It is common for clients to ask what the compliance requirements are in the UAE when setting up a business on the mainland. In this post, we have compiled a list of compliance requirements you should know before you enter the UAE market and begin doing business in Dubai.
Dubai has a very professional work environment, which contributes to its overall business growth. UAE business laws are compliant with international standards, and UAE leaders are keen on ensuring that businesses adhere to them. A hefty penalty will be imposed if compliance requirements are not followed. Compliance requirements in the UAE vary according to the type of business set up in Dubai. Most businesses in the UAE need to be aware of these major requirements.
In the UAE, tax compliance is regulated by the Federal Tax Authority (FTA). There is a very low VAT rate of 5% in the UAE. Once the threshold is crossed, businesses in the UAE are required to register for VAT. Companies must file VAT returns based on their turnover on a monthly or quarterly basis. Currently, the UAE does not levy a corporate tax or an income tax. However, there will be a corporate tax in the UAE, and this must be anticipated.
It is a legal requirement for mainland companies to conduct an audit every year. However, there is no requirement to submit this to any authorities. A yearly audit is required when renewing a freezone license, and the report must be submitted to the authority. Regardless of the situation, it is always recommended to hire a reputable auditing firm to complete a yearly audit. Since UAE’s compliance requirements have now reached international standards, this information would need to be submitted to the government.
- Economic Substance Regulations
Regulations on Economic Substances (ESR) were implemented in the UAE in 2020. Licence holders who conduct relevant activities must submit a notification six months after the end of the fiscal year and an Economic Substance Report twelve months later. This compliance requirement does not apply to licences that do not conduct relevant activities.
Activities that are relevant include the following:
- Banking Businesses
- Insurance BusinessesLease-Finance Businesses
- Headquarters Businesses
- Investment Fund Management Businesses
- Shipping Businesses
- Distribution and Service Centre Businesses
- Holding Company Businesses
- Intellectual Property Businesses
Compliance with UAE Anti-Money Laundering (AML) & Counter-Financial Terrorism (CFT) regulations is also required. As part of the KYC process, the bank will manage a lot of the compliance requirements. However businesses conducting the following activities
- Independent Accountants
- Providers of Corporate Services
- Brokers and Real Estate Agents
- Dealers in Precious Metals and Precious Stones
Are required to register with the GoAML system and thereafter report any suspicious transactions on this system.
- Maintain UBO and Shareholder register
An Ultimate Beneficial Owner (UBO) and shareholder register should be maintained. If any changes have been made to these registers, they must also be submitted to the regulatory authorities. Each emirate requires a different UBO submission, so you will need to contact the regulatory authority for that emirate.
Compliance with the above requirements is mandatory in the UAE. This is not an exhaustive list, since additional requirements may apply based on a business’s activities. Nevertheless, if you hope to set up your business in the UAE, it is imperative that you are aware of this list in order to avoid penalties.