Compliance Audit Guide in JAFZA: Documentation Requirements

JAFZA companies carry a documentation burden that purely office-based free zone entities do not. Alongside the corporate file, there is a physical operation: a warehouse or plot, goods moving across a customs boundary, staff who need permits and often accommodation, and a lease that ties all of it to a specific address. An audit touches every one of those, and the weak point is usually the seam between them — corporate records that say one thing and customs or lease records that say another.

This guide sets out what a JAFZA entity should be able to produce on request, who asks, and where files most often turn out to be incomplete.

Who reviews a JAFZA company, and what they look at

The free zone authority is registrar, licensor and landlord in one. It maintains the corporate record for each entity, whether a free zone establishment, a free zone company or a branch of a foreign or UAE company; it issues and renews the licence; it approves changes to shareholding, directors and activities; and it leases the warehouse, office or plot the entity operates from. Because those roles sit together, a discrepancy in one file shows up quickly in another.

Customs is the second reviewer, and for a trading or logistics business often the more demanding one. Goods entering the zone, moving between facilities, being consolidated or re-exported, or crossing into the mainland each generate a declaration, and the physical stock is expected to reconcile with those declarations and with the company's own inventory records.

Federal obligations apply on top of both. A JAFZA entity is within the scope of Federal Decree-Law No. 47 of 2022 on corporate tax, which applies to financial years starting on or after 1 June 2023, with 0% on taxable income up to AED 375,000 and 9% above; being in a free zone does not remove the registration and filing obligation, and whether any free zone treatment applies to particular income is a question for advice before the return is due. Where the entity makes taxable supplies, VAT at 5% arises in the ordinary way. Employment is governed by Federal Decree-Law No. 33 of 2021, which replaced Federal Law No. 8 of 1980, administered through the zone's own permit and contract processes. Personal data is governed by Federal Decree-Law No. 45 of 2021.

The core document set

• the certificate of registration and the current licence, listing the approved activities and the entity type;
• for a branch, the parent company's constitutional documents and the board resolution and power of attorney appointing the branch manager, legalised as required;
• the share register and the register of directors and managers, reconciled to the authority's record;
• the ultimate beneficial ownership record, updated when control changes rather than only at registration;
• resolutions approving share transfers, changes of manager, changes of activity and amendments to the constitutional documents, with the authority's approvals;
• the lease for the warehouse, plot or office, together with any approvals for fit-out, storage of particular goods or sub-use of the facility;
• customs records: import and export declarations, transfer and movement documents, bills of lading, packing lists and certificates of origin, with the stock records they should reconcile to;
• financial statements, audited where an audit is required, with the accounting records behind them;
• employment contracts, permits, payroll records, leave and end-of-service calculations, and where the workforce is housed in provided accommodation, the records relating to it;
• health, safety and environmental permits and inspection records for the facility and for any regulated goods stored in it.

Where the file usually breaks

Stock that does not reconcile

The most common finding in a logistics operation is a difference between declared movements and physical inventory. Goods received against one declaration but stored under another reference, part shipments released without the corresponding paperwork, damaged or returned stock never written off — each creates a gap that has to be explained later, usually by someone who was not there at the time. Reconciling stock to declarations on a fixed cycle, and recording write-offs when they happen, prevents a small discrepancy from becoming a pattern.

Activity drift

A licence lists specific activities. A storage business begins packing and labelling; a trading company starts distributing into the mainland through arrangements it has not documented. The invoices then describe activity the licence does not cover. Adding an activity is administrative; explaining a year of invoices that fall outside the licence is not.

Premises that no longer match the record

Facilities are given up, swapped or extended, and space is often shared informally with a group company or a partner. The lease, the licence address and what is physically happening on site should agree. Where another entity occupies part of the facility, that arrangement needs the authority's approval rather than a private understanding.

Branch documents that have gone stale

A branch depends on documents issued by its parent. When the parent changes its directors, its name or its own constitutional documents, the branch file needs updating, and the power of attorney under which the manager acts needs to still be valid and to cover what he is doing. Counterparties check this before they sign.

Substance records from earlier years

Economic substance obligations were cancelled for financial years ending after 31 December 2022 by Cabinet Decision No. 98 of 2024, but they remain in place for the financial years from 2019 to 2022. Notifications, reports and the evidence supporting them for those years should stay in the file.

The overlap with commercial disputes

Shipping and storage disputes are decided on the same paperwork an auditor asks for. A cargo claim turns on the delivery note, the condition report and the terms actually incorporated into the booking. A dispute over stock held for a customer turns on whether the storage agreement was signed and by someone with authority to sign it. Keeping executed originals, signature authority schedules and the approvals behind them in one place supports commercial dispute resolution as directly as it supports a clean inspection.

A routine that keeps the file audit-ready

Once a year, and before renewal, reconcile the corporate registers against the authority's record and file anything outstanding. Compare the licensed activities with what has actually been invoiced. Confirm the lease, the licence address and the physical operation agree. Reconcile stock to customs declarations and close out any variance in writing. Check every employee's permit, contract and payroll record. Confirm facility permits and safety inspections are current. Confirm the tax and VAT registration position and that filings due have been made. For a branch, check the parent's documents and the manager's power of attorney are current.

Where a gap appears, correct it and record the date of the correction. A file showing an issue found and fixed is far stronger than one where the issue is simply absent.

For help reviewing a JAFZA entity's corporate, lease and trading records before renewal or an inspection, our corporate legal services team can work through the file with you.

Schedule Your Consultation

Disclaimer: The information provided in this article is for general informational purposes only and does not constitute legal advice. Readers should seek professional legal advice tailored to their specific circumstances before making any decisions or taking any action based on the content of this article.

Nour Attorneys Team

Related Resources

Explore more of our insights on related topics:

• Company Formation Checklist for UAE Investors
• Compliance Audit Guide for Financial Entities
• Contract Drafting Protocol Guidelines
• Employee Onboarding Legal Requirements