26 August 2026 · Free Zone
Free-Zone Books Need a Clear Trail
A free-zone business still needs accounting records that show its transactions and support its tax position. The FTA's Tax Obligations guide includes payments, receipts, purchases, sales, profits, expenses, inventory, wages and fixed assets. FTA Decision No. 4 of 2026 also requires complete, legible records and access for the Authority. Free-zone status does not turn missing source records into compliant books.
Exiloz Management & Tax Consultant · Dubai-based FTA-focused advisory · VAT, corporate tax & accounting
Free-zone status does not replace a record trail
A free-zone business needs books that show what it sold, bought, paid, received and still owes. The zone name does not tell a reviewer which bank account funded a cost, which customer received a service or which document supports an entry. Start with the transaction trail. Analyse the tax treatment only after the legal entity, supply and source document are clear.
Federal Decree-Law No. 28 of 2022 requires a Person conducting Business or having a Tax obligation to keep accounting records and commercial books. FTA Decision No. 4 of 2026 then requires the maintained information to be complete and identical to the original documents, clear and legible, and accessible to the Authority on request. A free-zone label does not remove either record duty.
We advise clients to close the books by transaction rather than by marketing description, because the zone label cannot prove which entity, customer or source document sits behind an entry. Trace the sale to the customer and settlement, the purchase to the supplier and approval, and the funding entry to the person or entity that provided it. Once those links exist, a tax adviser can test the treatment without first repairing the basic ledger.
- Identify the legal entity behind each ledger.
- Keep each bank and sales stream traceable.
- Match entries to source documents.
- Mark tax questions instead of guessing at them.
Separate entities, channels and funding before review
The practical risk in free-zone bookkeeping is often mixing activity that looks similar. A company may use a bank account for more than one sales channel, receive funds through a gateway, share costs with another entity or have an owner pay a business bill. Those transactions can be recorded, but only if the bookkeeper can identify the entity, counterparty, business purpose and supporting document behind each one.
A separate ledger is not required merely because a document has a different logo or because two teams use different folders. What matters is whether the records allow the business activity to be identified and the balance to be checked. If a free-zone company has no stock, do not create a stock schedule. If it has related balances, do not hide them in general expenses because the amount is inconvenient.
Use one review sheet for every balance that crosses an entity or channel boundary. Show the source account, the receiving account, the allocation reason and the document that supports it. This is the part owners often discover late: a shared cost can be easy to post and hard to explain when the tax file is prepared months after the payment.
- List the bank accounts and payment channels.
- Identify owner, group and related-party balances.
- Keep purchase and sales support with the entry.
- Remove unused controls rather than leaving them blank.
Tax evidence follows the transaction, not the zone
A free-zone close pack should show the transaction, its accounting treatment and the question still awaiting tax review. For VAT, use the FTA guide and Federal Decree-Law No. 8 of 2017 as the starting point. A standard-rated supply of AED 10,000 at 5% produces AED 500 VAT and a total of AED 10,500. That is arithmetic for a standard-rated case, not a conclusion that every free-zone supply has that treatment.
The source file should distinguish sales invoices, purchase invoices, credit notes, imports, payments and adjustments. The FTA VAT Returns User Guide says output tax is reported in the VAT return for the Tax Period in which the tax point occurs, and the FTA says returns and payment are due within 28 days after the Tax Period. Posting net deposits without the underlying sales and fee details breaks that trail.
Do not let a tax code replace the evidence. A code may say standard-rated, exempt or reverse charge, but the close file still needs the invoice, contract or import record that supports the choice. Where the facts are unclear, hold the entry for review and state the missing fact. Guessing early creates a harder correction later.
- Keep the invoice and payment evidence together.
- Identify the tax point for VAT review.
- Separate gross gateway sales from fees and payouts.
- Flag zero-rated, exempt or reverse-charge questions for advice.
Build a free-zone close pack someone else can test
Begin with the entity list and the chart of accounts. Then reconcile each bank and gateway, match receivables and payables, review owner or group funding, test cut-off, and collect the asset or stock records that apply. The pack should make it possible to follow an amount from a statement to the ledger and then to the document. It should also preserve a list of items that need tax analysis.
Do not treat a free-zone certificate, licence or office lease as proof that the books are complete. Those documents establish context. They do not prove a sale, a purchase, a payment or a closing balance. The close is done when the financial records explain the activity and the owner can approve the remaining judgements without rebuilding the quarter from bank lines.
The review should end with an exception list that names the entity, account, amount, source requested and decision owner. Keep the list with the close pack even when an item is resolved after sign-off. It shows what was investigated and prevents a later reviewer from mistaking a documented question for an omitted transaction.
- Confirm the entity and account boundaries.
- Reconcile cash and gateways before tax coding.
- Match assets, stock and liabilities where relevant.
- Return an exception list with supporting files.
| Record area | Keep traceable | Failure to avoid |
|---|---|---|
| Sales | Invoice, customer, payment and tax review | Net deposits treated as revenue |
| Purchases | Supplier bill, approval, payment and tax review | Missing costs or duplicate bills |
| Shared costs | Entity, allocation basis and support | Group charges posted to one entity |
| Owner funding | Source, repayment and closing balance | Personal payments hidden in expenses |
| Assets and stock | Purchase, movement, count or disposal | Balance sheet items left untested |
The label is not the evidence
Federal Decree-Law No. 47 of 2022 requires records supporting the Corporate Tax return and allowing taxable income to be ascertained to be kept for 7 years after the end of the Tax Period. That makes the handover more than a set of totals. Keep the chart of accounts, source documents, reconciliation notes, approvals and exports in a place the business can retrieve without the original bookkeeper.
The unsettled point is practical rather than a licence to ignore the rule. FTA Decision No. 4 of 2026 states the standard for complete, identical, legible and accessible records, but it does not prescribe one free-zone chart of accounts or one cloud-folder layout. Choose a structure that preserves the evidence and the entity boundary, then test retrieval before a reviewer asks for it.
The same discipline helps if the business changes providers. A new reviewer can work from an indexed export, the source-record location and the open-item history. Without those items, the business may have to pay for the same mapping and reconciliation again. The record duty remains with the business even when the people doing the work change.
- Retain the chart of accounts and mapping notes.
- Keep source documents in their original order.
- Record the tax questions left for review.
- Test access and retrieval from the business account.
Frequently Asked Questions
For keeping free-zone books ready for review.
Does a free-zone company need bookkeeping records?
The FTA's Tax Obligations guide says every person conducting business should hold accounting records, including payments, receipts, purchases, sales, profits and expenses. It also lists inventory, wage, fixed-asset and VAT records where relevant. Free-zone status is not a reason to leave the books incomplete or the source trail unclear.
What should free-zone books keep separate?
The FTA's Tax Obligations guide requires records that let business activity be identified. Keep bank feeds, sales channels, purchases, stock, assets and owner or related balances traceable, then mark items needing tax analysis. Separation is an operating control, not a substitute for the tax position set by legislation.
Does FTA Decision No. 4 apply to free-zone records?
Yes. FTA Decision No. 4 of 2026 applies to a Person maintaining accounting records and commercial books. It requires complete and identical records, clear and legible copies, and access for the Authority on request. The Decision does not create a separate record standard for free-zone businesses.
Can Exiloz close books for a free-zone company?
Yes. Exiloz can reconcile the bank, sales, purchases and supporting files for a free-zone business and flag items needing tax review. The FTA's Tax Obligations guide and FTA Decision No. 4 of 2026 make the source trail and record access part of the handover, whatever the company's zone.
Are your free-zone books ready?
Exiloz reconciles your free-zone records and flags the items that need tax review.