COMPLIANCE REQUIREMENTS YOU NEED TO KNOW ABOUT FOR YOUR UAE & DUBAI BUSINESS
In the UAE, there are several regulations and compliance requirements that must be completed by your UAE and Dubai company annually. These mandatory obligations act to ensure that your business is conducted in a fair and orderly manner.
It is important that you are aware, and up to date with recent changes to regulations especially those that will apply to your UAE entity, its shareholders, general manager and its employees. Consequences of non-compliance can result in significant financial fines, closure of bank accounts, businesses, and even imprisonment.
WHAT ARE THE MAIN COMPLIANCE REQUIREMENTS FOR MY UAE & DUBAI COMPANY?
Creation Business Consultants has listed the main compliance requirements that your UAE company must comply with.
TAX LAWS IN THE UAE
UAE for the most part is a tax-free economy. Corporate Income Tax (CIT) is currently only applicable for branches of foreign banks and oil and gas companies. With effect from 1 June 2023, the corporate rate at a standard tax rate of 9% will be applied to all mainland business and commercial activities on taxable profits above AED 375,000. There is no personal income tax or withholding tax requirements.
The UAE introduced Value Added Tax (VAT) effective from Jan 1, 2018.
VAT in the UAE is applicable for all registered companies irrespective of the fact that the business is a mainland or free zone company. Tax rate is 5% but some business activities are exempt from VAT or carry 0% VAT.
Your UAE business must register for VAT if it meets either of the following criteria:
The total value of your taxable supplies made within the UAE exceeds AED 375,000 over the previous 12-month period.
You anticipate making taxable supplies with a value exceeding AED 375,000 within the next 30 days.
Your UAE business can also voluntarily register for VAT if its value taxable supplies exceed AED 187,500.
AUDIT OF FINANCIAL RECORDS
For UAE mainland companies, it is necessary to get the financial records audited. However, it is not required to submit the audited accounts with the authorities in which they are registered.
For UAE free zone companies, audit requirements depend entirely on the jurisdiction of the free zone in which they are registered in. UAE free zone companies may need to get their financial records audited and submitted to their respective free zone authority in the time frame specified by each governing free zone.
ECONOMIC SUBSTANCE REGULATIONS
The Economic Substance Regulations (ESR) in the UAE were introduced in April 2019 (amended in August 2020). The ESR are in line with UAE’s commitment to the international tax cooperation and transparency.
The regulations require UAE’s onshore companies, free zone companies, and other business forms that carry out any of the ‘Relevant Activities’ listed in the regulations’ framework to maintain an adequate ‘economic presence’ in the UAE.
The following activities are considered as relevant activities for the purpose of ESR:
Banking business
Insurance business
Investment fund management business
Lease finance business
Headquarters business
Shipping business
Holding company business
Intellectual property business
Distribution and service center business
Licenses that conduct a relevant activity must submit an economic substance notification within 6 months of their financial year end. If required, your UAE company must also submit an economic substance report within 12 months of your financial year-end.
ULTIMATE BENEFICIAL OWNER (UBO)
All companies whether registered in mainland or freezone need to maintain a UBO register or a register of shareholders.
All shareholders holding, owning, or having the power to control and vote more than 25% of the share capital of the company are deemed as a Beneficial Owner (BO). Nominee directors are also considered to be BO.
If you are a shareholder of a UAE mainland company, it is necessary for your business to file your UBO registration along with supporting documents to the relevant authority.
ANTI-MONEY LAUNDERING & COUNTER FINANCE TERRORISM
As per the UAE’s bids to further enhance the transparency of companies, the Anti-Money Laundering (AML) and Counter Finance Terrorism (CFT) requirements must comply. These requirements are also part of the Know Your Client (KYC) requirements by banks to maintain your company’s bank account.
Businesses conducting the following activities must comply with AML/CFT requirements:
Brokers and real estate agents
Dealers in precious metals and precious stones
Independent accountants
Corporate service providers
These businesses must register with the goAML website and report any suspicious transactions.
TAKEAWAY
For businesses in the UAE, it is not only important to know some of the compliance requirements but to also ensure that these requirements are properly satisfied in a timely manner to avoid penalties for your company.
Creation Business Consultants provides the most up to date support to ensure that your business will comply to the required standards in the UAE. Email us on info@creationbc.com or call UAE +971 4 878 6240 Saudi Arabia +966 54 995 2676to know more on our regulatory and compliance services for the UAE and Saudi Arabia.
Creation Business Consultants – Tax & Compliance Team
