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The potential for success when starting a company in Dubai, particularly on the mainland, comes with a great deal of opportunity. However, the challenge is in understanding the many regulations and legal provisions that come into play and complying with all of them. For many seasoned entrepreneurs, this isn’t about avoiding any penalties but rather about building your business on a legal, compliant, and sustainable basis.
Below is an overview of the most severe compliance areas and how to address the common challenges you will face.
The company formation process begins with multiple approval processes from various governmental and relevant authorities. You should keep in mind that all approvals are directed mostly by the Department of Economic Development (DED), the Free Zone Authority, the Federal Tax Authority (FTA), or the Ministry of Human Resources and Emiratisation (MOHRE), which also serves as the central authority for mainland companies; there may be other approvals necessary depending on your business activity, such as getting approval from the DHA and Dubai Civil Defence for healthcare-based businesses.
Challenge: Administrative complications caused by wrongly choosing business activity, missing documentation, or confusion about the types of licenses that are actually required can delay or cause the refusal of an application.
How to Address:
Research: Ensure you properly research and clarify your business activities and select the correct trade license.
Engage a local professional: Work with a known business setup consultant or a Public Relations Officer (PRO) service provider like CDA. These professionals will have an intimate knowledge of the constant legislative changes and will take the responsibility for completing the large volume of paperwork as required with the knowledge that it is all completed properly and on time.
If you are starting a business that employs people in the UAE, compliance with the labour laws is part and parcel of the process. This means the employment laws, including employment contracts and working hours, must be as per the mandatory Wage Protection System (WPS); thus, all salaries paid must be paid through an official government-approved tracking system.
Challenge: Many business owners or new entrepreneurs, particularly those unfamiliar with the region, either do not make employment a legal document, misidentify and classify an employee (i.e., hire a full-time employee as a “freelancer”), or do not send the proper paperwork in between the deadlines and find themselves—both personally and for the company—facing large fines, similar to moving violations in the UAE.
How to Address:
Create professional contracts: Ensure all employment agreements are in accordance with UAE labour laws, and the terms and conditions of employment are made clear. Ensure you are aware of all the updates and amendments made in the laws to avoid any non-compliance issues.
Use professional services: PRO services (Public Relations Officers) can also help with the entire visa and immigration process, from filling out forms for work permits to stamping visas and renewals, all the way through to making sure the system is being followed.
While there are tax advantages in the UAE, businesses must still follow sound financial practices, especially after the introduction of Value Added Tax (VAT) and Corporate Tax.
Challenge: Common mistakes include not registering for VAT or CT when annual revenue exceeds sain threshold, incorrect reporting of tax, and a failure to properly account and document.
How to Address:
Separate Your Finances: Separate your business and personal finances by having different bank accounts.
Corporate governance and documentation are vital for a successfully run business. Good governance includes keeping the company records current, holding Annual General Meetings (if necessary), and ensuring compliance with regulations such as the Ultimate Beneficial Owner (UBO) disclosure requirements.
Challenge: Business owners often do not keep adequate records of their companies, which can create challenges if they are audited or when they want to make formal changes to the structure of their company.
How to address:
Get Organized: Make sure all documentation related to your corporation—from licenses, tenancy agreements, visas, and legal agreements—is organized and can be found with ease.
Update registries: If any changes are made to your corporation—such as a change of address or change of ownership—make sure you update the relevant authority immediately.
Overcoming compliance in company formation is an important task for any business. The primary point to focus on is licensing and registration obligations, such as registering for appropriate business activity. On the admin side, companies need to stay on top of their trade licenses and immigration cards, submit Ultimate Beneficial Ownership (UBO) reports, and remain compliant with Anti-Money Laundering (AML) rules. Finally, businesses must stay compliant with labour law. This includes using the Wage Protection System (WPS) to pay employees’ salaries, providing employee health insurance, and keeping all employment documentation up-to-date. By keeping the above compliance requirements at the same high level as your legal obligations at incorporation, businesses can have legal assurances and operate successfully in the UAE.
Going through the compliance requirements laid by the UAE might seem overwhelming for the business owners and entrepreneurs, but in reality, these stringent compliance requirements make the land more attractive and provides with more opportunities to the businesses. The companies entangled in the cut throat competition can approach the professionals like CDA business set up service providers to get the compliance requirements sorted. The professionals at CDA would assist you in sorting out the compliance framework applicable for business and ensuring that company is free of any other non-compliance burden.
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