April 19, 2024
Expired Business LicensesPenalties

Beware of the Penalties Incurred on Expired Business Licenses in Dubai

penalties on Expired Business Licenses in Dubai

All businesses operating in Dubai are required to have a valid license issued by the Department of Economic Development (DED) or concerned authorities for freezone entities. This license needs to be renewed annually to remain active. However, there are instances where business owners may forget or delay the renewal process, causing their licenses to expire. Having an expired business license in Dubai can attract serious penalties. Here are some of the potential penalties one may face from authorities. The firms can avoid these situations by hiring or outsourcing their trade license renewal activities to business set-up service provider or PRO service providers like CDA who can get their license renewed in no time, making it easier.

Fine for Operating without a Valid License

Imagine that you are the owner of a small cake shop called “Magnificent Desserts”. A few weeks ago, you received a notification from the Dubai Department of Economic Development (DED) reminding you that your license is due for renewal. However, due to your busy schedule, you completely forgot about it. After a few weeks, you received a sudden inspection and found out that your license had already expired.

Consequences Faced:

  • Fine: The inspectors inform you that “Magnificent Desserts” will be fined between AED 5,000 and AED 50,000 for operating without a valid license. This unexpected penalty puts a strain on your store’s finances.
  • Closure Threat: You are also warned that if you don’t renew the license immediately and pay the fine, the authority may instruct to temporarily close “Magnificent Desserts” for 2-4 weeks. This closure would significantly disrupt your business and lead to lost sales during a crucial time.

If a business continues to operate even after being fined once for license expiration, the authority will require the business to shut down its commercial premises temporarily. This closure period typically lasts 2-4 weeks but could be longer for repeat offenders.

Sealing of business premises means a complete halt of all sales, transactions, and operations from that location during the closure duration. This leads to significant loss of income and disruption of business activity. To reopen, the license must be renewed with applicable late fees and clearance from the authority.

Imposition of other fines

As per the rules, businesses operating without a valid license not only face one-time penalties, but other than that, the companies or businesses may be fined AED 250 for not renewing the license on time, and the investors will also be required to pay AED 2000 when the existing business license is overlapped.

The imposition of these fines may affect the goodwill of the businesses in Dubai, whereby the credibility of the business may be lost, affecting sales, operations, and customers, so it is always the best call to renew your trade licenses on time without further delay, which might affect the business. PRO service providers like CDA can assist you in renewing your firm’s business licenses, making it simpler and easier.

Blacklisting of Business Entity

Non-compliance with license renewal timelines is treated very seriously by authorities. In extreme cases of repetitive offenses and failure to renew licenses for extended periods despite notices and penalties, the authorities reserve the right to blacklist the business entity.

Once blacklisted, the business entities will be under the surveillance of the government due to repetitive failures in the renewal of the license or conducting the business without the renewal of the license. The business may not be provided with any assistance from the government to operate the business; the visas for the employees may not be provided; the sponsors may not provide the services to the business entities; the entity won’t be allowed to conduct any other business operations; the existing visas may be nullified; and business transactions may not be permitted.

 Along with the above-mentioned circumstances, the shareholders, owners, or directors may also be deported from the emirates due to the non-renewal of the license of the business. The authorities may provide you with some grace period, but still once getting black listed may affect the good image of the business.

Imprisonment and Other Legal Actions

For offenses involving fraudulent practices related to license procurement or renewal, authority files cases with public prosecution. This may lead to imprisonment of business owners/directors for a period of up to 6 months. Heavy fines and penalties are also levied in such cases.

Furthermore, labour cases may be filed against the company by affected employees for failure to comply with Emirates Labor laws in the absence of a valid trade license. Additional financial and legal implications have to be dealt with for labour law violations.

Prohibition on expansion

If any small business entities fail to renew their licenses on time, then the entity might face many consequences in the future. The SMEs may not be able to expand their businesses in Dubai if they do not renew their license on time. The SMEs established in Dubai with the vision of expansion and prosperity must ensure that they keep the dates of renewal in mind to avoid further mishaps. A business planning to expand must have a clear track record without a bad reputation.

What are the documents that may be required for the renewal?

The business entities that want to renew their license must maintain the following documents to facilitate the renewal process:

  • Copies of the passports of the owners and the investors
  • Copy of the current trade license
  • Typed BR/1 form
  • Copy of the tenancy and Ejari registration certificate

How to Avoid Penalties on Expired Business Licenses in Dubai?

Now that we’ve seen a picture of the potential penalties, let’s provide you with the knowledge to navigate them successfully. Here are some key steps to avoid license expiration woes:

  • Set reminders: Mark your calendar and set up automated notifications well in advance of the renewal date.
  • Understand your license type: Different license types have different renewal periods. Familiarize yourself with your specific requirements.
  • Renew online: The DED offers a convenient online platform for license renewal. Utilize this to streamline the process and avoid delays.
  • Seek professional help: If you’re unsure about any aspect of the renewal process, consult a business setup or legal professional like CDA. We can guide you through the paperwork and ensure compliance.

Why should you keep your business license renewed?

The significance of renewing your business license is clearly evident from the above consequences, but some of the major reasons why you should keep your license updated include the following:

  • Maintaining credibility: If you fail to renew the license on time, then it might result in penalties and fines; in the worst cases, they can be blacklisted. This might affect the credibility of the business, and customers and other interested parties may lose confidence in the business and may be reluctant to continue the operations or transactions with the business.
  • Ensuring strict compliance: Keeping updated licenses ensures that you are compliant with the regulations of the land, and the business can avoid any penalties or fines. It can also carry out operations and transactions freely, gaining assistance from the government like visa approvals, etc.
  • Getting smooth financial and banking services: Businesses that maintain an updated license can gain financial assistance and banking services smoothly without any further hindrances. The updated business licenses will enable them to get the required finances, such as loans or debts, from the banks.
  • Attracting overseas investors: The major importance, among others, of maintaining a proper business license is that the entity can confidently approach the investors and fund the businesses. The updated license is a symbol that the business has always complied with the regulations and has not indulged in any malpractices or illegal transactions.
  • Acquire government assistance: If you maintain a properly updated license, then you can acquire the assistance of various services from the government, like subsidies, tax exemptions, and many other facilities, whereby you can get your business on the path of growth.

How can we ensure a smooth license renewal process?

In order to facilitate a smooth license renewal process, businesses can use the below-mentioned tips to get their licenses renewed easily:

  • Keeping updated information: Keeping all the documents required for the renewal of the license will help you get the license easily.
  • Filing the taxes and VAT: Filling all the taxes and VAT on time may help you get the trade license renewed easily, whereas failure to do so may result in the cancellation of the license.
  • Keeping all the documents ready and complete: Ensuring that you have all the documents complete and ready for submission will result in a smooth process of license renewal.
  • Seeking professional assistance: The business entities can approach professional firms like CDA, who can assist them in getting their license renewed on time without any delay and also maintain all the required documents and forms to facilitate the proper renewal process. Business firms can approach professional firms as they can protect them from fines and penalties.

To get insights about applying for a business license click here 

How CDA Can Help for Expired Business Licenses in Dubai?

To avoid these hefty penalties for expired business licenses in Dubai, proactive cooperation with CDA is key. Our licensing experts can provide the following crucial assistance:

  • Guidance on documentation and procedures for smooth and timely license renewal before expiration.
  • Reminder notifications well in advance of upcoming deadlines to avoid oversights.
  • Options analysis and advice to address technical lapses to secure renewal on priority without fines.
  • Walkthroughs of online license renewal portals to submit applications hassle-free.
  • Support in reopening premises closure orders expeditiously post renewal.
  • Counsel for appropriate procedures to rectify license status for long non-compliant cases without blacklisting risks.

By utilizing these CDA services efficiently, businesses can sidestep penalties and ensure continued legal operations in Dubai through valid license renewals every year. Early consultation works better than paying hefty fines for lapses. CDA aims to facilitate licensees through a collaborative approach.

In conclusion, license non-compliance in Dubai attracts heavy penalties from authorities. However, proactive coordination with the Dubai Community Development Authority helps navigate requirements smoothly without incurring penalties. If you are interested to know more about our services, please feel free to reach out to us.

Reaching out to CDA license experts in advance saves businesses from facing shutdowns, fines, or blacklisting due to expired permits. To know more contact our team now.