Accounting and Financial Reporting in Dubai

This guide will help you understand the potential of accounting and financial reporting in Dubai. So let's dive right in with a detailed definition.

What is Financial Reporting?

When you're running a business, it's crucial to stay on top of your finances. Financial reporting is essentially taking a closer look at your accounting process. This way, you can see what you've done in the past, how you're doing now, and maybe even predict how things will go in the future. It's like seeing the big picture of your finances to understand what’s going well and what might need a little help.

Accounting and Financial Reporting in Dubai

Keeping track of a company's financial health is essential. It shows you're on top of everything and keeping things organized. Accounting ensures all the numbers and information are accurate and communicated, even for non-financial matters. But financial reporting takes that accounting information and presents it in a clear, organized way. This financial reporting is beneficial for the government, shareholders, and investors.

In UAE Dubai, we follow the International Financial Reporting Standards (IFRS) for accounting standards. This is a big deal and something every company needs to follow. Tracking finances and making sure everything is reported correctly is very important in Dubai. It helps everyone stay on the same page and play by the rules.

Benefits of Financial Reporting in Dubai

If you're thinking about doing business in Dubai, you should know that accounting and financial reporting systems offer some great advantages. They can help your business become more successful and stable overall. It helps improve debt management by allowing you to track your assets and liabilities. It also enables you to manage your debts effectively and maintain a healthy financial position. Furthermore, financial reporting in Dubai, makes it easier to identify trends. By using financial reporting, you can spot patterns and trends in your financial activities, both past and present.

Another advantage of financial reporting is real-time tracking. It gives you timely access to insights, allowing you to make the right decisions quickly. It also helps businesses manage their liabilities effectively. This ultimately assists in fulfilling various financial obligations like commercial loans, credit lines, credit cards, and vendor credit.

By keeping accurate records of your finances, you not only improve efficiency but also maintain compliance with regulations.

The Difference Between Financial Accounting and Financial Reporting in Dubai

So, what's the deal with financial reporting and accounting?

1. Storage and Analysis: Accounting is concerned with producing and storing financial information that will later be analyzed through financial reporting.
2. Information Gathering: Financial reporting gathers all the information from accounting and compiles it in one place, making it easy to understand and analyze.
3. Accounting Rules: Financial accounting follows specific rules to ensure consistency and accuracy. Failure to follow these rules can mess up calculations and lead to faulty financial reports.
4. Forecasting: Financial reporting focuses on predicting future finances and influencing future spending. Accounting gathers the necessary information for this prediction and analysis to happen down the line.

Now, let's check the objectives of each:

Accounting:

• Keeps a record of your business's financial history.
• Provides a snapshot of your financial health.
• Presents financial information in an easy-to-understand format.

Reporting:

• Forecasts your business's financial future.
• Analyzes and interprets your company's financial status.
• Highlights cash flow and overall economic value.

What Accounting Standards Are Followed in Dubai?

Businesses in the UAE, including in the Dubai International Financial Centre (DIFC), follow the International Financial Reporting Standards (IFRS) for their accounting services. Previously, in 2012, Islamic Financial Institutions (IFIs) operating under the DIFC followed the Financial Accounting Standards (FAS) report, which was overseen by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). However, after a two-year transition period, IFRS became the regulated accounting standard used in the UAE.

Components of IFRS Reporting in UAE Dubai

The International Financial Reporting Standards (IFRS) are a global standard for financial management tasks and activities.

IFRS guides accountants on handling specific events and transactions when preparing financial reports. It provides a comprehensive framework for accountants to maintain accurate records. The purpose of these guidelines is to create a common language that can be easily understood by businesses and accounting firms.

Under IFRS, management prepares financial statements using the accrual basis of accounting. In the UAE, the following components are included in IFRS financial reporting:

• Balance Sheet: A snapshot of the company's financial position, showing its assets, liabilities, and equity at a specific point in time.
• Income Statement: Summarizes the company's revenues, expenses, gains, and losses over a specific period.
• Cash Flow Statement: Highlights the inflows and outflows of cash and cash equivalents over a specific period.
• Statement of Changes in Equity: This provides details about the changes in equity, including contributions, distributions, and retained earnings.

Types of Financial Reporting in Dubai

There are seven types of financial reports that provide valuable insights.

• Financial Statements:

This report includes all the crucial financial info, like how much money we're making (income statement), what we own and owe (balance sheet), how much cash we have (cash flow statement), and how much ownership the shareholders have (shareholder's equity). These are the essential reports required for legal audits in the UAE.

• Board of Directors Report:

When companies want to show how they're doing, they use a report that looks at the performance of everyone in charge. It's a way to get a good idea of what's working and what needs to change.

• Management Decisions & Analysis Report:

This report discusses the company's past choices, what they've learned from market research, and how they stack up against their competitors.

• Inspection report:

Audit firms in Dubai ensure that government guidelines are followed to stay in compliance. It's just part of doing business in Dubai! These independent reports operate under the regulations of the Supreme Audit Institution (SAI).

• Corporate Governance Report:

This report holds companies accountable for their decisions, employees, and management. It helps them stay compliant with accounting and auditing standards, so everything remains fair and transparent.

• Notes to the Accounts:

This report gives more detail on how the company handles its accounting policies and procedures. This information is included in internal or external audit reports.

• Prospectus:

It's basically a report that breaks down all the financial information for investors, shareholders, and stakeholders. It's important for them to have all the details, so the prospectus makes it easy to understand what's going on with the company's finances.

How Can World Company Setup Chartered Accountants Help You?

When it comes to financial reporting, it's important to be upfront and honest about how the company handles its accounting. It helps the right people to detect and prevent fraud when managing the company's finances.

With all the changes happening in tax and federal regulations, financial reporting here in the UAE is getting complex. However, the strict guidelines ensure that companies are held accountable. This is where World Company Setup comes in!

We have tons of experience helping clients all over the UAE with their financial reporting and accounting needs. We provide our clients with vital insights and help companies manage potential risks when it comes to their finances. World Company Setup has a competent team that knows its business when it comes to auditing and accounting.

UAE Dubai Offshore Company Formation

United Arab Emirates offshore entities are non-resident "paper" companies traditionally used by foreign entrepreneurs to conduct trade and own subsidiaries in the Middle East and Africa. There are three main offshore options in UAE Dubai: the Dubai offshore company, RAK offshore company, and Ajman offshore company. Below you can find more information about the benefits and challenges of registering a UAE Dubai offshore entity.

Benefits of registering a UAE Dubai offshore entity

1. Compared to other available entities for registration, UAE Dubai offshore entities are quick and simple to set up because:
   • These types of entities can be registered within 2 weeks, are 100% foreign-owned, and the registration process does not require foreign shareholders or directors to travel to UAE Dubai,
   • UAE Dubai offshore companies can have a corporate bank account not only within UAE Dubai but also abroad,
   • The corporate documents of Offshore UAE Dubai companies are bilingual (English and Arabic), which simplifies the process of opening a corporate bank account with banks,
   • UAE Dubai offshore companies can hold shares in other UAE Dubai offshore or Free Zone Companies. UAE Dubai offshore companies are also allowed to trade with other UAE Dubai offshore companies (but not with free zones).
2. Like other UAE Dubai entities, UAE Dubai offshore entities are attractive from a tax perspective because:
   • There is no corporate tax in UAE Dubai, making UAE Dubai offshore entities an ideal vehicle for trading with international clients,
   • An offshore company registered in UAE Dubai projects a good image to clients, suppliers, and potential venture capitalists. UAE Dubai is a globally recognized jurisdiction that does not carry the "tax haven" stigma.

Important points to consider before registering a UAE Dubai company

UAE Dubai offshore entities are not permitted to:

• Trade with UAE Dubai customers,
• Lease or purchase local real estate (including office space),
• Employ local or foreign staff.

They are classified as non-resident entities and also do not have access to UAE Dubai double taxation avoidance agreements.

UAE Dubai Offshore Company Comparison

Below is an overview of the 3 different offshore options. We hope this information helps you decide which is the best corporate structure to achieve your international business goals. For a comparison between Dubai, RAK, and Ajman offshore companies, you can also refer to the table available on our website.

Dubai Offshore Company (Jebel Ali Offshore Company)

• Dubai offshore companies are actually registered in the Jebel Ali free zone. Consequently, they are also known as Jebel Ali offshore companies,
• This type of entity requires:
  • At least one shareholder with no capital requirement
  • 2 directors
  • 1 company secretary, who can be one of the two directors,
• The registration of Dubai offshore companies is expensive, particularly due to the requirement to legalize the personal documents of shareholders and directors,
• Finally, these types of entities are subject to various business activity restrictions and specifically cannot engage in activities related to:

• • Insurance
  • Film production
  • Banking
  • Management
  • Financial
  • Gambling
  • Professional services
  • Casino
  • Consulting. Also, property development, intellectual property, education, media, security, real estate, publishing, military, and advertising. The Jebel Ali Authority reserves the right to add more activities to this list and has the final authority to accept or reject company registration.

Dubai RAK Offshore Company

• RAK offshore entities are registered with the RAK Investment Authority, which to date has a portfolio of over 2,000 offshore companies currently registered,
• A RAK offshore company can be i) 100% foreign-owned. It can be established within 2 weeks with just one director and one shareholder. Furthermore, there are no public records of directors or shareholders,
• RAK is an excellent and cheaper alternative to Dubai. Unlike Dubai, the registration of a RAK offshore company is not subject to restrictions on business activities or a legal requirement for the submission of legalized documents.

Dubai Ajman Offshore Company

• Recently renamed Ajman "International Business Companies," Ajman offshore entities are supervised by the Ajman Free Zone Authority,
• An Ajman IBC can be 100% foreign-owned, can be established within 2 weeks with only one director and one shareholder, and is not required to submit financial statements or audit its accounts.

Setting Up a UAE Dubai Offshore Company

How to set up an offshore company in Jebel Ali Free Zone (JAFZA)?

Opening a Dubai offshore business is a tax-efficient and cost-effective corporate structure, ideal for entrepreneurs wanting to conduct international trade.

An offshore entity can also be called a non-resident "paper" company, which allows foreign entrepreneurs to serve Africa and the Middle East without administrative burdens. Consequently, an offshore business is a wholly-owned LLC that is legally tax-exempt and has no annual accounting and tax obligations.

1. Offshore companies are used for international trade, holding company, shipping company, owning real estate, copyright and patent registration, and international consulting services,
2. Offshore Dubai company formation is governed by the Jebel Ali Free Zone Offshore Companies Regulations 2003.

Advantages of a Dubai Offshore Entity

1. Especially compared to other business types in UAE Dubai, setting up an offshore company in Dubai is quick and simple,
2. The offshore company in Dubai projects a good image to Clients, suppliers, and even potential venture capitalists. Dubai is a globally recognized jurisdiction that does not carry the 'tax haven' stigma,
3. If structured properly, a Dubai offshore business setup is legally exempt from corporate tax, making it an ideal international trading vehicle,
4. Shareholders and directors in the off-shore company will not be required to register their names and details in public records,
5. An offshore company in Dubai is exempt from all annual accounting and tax obligations,
6. Compared to other tax haven entities, setting up an offshore business is a cheap and easy way to get a corporate bank account in Dubai,
7. Dubai company documents are bilingual (English and Arabic), so they are recognized worldwide by banks, Governments, suppliers, and investors.

Disadvantages of a Dubai Offshore Entity

1. A Dubai offshore entity is not allowed to trade in Dubai and the UAE,
2. The offshore entity can neither rent local facilities in UAE Dubai, hire staff in UAE Dubai, nor obtain residence or work visas for staff,
3. Compared to other tax haven entities, setting up an offshore company in Dubai can be expensive,
4. Dubai banks provide poor customer service support,
5. The offshore business cannot use UAE Dubai's double taxation agreements to reduce global withholding tax,
6. A Dubai offshore business cannot invest in UAE Dubai real estate.

Other Options for Dubai

Besides setting up an offshore company in Dubai, entrepreneurs have the following options to conduct their business in the Middle East:

1. Dubai LLC,
2. Dubai free zone company.

UAE Dubai Offshore Companies Comparison

There are three different options when registering an offshore company in UAE Dubai: Jebel Ali in Dubai, Ajman, and Ras Al Khaimah (RAK).

Both Ajman and RAK offshore companies can be used to conduct international trade, as holding companies, and for real estate planning and asset protection tools outside of UAE Dubai. Both are low-cost options for setting up an international business company compared to the costs of registering a Jebel Ali offshore company.

While the incorporation process of an Ajman offshore company, its timeframe, and registration requirements are much easier, our preferred option is often the RAK company, as the free trade zone is much more established and well-known by international entrepreneurs. Also, an additional advantage is that a RAK offshore company is also allowed to have a registered office in Dubai. See the table below to view the detailed comparison.

Check out offshore company formation for other offshore jurisdictions

What are the uses of a non-resident company in Dubai?

A Dubai offshore business allows Clients to engage in:

• International Trade
• Holding Company
• Shipping Company
• Owning Real Estate
• Copyrights And Patent Registration
• International Consulting Services

How many directors are required to incorporate a Dubai IBC?

Only 1 director is required to set up a RAK offshore company, whereas 2 directors would be necessary for a Jebel Ali offshore company.

How many shareholders are required to set up an offshore company in Dubai?

A Dubai offshore business setup is required to have only 1 shareholder.

Is it mandatory to have a resident director or shareholder for Dubai offshore formation?

Resident directors are not required for any offshore company in Dubai.

What Dubai offshore banking facilities will be available for my business?

Companies looking to do offshore banking in Dubai will have access to internet and telephone banking, checking and savings accounts, debit and credit cards, term deposits, and wealth management facilities.

Doing Business in Dubai Ras Al Khaimah in 2023

For over a decade, World Company Setup has been efficiently and effectively assisting our Clients with:

• Business registration
• Business licensing
• Rakez business banking solutions
• Accounting and tax strategies

Dubai Ras Al Khaimah Company Registration Summary

Advantages of RAKEZ Company Registration

• Setting up a company in Ras Al Khaimah Free Zone is simple and straightforward because:
  • To set up a company within the Ras Al Khaimah Economic Zone, at least one shareholder and one director are required, who can be the same person,
  • There are no restrictions on the maximum number of shareholders, and corporate shareholders are allowed. Furthermore, there is no public register of shareholders or directors for RAKEZ companies,
  • Our clients do not need to travel to Ras Al Khaimah to sign the company formation forms, and the incorporation process can be completed within 2 weeks,
  • UAE Dubai has signed 94 double taxation agreements to eliminate double taxation and provide protection to taxpayers.
• Ras Al Khaimah is a strategic location to start a business in UAE Dubai because:
  • Located near the Strait of Hormuz and only 40 minutes from the center of Dubai, Ras Al Khaimah (“RAKEZ”) is a prime location providing access to over 2.2 billion consumers in the Middle East, Africa, and the rest of the world,
  • Ongoing negotiations to establish free trade agreements with countries like the US and Japan, potentially giving UAE Dubai companies, including those in RAKEZ, free access to markets of over 500 million people,
  • In the last few years, RAKEZ has achieved an outstanding average of 1.5% - 2% economic growth,
  • Due to its location at the mouth of the Persian Gulf, RAKEZ has huge logistical advantages, including 5 seaports and an international airport managed by Saqr Port, the most important bulk port in the Middle East.
• Setting up a company in Ras Al Khaimah Economic Zone (RAKEZ) will be advantageous for our Clients because:
  • Ras Al Khaimah Free Zone Authority (“RAKEZ”) company registration is an excellent alternative to Dubai free zone company formation. Besides fast incorporation, RAKEZ offers a wide range of offices, storage facilities, and land for development,
  • If structured properly, a RAKEZ company is an ideal way to book international profits without legally paying local corporate tax. Furthermore, there is no capital gains or personal income tax in RAKEZ,
  • RAKEZ allows investors to choose between a Free Zone Company, a local branch of an existing UAE Dubai company, and a foreign branch of an existing company,
  • The RAKEZ company can fully repatriate its capital and profits, and there are no exchange controls imposed by the RAKEZ Authorities,
  • Furthermore, a branch company can be fully foreign-owned and is not subject to an annual audit,
  • A RAKEZ company can be a sponsor for multiple UAE Dubai residence and work visas for investors, entrepreneurs, and employees. For more information, please visit our relocation and resettlement services page,
• Our Clients wishing to do international business can set up an offshore company in the RAKEZ International Corporate Centre:
  • Ras Al Khaimah International Corporate Centre (“RAKEZ ICC”) company registration is an excellent alternative to UAE Dubai offshore company formation,
  • Through a RAKEZ ICC offshore company, it is possible to have an entity and business address without the legal requirement to rent a physical office and employ staff locally,
  • The RAKEZ ICC company is allowed to conduct most business activities. It also allows for multiple activities such as trading, consulting, construction, real estate, marketing, travel and tourism, and others for the same company,
  • A company registered with RAKEZ ICC can own freehold properties and land in designated areas in Dubai. There are 23 property areas in Dubai, including Dubai Marina, Downtown Dubai, Jumeirah Village Circle, and Palm Jumeirah.
  • From August 2021, a RAKEZ offshore ICC can do business in the RAKEZ "mainland" by registering a subsidiary in the RAKEZ "mainland" and securing UAE Dubai residence visas.

Disadvantages of RAKEZ Company Registration

• Effective from January 1, 2019, locally incorporated RAKEZ entities, foreign entities registered in RAKEZ, and limited partnerships engaged in holding company activities, banking business, distribution and service center business, finance and leasing, fund management, headquarters business, insurance, intellectual property ownership, and shipping are required to employ local staff and rent a physical office. For more information on UAE Dubai economic substance requirements, click here,
• A limited liability company (LLC) requires UAE Dubai citizens to own at least 51% of the shares,
• An offshore company cannot trade products or provide services within UAE Dubai and cannot rent local property or open a corporate bank account in UAE Dubai,
• Most entities are required to submit annual audited accounts to the government,
• Transportation is a significant concern within and outside of RAKEZ. There are no frequent public transport services in RAKEZ, and the main mode of transport is taxis. Furthermore, RAKEZ is connected to other emirates by private taxis and infrequent public bus facilities,
• All companies registered in UAE Dubai must create and maintain a register of their ultimate beneficial owners (UBO) and submit the UBO data to the relevant registrar or licensing authority,
• In 2020, UAE Dubai introduced new regulations requiring all UAE Dubai companies to maintain and submit registers of their Ultimate Beneficial Owners (UBOs) or Real Beneficiaries, shareholders, and directors. Fortunately, the information in the company registers is kept confidential by the authorities.

·         Best Uses of RAKEZ Company Registration

• RAKEZ offers an excellent corporate structure for clients looking for a legally tax-exempt structure to do business worldwide.

Doing Business in Dubai Ajman

Since 2003, World Company Setup has been efficiently and effectively assisting our Clients with i)

• Ajman business registration
• Business licensing
• Ajman business banking solutions
• Visa options
• Staff recruitment strategies
• Workspace rental solutions

 matters.