Company Laws in UAE That Every Entrepreneur Must Know

Over the last few decades, the UAE has cemented its reputation as one of the biggest investment hubs in the world. One of the ways it has achieved that is through introducing policies that fostered business growth. The UAE has it all for entrepreneurs and businesspersons looking to setup new business in Dubai.

However, it is common knowledge that business setup in UAE is not a straightforward path, as each business has a different set of requirements. The UAE has formulated these procedures and regulations to ensure smooth business setup and operation. Understanding these rules and regulations by the regular entrepreneur is of utmost importance.

In order to setup a company in the UAE, one must understand the tenets of business setup, some of which that will:

• Govern the business.
• Protect health.
• Protect the environment.
• Protect labour law right, intellectual property rights, and the rights of the consumers.
• Govern and authorize any and all free zones that the business is setup in.

Business Regulations in the UAE

All companies in the UAE majorly fall under two categories: Mainland and Free Zone. Both of these categories are tied to their relevant jurisprudential laws and regulations. Both of these structures vary in their policies and have very different rules.

Business regulations for Mainland: All establishments that have a mainland business or are recognized as mainland companies must adhere with the Federal Law No. 2 of 2015 on Commercial Companies.

Business regulations for free zone companies: Companies operating within free zones will be governed by their respective free zone authorities. Very few times does the government interfere with free zone policies.

Law on Bankruptcy: The law on business bankruptcy has been delineated under Federal Law by Decree No. 9 of 2016. This law serves as a framework to provide support to companies and help them avoid bankruptcy and liquidation of assets through various techniques such as:

• Out-of-court financial restructuring.
• Conversion to liquidation of the debtor’s assets and declaration of bankruptcy.
• Composition processes.
• Efforts to obtain new loans under the terms set.

100% Expat Ownership in UAE Mainland

Recent amendments to the federal law abrogate the requirement of a UAE national for establishing a company in UAE Mainland. More than 1000 activities have also been added to the list that mentions business activities that require no UAE national. Read about it extensively here.

Ultimate Beneficial Ownership in UAE

To ensure and increase transparency in the corporate world, the UAE govt. drafted Cabinet Resolution 58, 2020. This resolution spans all businesses and companies across mainland and free zones in the UAE. Businesses must submit all details of their owners to the respective authority. Any change in the data must be apprised to the relevant authority.

Filing Ultimate Beneficial Ownership (UBO):

If a person or party owns more than 25% of the shares of a company or if a person benefits off of the transactions made by the company, then the person is liable to register as the Ultimate Beneficial Owner.

One can file for UBO to mitigate the chances of monetary fraud. Industries that are not regulated will not only jeopardize themselves financially, but also imperil the country.

VAT Registration and Filing

If you, as a company, have a turnover of more than AED 375,000 in the last 12 months, then VAT registration becomes mandatory. If your company’s turnover surpasses AED 375,000, then you can apply for VAT within the next 30 days.

You also have the option of voluntarily registering for VAT once your company turnover exceeds 187,000 in the last 12 months. You can do the same if you expect to make a turnover of more than 187,000 in the next 30 days.

Filing VAT Returns in UAE: A VAT Return is a summary of the value of supplies and purchases an entity has incurred during the specified tax period. The summary also contains all the VAT liabilities of the person.

The VAT return must be submitted to the Federal Tax Authority (FTA) at the end of each tax period. Depending on the annual turnover, the filing has to be submitted either monthly or quarterly. In order to be eligible to submit it quarterly, the annual turnover must be less than AED 150 million.

UAE Excise Tax

Excise tax in the UAE was introduced in 2017 as a type of indirect tax that was imposed on certain goods that are usually detrimental to the health or the environment.

Some of the common items that hold an excise tax are:

• 50 percent on any product with added sugar or other sweeteners
• 50% on carbonated drinks
• 100 percent on energy drinks
• 100 percent on electronic smoking devices
• 100 percent on tobacco products
• 100 percent on liquids used in such devices
• Hence, businesses that deal with goods like the above must be registered for Excise tax:
• For importing of excise goods into the country.
• Maintaining an Excise Warehouse or a separate, designated warehouse for the storage of excise goods.
• Production and stocking of excise goods in certain cases.

Start Here

There couldn’t be a better time to establish your company in the prosperous Emirates than now! Start your business with our help today!

Cross Link International is one of the best business setup consultants in Dubai and will assist you in Trade Licenses, company formation, Business License renewal, PRO Services, Visa Services, free zone company formation, Golden Visa Procural, LLC company formation, Dubai Business Setup, 100% company mainland setup, and many more services that go into business setup. You can reach out to us through + 971 4321 6631 / + 971 55 744 6445 or fill-in this form to get a free consultation from us.

*Subject to company structure