The introduction of Corporate Tax in the UAE has significantly altered the financial landscape for businesses across all emirates, including those operating within free zones like the Ras Al Khaimah Economic Zone (RAKEZ). While RAKEZ has long been a preferred destination for startups, SMEs, and international investors due to its cost-effective and business-friendly setup, the onset of Corporate Tax demands greater focus on compliance, transparency, and accurate financial reporting.

One of the core components of ensuring compliance with the new Corporate Tax regime is a strengthened audit requirement. In this blog, we’ll dive deep into how UAE Corporate Tax impacts the audit obligations of RAKEZ-registered entities and why proper auditing—especially through RAKEZ Approved Auditors—is more important than ever.

What Is UAE Corporate Tax?

In 2023, the UAE introduced a federal Corporate Tax at a standard rate of 9% on taxable income exceeding AED 375,000. While the UAE had previously been known for its tax-free benefits, the implementation of Corporate Tax aligns the nation with global tax standards and helps enhance its economic sustainability.

This new law applies to:

• Mainland companies

• Free zone entities (with specific exemptions)

• Foreign businesses generating income in the UAE

• Branches of foreign companies

However, free zone businesses, including those in RAKEZ, may still enjoy a 0% Corporate Tax rate provided they meet certain conditions and earn only Qualifying Income.

What Are the Corporate Tax Implications for RAKEZ Businesses?

Although RAKEZ businesses may qualify for a 0% tax rate, they are not automatically exempt from compliance responsibilities. The key tax-related obligations include:

• Corporate Tax registration with the Federal Tax Authority (FTA)

• Annual tax return filing regardless of the applicable tax rate

• Maintaining proper accounting records and audit reports

• Proving eligibility for the 0% Free Zone Tax Regime

Hence, even if a business is not currently paying Corporate Tax, it must demonstrate compliance and maintain financial transparency—and this is where audits play a critical role.

Increased Focus on Financial Audits

Before Corporate Tax came into effect, audits in RAKEZ were largely driven by free zone authority mandates for license renewal. However, with Corporate Tax in play, audits now serve an additional purpose: they act as proof of compliance with tax obligations and income classification.

Why Audits Matter Now More Than Ever:

• Verification of Qualifying vs Non-Qualifying Income
  Only income that meets specific criteria is considered tax-exempt under the Free Zone Regime. An audit helps segregate income correctly and ensures it is reported accurately to the FTA.

• Demonstrating Substance in RAKEZ
  To qualify for the 0% rate, businesses must have adequate substance in the free zone (physical office, core income-generating activities, employees, etc.). Auditors assess whether these substance requirements are met.

• Supporting ESR and UBO Filings
  Economic Substance Regulations (ESR) and Ultimate Beneficial Ownership (UBO) compliance go hand-in-hand with Corporate Tax rules. Audited financials help validate these submissions.

• Reducing Risk of FTA Penalties
  With tax audits and assessments expected from the FTA, a professionally audited financial report reduces the chances of errors or misstatements in tax filings.

RAKEZ’s Mandatory Audit Policy

RAKEZ mandates that all Free Zone Establishments (FZE) and Free Zone Companies (FZCO) submit audited financial statements annually for license renewal. This requirement remains unchanged post Corporate Tax but takes on greater significance due to:

• Need for Corporate Tax registration evidence

• Classification of income as Qualifying or Non-Qualifying

• Assurance that tax records match financial reports

To fulfill these obligations, companies must appoint only RAKEZ Approved Auditors —those vetted and listed by the RAKEZ authority to ensure audit credibility, adherence to international standards, and alignment with RAKEZ’s reporting expectations.

How Corporate Tax Is Reshaping the Role of RAKEZ Approved Auditors

With the introduction of Corporate Tax, the role of RAKEZ Approved Auditors has evolved from basic compliance facilitators to strategic advisors. Here’s how:

1. Corporate Tax Advisory Support

Approved auditors now assist businesses in determining their taxable income, applying relevant tax exemptions, and preparing for tax return filings.

2. Risk Assessment & Internal Controls

They help businesses implement stronger internal financial controls to avoid reporting errors that could trigger tax audits or penalties.

3. Record-Keeping Guidance

Proper documentation is vital for proving compliance. Approved auditors advise on maintaining financial records that meet both RAKEZ and FTA standards.

4. Audit Readiness for FTA Reviews

They prepare businesses for potential FTA audits or tax assessments, minimizing exposure to legal or financial liabilities.

Preparing Your RAKEZ Business for Tax-Driven Audits

If you're running a business in RAKEZ, here are some key steps to follow in the Corporate Tax era:

✅ 1. Register for Corporate Tax

Even if you qualify for the 0% rate, you must register with the FTA and obtain a Tax Registration Number (TRN).

✅ 2. Appoint a RAKEZ Approved Auditor

Only hire auditors listed on RAKEZ’s approved panel to ensure compliance with audit submission requirements.

✅ 3. Maintain Accurate Books

Ensure your financial records are up-to-date, including bank statements, invoices, payroll records, and VAT returns.

✅ 4. Classify Income Clearly

Work with your auditor to correctly classify your income as Qualifying or Non-Qualifying, as this impacts your tax obligations.

✅ 5. Submit Audited Financials on Time

Audits should be completed and submitted within six months of your financial year-end.

Conclusion

The implementation of UAE Corporate Tax marks a shift towards a more transparent and accountable business environment. For companies in RAKEZ, this means more than just staying compliant—it’s about aligning business practices with tax laws, maintaining proper financial discipline, and making informed decisions.

Annual audits, once considered a formality for license renewal, are now a cornerstone of your company’s tax strategy. By partnering with RAKEZ Approved Auditors, you ensure that your business remains compliant, credible, and fully prepared for the evolving regulatory landscape.

Whether you're a startup, SME, or established enterprise in RAKEZ, now is the time to take your audit obligations seriously and turn them into a strategic advantage in the age of UAE Corporate Tax.