With summer here in full swing and holidays starting, it can be really easy to take a more laid back approach to things and whilst one should always take time to rest and recharge, it is important to make sure that your business is still compliant with all the laws and regulations set out for businesses in the UAE.
In this blog we’re going to take a look at some of the basic laws that are applicable to almost every business in the UAE so that you, as a business owner, can stay out of trouble and focus on selling your products and services!
[1] Federal Decree Law No. 32 of 2021 on Commercial Companies
First we will be looking at the Federal Decree Law No. 32 of 2021 on Commercial Companies which is applicable to any economic entity that practises commercial, financial, agricultural, industrial and real estate economic activity. More specifically forms of companies such as Joint Liability, Limited Partnership, Limited Liability, Public and Private Joint Stock Companies. The objectives of this law, as stated in the Decree, “is to contribute to the development of the working environment and the State’s capabilities and economic position in accordance with global changes as to regulating companies, especially those related to regulating Governance rules, protecting the rights of shareholders and partners, supporting the flow of foreign investment, and enhancing the social responsibility of companies.” You can read more about this law here.
[2] ESR (Economic Substance Regulations)
The next law to be aware of is the ESR (Economic Substance Regulations), this is essentially in place so that the UAE meets the required international standards that are in place to combat things that are harmful to the economy such as tax evasion. These regulations require onshore and free zone companies that perform certain activities (as per their trade licence) to uphold a relevant and substantial economic presence in the UAE. This is so that the profits that are reported are in line with the economic activity that is undertaken within the UAE thus leaving fewer grey areas for things such as tax avoidance. If you would like to know more about ESR then this mini course put together by the MOF will tell you everything else you want to know. Additionally you can check here if the activities your company engages in requires you to comply with this law!
[3] Federal Decree Law No. 20 of 2018 on Anti-money laundering and combating the financing of terrorism and financing of illegal organisations
Anti money laundering laws are very important and countries are flagged if they are not meeting the required global standards set out by the Financial Action Task Force. Thus, within the UAE businesses that carry out certain activities, known as DNFPS (Designated Non-Financial Businesses and Professions), who are at a higher risk and are more likely to be exposed to these illegal activities are required to register so as to protect their own businesses as well as ensure they themselves are not doing anything illegal. To check that your company’s activities are not within this scope there is a quick online form created by the government to double check here! Additionally you can read this law here.
[4] Federal Law No. 15 of 2020 on Consumer Protection and Federal Decree Law No. 33 of 2021
The following two laws are important to be aware of when it comes to customers and employees. Federal Law No. 15 of 2020 on Consumer Protection is in place to ensure that consumers’ rights are protected and to prevent exploitation. More specifically, as outlined in the law, it is aimed at ensuring that “consumers have access to quality goods and services and can obtain them at the declared price”. Additionally it is in place to preserve “the health and safety of the consumers when using and or obtaining said goods or services and to encourage healthy consumer patterns”. The law that is directed at protecting both employers and employees is the UAE Labour Law which is essentially an umbrella term for a few different laws, but the main one is Federal Decree Law No. 33 of 2021 on the regulation of labour relations in the private sector. The law is designed to enhance employment rights and boost the competitiveness of the UAE as a place to live and work, helping the region to attract and retain world class talent. You can read these laws here (consumer protection) and (labour law).
[5] Federal Decree Law No. 8 of 2017 on Value Added Tax and Federal Decree Law No. 7 of 2017
Arguably the most important laws are the taxation laws as these are applicable to any and all businesses with only a few goods and services being exempt. Even so, all businesses must comply with the requirements laid out by these laws. Firstly, the Federal Decree Law No. 8 of 2017 on Value added Tax which outlines the VAT amount charged on goods and services as well as what tax shall be imposed on. In the UAE the rate of VAT is five percent and businesses are essentially in charge of collecting and accounting for the tax imposed on behalf of the government. There are voluntary and mandatory thresholds with which businesses must comply in order to register for VAT or they could be fined. Additionally, once businesses are registered they are required to submit their VAT returns quarterly or monthly depending on their income. To know a bit more about VAT here is the government website page. Next is the Federal Decree Law No. 7 of 2017 on Excise Tax which outlines the tax obligations and the tax calculation for those goods that fall within this category. Excise tax is considered an indirect tax and it is levied on goods and services that are deemed as harmful to human health and or the environment. Ths law is in place to reduce the consumption of these harmful goods by making them less affordable. Read the VAT law and Excise tax laws here.
[6] The Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses
Finally, one of the most recent tax laws in the UAE was introduced in order to regulate Corporate tax which is a tax that is levied on the net profit of businesses. The implementation of this law is effective for financial years starting on or after 1st of June 2023 and the introduction of this tax was “intended to help the UAE achieve its strategic objectives and accelerate its development and transformation”. If you are not sure whether your business needs to register for Corporate Tax and want to know how it will impact your business, make sure you hire a qualified accountant! Read more about this law here.
[7] Federal Law by Decree No. 9 of 2016 on Bankruptcy
Laws such as the Federal Law by Decree No. 9 of 2016 on Bankruptcy are in place to help companies which are facing serious financial distress to avoid bankruptcy and liquidation through certain mechanisms. This includes things such as, “consensual out-of-court financial restructuring, composition procedures, the potential to secure new loans under terms set by the law and conversion to declaration of bankruptcy and liquidation of the debtor’s assets”.You can read more about this law here.
[8] Additional laws:
In addition to all the laws listed above there are a few more that you should be aware of including the following:
Unemployment Insurance Law
Ministerial Resolution No. (598) of 2022 Concerning the Wages Protection System
The Central Bank of UAE laws and regulations
Federal Law No.19 of 1916 on Combating Commercial Fraud
There are copious amounts of laws that are applicable to businesses in the UAE and the few listed above are only a drop in the ocean. It is important to note that companies within the free zones need to comply with the laws outlined in that specific Free Zone as most are different from the laws applicable to mainland companies.
By working with our Bespoke Accounting team you can save both time and money while having the reassurance and peace of mind that you’re making sound business decisions for your future.
Whether you need help with VAT filing, monthly bookkeeping or budgets and keeping in line with the laws, get in touch with us to see how we can help you grow your business. Have a look at how we have been helping our clients. If you have any questions, simply book your free 30 minute consultation.
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