Both mainland and free zone trading companies in the UAE operate in a well-regulated environment with clear compliance expectations. While the requirements are manageable, they require ongoing attention and timely filings. A structured compliance approach helps companies avoid penalties, maintain good standing, and focus on growing their business.
If you wish to engage a professional licensed corporate service provider to assist with mandatory filings and compliance requirements, our team will be delighted to assist. We can schedule a call to discuss the most suitable secretarial and compliance package for your company, ensuring it remains fully compliant with local regulations.
