Ways to control business when opening in Dubai

Published on

The main ways to control business in the UAE are the requirement to obtain a license and to submit audit reports at the end of the financial year (not applicable in all jurisdictions and for all types of companies). Otherwise, the business environment is very welcoming to foreign capital.

Company Establishment and Registration

In the UAE, you can open a company in a free economic zone or on the mainland. In 2021, the requirement for mandatory hiring of a director (partner) from among UAE citizens and transferring at least 51% of the company to them upon registration on the mainland was abolished. The exception is the oil and gas sector, finance, and insurance. Now, foreign investors can freely open a business that will be 100% owned by them, both in free zones and on the mainland.

Registering a company in a free zone or on the mainland can be done online, but you need to be a UAE resident for this. If you do not have a residency visa yet, you need to contact the management authorities of the free zones or the Chamber of Commerce. Additionally, you need to obtain a license, Establishment Card allowing you to hire employees, and register a bank account.

Types of Companies that can be Registered in Dubai

In free zones, offshore and onshore companies are registered. Offshore firms cannot lease an office and generate profits in the UAE, but they can reduce their tax burden. Onshore companies are registered in free zones to operate in the UAE but only within the zone where the business is registered. Unlike offshore, onshore businesses can:

  • Lease commercial space
  • Use free zone infrastructure (for example, in a free zone with a port, goods can be stored in warehouses at reduced rates)
  • Obtain a residency visa (the number depends on the office space)
  • Open a bank account

There are also local companies. These are firms registered on the mainland of the UAE (outside the free zones). Such businesses can operate in the UAE and export goods abroad.

Financial Control

There is no currency control in the UAE, no need to report, no tax authorities to monitor, and capital can be freely brought in and taken out. Customs duties exist and depend on the type of goods. Corruption is absent in the UAE, and there are strict rules for businesses to prevent money laundering.

Registering a company in the United Arab Emirates is advantageous, but running a business has its peculiarities. Therefore, it is optimal to use the services of consultants. Contact The Level Consulting - we provide business support in the UAE at all stages.

Accounting and Reporting

Any enterprise registered in the UAE is required to maintain accounting records and undergo an annual audit. Mainland companies must appoint an independent auditor licensed by the Ministry of Economy to audit the financial statements and other financial documentation. All records must be kept for five years.

Companies registered in free zones must also keep financial documentation for at least 5 years. However, it is necessary to clarify how this form of control is implemented in a specific free zone. Most free zones, such as DMCC, DWC, DAFZA, JAFZA, DIFC, DSO, duplicate the requirements of UAE legislation for mainland companies. But in some free zones, providing financial statements and conducting audits is not required.

The absence of the need to report to the authorities does not mean that financial documentation does not need to be kept for the company's own purposes. Independent verification will provide reliable information about the company's condition, help reduce tax risks, increase profits, and attract investments.

Tax Control

In the UAE, there is no income tax, capital gains tax, and many other types of mandatory payments. If your company is not engaged in mining activities in the UAE, does not conduct financial activities, you are not a hotel owner, and do not work in the commercial real estate sector, taxes for you can indeed be very low or practically non-existent.

Small, medium, and large businesses in Dubai are exempt from corporate tax for 40-50 years. Only VAT needs to be paid. However, from the beginning of the financial year (June 1, 2023), it is planned to introduce a corporate tax of 9%. Only companies operating on the mainland of the UAE will be required to pay this tax. If you operate in a free zone with foreign counterparts, the tax will remain at zero. Additionally, corporate tax will be levied on incomes exceeding 375,000 dirhams per year.

VAT is set at 5%. The tax is paid only if the company is registered and operates on the mainland of the UAE. Businesses opened in a free zone that do not operate in the UAE are exempt from VAT. Some types of activities (regardless of the place of registration) are not subject to VAT. These include education, passenger transportation, and others.

Financial Transactions Control

Authorized persons have the right to pay business expenses with a corporate company card. Overall, financial transaction control is minimal. However, the country has laws against money laundering and terrorism financing, so counterparts undergo mandatory checks and identification in UAE banks.

Labor Control

In the UAE, the main document regulating relations between employers and employees is the employment contract. Therefore, it is extremely important to carefully read the contract terms if you are seeking employment, or carefully draft contracts, considering all possible nuances, if you are an employer.

There are no trade unions in the United Arab Emirates, and strikes are prohibited. An employee can only appeal to the Ministry of Labor. The government body considers each appeal individually and makes a decision. If the parties do not agree, they can go to court. Action can only be taken in this order.

Foreign workers of any nationality can be hired (there are not so many areas where it is mandatory to hire UAE citizens). Employers must provide expatriate employees with:

  • At least 30 days of annual leave
  • At least one day off per week
  • 40 paid sick days and the same number at their own expense
  • 10 paid public holidays per year
  • Guaranteed leave for childcare
  • Medical insurance for the employee and their family members.

The Importance of Business Control in Dubai

All methods of business control in Dubai are aimed at maintaining stability in the country and maintaining a high investment potential. Many of the methods familiar to Russians for solving problems cannot be applied in the UAE. It is necessary to carefully study the legislation of the chosen free zone or emirate, if the company is registered on the mainland, and strictly adhere to it.

Tips for Compliance with Business Control in Dubai

Each emirate and free zone has its own laws regulating the registration of companies, determining control methods, etc. Here are a few tips for entrepreneurs who have decided to transfer their existing business to Dubai or register a new company:

  • Understand the legal peculiarities to correctly choose a license, place of registration, ownership form, etc.
  • Do not skimp on the office (if registering onshore) - this will make it easier to open an account, deal with the Immigration Service, the Ministry of Labor, etc.
  • Do not hire employees without official registration
  • Comply with ESR regulations (requirements for substantiation of presence): register and submit audit reports
  • Adhere to KYC procedures, which involve checking counterparties.

In different jurisdictions, there are peculiarities and some difficulties, which are easier to cope with with the support of specialists. For individual consultations, contact The Level Consulting.

Order a consultation

Learn about the benefits and details of starting or relocating a business in the UAE