Discover essential compliance practices for businesses in Dubai after registration. Learn about VAT, corporate tax, financial audits, and more. Partner with BMS Auditing for expert guidance.
If you are on the verge of completing your business registration in Dubai, you are entering one of the most energetic and robust business environments around the world. The UAE boasts immense opportunities for entrepreneurs in its dynamic economy.
However, navigating the complexities of compliance with local laws and regulations is important to ensure your business will thrive. This guide will equip you with vital information, ensuring you remain compliant and avoiding the pitfalls that may occur due to non-compliance.
Why Compliance Matters
The primary essential legal practice any business operating within the UAE needs to be aware of is the rigorous regulation on compliance. Failure to adhere to any such regulation may lead to severe consequences, including heavy fines, license suspensions, and even the forced closure of a business. Consequently, gaining knowledge of the existing laws will define the sustainability of your business.
Taxation
Upon registration, you will be taught one of the most basic aspects you should know: taxation. The UAE has a relatively straightforward tax framework.
Value Added Tax (VAT)
Under UAE VAT regulations, businesses with an annual taxable turnover exceeding AED 375,000 are required to register for VAT. The standard VAT rate is 5%, and registered entities must file quarterly returns. These returns are to be submitted within 28 days after each tax period ends. Compliance is critical, as the Federal Tax Authority imposes significant penalties for violations. For instance, the initial failure to file a timely return incurs a penalty of AED 1,000. Given the potential for substantial fines, businesses must remain vigilant about their VAT obligations and ensure timely submissions.
Corporate Tax (CT)
The UAE has introduced a competitive corporate tax (CT) system, featuring a standard rate of 9% - the lowest in the GCC. Small businesses and startups with turnover below AED 300,000 benefit from a 0% rate. While tax payment may not be immediate, registration and financial record-keeping are mandatory.
Key points on CT registration:
- Mandatory registration applies to tax periods starting June 1, 2023, or later.
- The Federal Tax Authority (FTA) has set specific deadlines for both resident and non-resident entities.
- Late registration incurs a penalty of AED 10,000, effective March 1, 2024.
- This penalty system aims to ensure timely compliance and aligns with other tax regulations.
Businesses are advised to register promptly to avoid penalties and maintain compliance with UAE tax laws.
Financial Audits
Many businesses have to prepare their accounts for annual audit processes. This is particularly crucial for all UAE companies; either as a requirement for bank facilities, authority compliance, or as an in-house tool for strategy formulation.
Annual audit needs to be presented for the following key documents:
- Profit and loss statement
- Balance sheet
- Trial balance
- Cash flow statement
Free zone businesses need to refer to free zone regulations which determine the audit required. Our expert auditors understand the requirements for the financial audit standards in compliance in each mainland or free zone jurisdiction and are always at hand to assist in any way possible.
Economic Substance Regulations (ESR)
The objective of the Economic Substance Regulations is to safeguard the UAE from companies that are performing particular economic activities with no genuine economic presence in the UAE. Affected industries include banking, insurance, and investment management, among others.
If your business falls within one of the above categories, you will be obliged to file an ESR notice within six months of the year-end of your financial year. Non-compliance could lead to substantial penalties, so being aware of your obligations is very important.
Ultimate Beneficial Owner (UBO) Compliance
UBO compliance is one of the most significant aspects of doing business in the UAE. It is related to the ultimate owner of a company or the one exercising ultimate control over it, usually with more than 25% of shares or voting rights.
All business companies operating in the UAE have to be registered with the respective relevant authorities by providing updated data and information about the named individuals, including their name, nationality, and address. Failure to comply may attract considerable penalties; thus, accurate and timely reporting becomes necessary.
Anti-Money Laundering (AML) and Counter-Finance Terrorism (CFT)
The UAE has strict requirements for AML/CFT. Businesses in the UAE are also expected to follow rules on Customer Due Diligence (CDD) and suspicious activity reporting. Certain sectors, such as corporate services and real estate, include registrant requirements on the goAML website and imposing obligations of Know Your Customer (KYC).
Non-sanction against AML and CFT regulations may force your business to a severe warning due to heavy fines with judicial confrontation, thus also necessary to be vigilant and alert about all of these requirements.
Your Annual Compliance Checklist
Once your business is registered, you'll need to fulfill various compliance requirements for the upcoming fiscal year, including:
- Renew trade license
- Renew immigration card
- Labor card renewal
- Visa renewal
- Custom code renewal if your business is trading
- Update on insurance policies
- Lease agreements.
- Tax registration and filing
- Financial audit
Moreover, companies are responsible for their compliance with data protection legislation, which, in this context, includes the UAE Personal Data Protection Law, regarding privacy management.
Being alert to these compliance regulations will ensure that you reduce the risks accompanying non-compliance and will know how to successfully launch your business in the UAE. It is highly advisable to partner with us as your business setup advisor of choice so that you comply with all regulations and ensure that everything operates smoothly.
BMS Auditing will provide you with fully tailored comprehensive compliance solutions. Our team has extensive experience working with new entrepreneurs and established businesses, guiding them every step of the journey.
Ready to take your business journey to the next level?
Contact us for expert guidance and support from BMS Auditing!
