However, for the businesses to not have any hassles in the course of their regular business operations, knowing the business regulations in UAE are essential. UAE has several regulations in place for smooth and transparent business operations.

The Entrepreneur must comply with the Company Laws that will:

• Govern the business
• Protect Labour rights, consumer rights, and intellectual property rights
• Protect the health and the environment
• Govern the Free Zone that the business is established in.

1. Economic Substance Regulations

The Economic Substance Regulations (ESR) is in line with UAE’s commitment to international tax cooperation and transparency.

All companies in the UAE’s onshore and Free Zones that carry out any of the ‘Relevant Activities’ listed in the regulatory framework must submit the ESR file. Also, these companies must have an adequate ‘Economic Presence’ in UAE and will have to undertake the Economic Substance Test.

To know more, read about Economic Substance Regulation in UAE

2. Business Regulations in UAE

Businesses in UAE are governed by two major Business jurisdictions the Mainland and the Free Zone depending on where the company is established. Each of the business jurisdictions has its own governance and policies that the businesses have to adhere to.

Business Regulations for Mainland Companies

The companies operating in the mainland of UAE are governed by the Federal Law No.2 of 2015 on Commercial Companies.

Business Regulations for Free Zone Company

The businesses operating in a specific free zone will be regulated and governed by the policies of the free zone. In some cases, it might be additionally governed by another government entity.

Law on Bankruptcy

Business bankruptcy in the UAE is governed by Federal Law by Decree No.9 of 2016. The law provides a legal framework to help distressed companies in the UAE avoid bankruptcy and liquidation through various mechanisms such as:

• Out-of-court financial restructuring
• Composition procedures
• Potential to secure new loans under terms set by law
• Conversion to the declaration of bankruptcy and liquidation of debtor’s assets

Changes to UAE National Minimum Ownership Law – 100% Expat Ownership in UAE Mainland

The recent company law amendments state that there is no requirement of a UAE national for establishing a company in the mainland of UAE. More than 1000 business activities are on the positive list which allows 100% ex-pat ownership.

For a service company in the mainland for there must be a local service agent appointed by the company for an annual fee.

The local Agent does not have any control over the shares or the business operations but will act as a liaising agent with the government during the trade license renewals.

Ultimate Beneficial Ownership in UAE

Based on the UAE Government Cabinet Resolution 58, 2020, the Ultimate Beneficial Owner Procedure is for increasing corporate transparency.

The resolution is applicable for all legal entities that are registered in UAE Mainland and the Free Zones. The entity must keep the details of their owners ready at their office premises and must file it with the authorities. Any change in the register must be notified to the authorities immediately.

Filing Ultimate Beneficial Ownership

The reason for filing for UBO is to reduce the chances of monetary fraud at corporate levels. unregulated industries can get into financial transactions that can be harmful to the country. Declaring the shareholders of the company as Ultimate Beneficial Ownership can avoid all illegal transactions and curb money laundering to a great extent.

A person or party owning more than 25% of a company share or the person who benefits from the transaction made by the company in UAE must be registered as the Ultimate Beneficial Owner of the company.

VAT Registration and Filing

Business residents in UAE must mandatorily register for VAT who have a turnover of more than AED 375,000 in the last 12 months. Also when a company’s turnover exceeds more than AED 375,000 in the next 30 days they can apply for the VAT registration.

Businesses in UAE can voluntarily register for VAT if the turnover or expenses (subjected to VAT) were more than AED 187,000 in the last 12 months or the company expects the turnover to exceed AED 187,500 in the next 30 days.

UAE Cabinet has defined certain Free Zones as Designated Zone. It is treated outside the scope of VAT when the goods are transferred between Designated Zones.

Filing the VAT Returns in UAE

At the end of each tax period, VAT-registered businesses must submit a VAT Return to the Federal Tax Authority (FTA). A VAT Return summarizes the value of supplies and purchases a taxable entity has made during the tax period and shows the person’s VAT liability.

The VAT filing is either monthly or quarterly depending on the annual turnover. If the annual turnover is less than AED 150 million, It can be submitted quarterly.

To know more, read VAT Registration in UAE

Excise Tax in UAE

Excise Tax was introduced across the UAE in 2017 as a form of indirect tax levied on specific goods that are typically harmful to human health or the environment.

The rate of Excise Tax on various items are:

• 50% on carbonated drinks
• 100 percent on tobacco products
• 100 percent on energy drinks
• 100 percent on electronic smoking devices
• 100 percent on liquids used in such devices
• 50 percent on any product with added sugar or other sweeteners

Hence, businesses engaged in the following categories must be registering for Excise Tax.

• Import of Excise goods into the UAE
• Production of Excise goods where they are released for consumption in UAE
• Stocking of the Excise goods in UAE in certain cases
• Overseeing an Excise warehouse or designated warehouse storing Excise goods

Businesses can register for Excise Tax through the FTA Website, Aurion will assist in registering for Excise Tax in UAE.

To know more about the Business Laws in UAE that are applicable to your company. Talk to our expert Business Consultants right away!

Contact Us: Aurion Business Consultants

The post Company Laws in UAE that Every Entrepreneur Needs to Know appeared first on AURION.

UAE tops the list of ‘Ease of Doing Business in the Middle East region and offers a variety of low-cost company license packages for investors to choose from. The Business Amendment Laws in UAE aims at providing entrepreneurs a friendly ecosystem to easily do business in the country.

The article covers a list of the latest business amendment laws in UAE that an entrepreneur must know for conducting smooth business operations. To avoid fines and do business legally, there are certain business laws the investor have to adhere.

Following are few of the Business Law Amendments in UAE that every entrepreneur must know for operating a business in the country.

Business Laws Amendments for Entrepreneurs in UAE

To streamline and create transparency in the business world over the years UAE has introduced a series of transformational business law amendments.

Safeguarding the interest of investors is the topmost priority in UAE and the changes are reflecting positive sentiments in the market of UAE being the safest and most robust business center in the world.

List of Recent Business Amendments for Entrepreneurs

Here is a list of a few business amendments that every entrepreneur in the UAE must be aware of and comply with.

These amendments are aimed at promoting economic activities more effectively and helping global investors to easily set up companies and scale up their establishments quicker in the region.

1. Stimulus Packages and Incentives

The Stimulus Package and Incentives were provided to businesses in the UAE during the pandemic period. When globally there was a slowdown in trade, employment, and business growth, the Stimulus Package from the UAE Central Bank and the Government saved ailing companies in the region.

Stimulus Package and Investor Confidence

The issuance of the stimulus package in the UAE has raised investor confidence and the new company registrations in UAE are at an all-time high.

The Dubai Government launched an AED 1.5 billion economic stimulus package for supporting the business affected by the pandemic.

From rent relief to interest-free loans and payment deferrals, the UAE government is in-game with boosting the business scenario in the region.

2. Foreign Direct Investment on Key Sectors

With 100% foreign ownership in onshore companies in the mainland of UAE to reducing the minimum share capital to set up a mainland company in UAE for foreign investors. The 100% expatriate ownership in mainland came in as a major business law amendment in UAE.

UAE is offering several options for opening a business in the region for foreign investors. It is focusing on building a transparent and robust business ecosystem for the investor to do business in the region.

The Free Zones in UAE are a major driving force to foreign direct investment in the form of opening new companies in the UAE and strengthening the economic activities.

3. Economic Substance Regulation

The Economic Substance Regulation is a policy launched in UAE to ensure the companies operating in UAE comply with the international tax laws. The ESR is also another major Business Law Amendment that all companies under the ‘Relevant Activities’ must adhere to the ESR Filing and Regulations.

ESR states that any business entity in the UAE onshore and Free Zone companies and other business forms that carry out any of the ‘Relevant Activities; listed in the regulatory framework must maintain an adequate ‘economic presence’ in the UAE.

ESR Regulations are aimed at creating transparency in the market and a strategic move towards Anti-Money Laundering and Combating the Financing of Terrorism and illegal organizations.

4. Ultimate Beneficiary Owners

Ultimate Beneficiary Owner (UBO) is a natural person who owns more than 25% of a company shares registered in UAE. UBO Registration is another latest business law amendment that all companies operating in UAE must adhere with to avoid any compliance issues.

All details of the shareholders are now to be included along with the ESR Documentation. It is aimed at creating transparency and reduce illegal transactions.

Hence the declaration of Ultimate Beneficial Owner helps in establishing an effective regulatory mechanism and procedure for stating the ownership details of the company operating in UAE with the Ministry of Finance.

5. Know Your Customer (KYC) Norms for Opening Corporate Bank Account

UAE has a well-secured network of international and local banks UAE. Recently with the impact of the Pandemic, business lending and day-to-day transactions have had a significant impact across every bank globally.

Banks in UAE are highly supportive of the business sector with business incentives such as loan deferrals, banking charge waive-offs, attractive financial solutions, easy bank accounting openings, and more.

There is strict KYC Compliance in all UAE Banks for opening a corporate bank account. They require a bank statement (from the previous bank), a robust business model, and an investor profile to review.

6. VAT Registration and Filing

The Value Added Tax in UAE applies to all consumer and commercial transactions in the region at a rate of 5 %. There are certain criteria for registering the VAT. Companies must be aware of the VAT rules in UAE for smooth operations of their business.

The Federal Tax Authority is the governing body for overseeing VAT compliance, regulations, and the VAT regime in the UAE. For small businesses, entrepreneurs, and freelancers it is not mandatory to file until they have not reached the VAT Threshold.

VAT Registration Compliance to Follow

VAT registration is mandatory for companies that have an annual turnover of AED 375,000. Companies that get VAT-registered benefits can opt for voluntary registration for VAT even though the annual turnover is less than AED 375,000.

Those companies registered for VAT must submit the VAT Returns periodically. Also, file for any VAT refund for business supplies, maintain the VAT record, and pay the due to FTA accordingly.

To know more, read: VAT Registration in UAE

Legal Documents every Entrepreneur must be having in UAE

A new business in UAE must have a strong legal structure and disciplined operations to successfully scale up and achieve sustainability. The company while registering in UAE will receive the Trade License where the mention of the list of business activities chosen will be present.

Also, the Trade License will have the shareholder information, date of company incorporation and expiry date. Another important document is the Memorandum and Article of Association. It states the terms and conditions and rules relevant to the company operations.

Having all the company documents in place enable the business to protect their investment and intellectual property of the business.

An investor or a company must always have their establishment card valid for applying the employee visas as required.

Employee and Company Documents that Must be Available Handy

The next key document is the Non-Disclosure Agreement, employee contracts, and offer letters to keep the employees, and supplier relationship strong.

Then comes the requirement of documentation like the company trade secrets such as trademark registration certificates for the marketing assets, Intellectual Property rights for new products/applications, etc.

Hence, in a nutshell, there are numerous business law amendments in UAE that the investor must closely follow.

All the latest amendments in the Ultimate Beneficiary Ownership, Economic Substance Regulation, VAT Registration, and is having a significant effect on the current businesses that are operating in the country.

To know more about the process and documents required for company formation in UAE, talk to our expert Business Consultants right away!

Contact Us: Aurion Business Consultants

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