Amendments to keep in mind for UAE Entrepreneurs
The UAE is a popular investment destination for many entrepreneurs worldwide. Moreover, many expatriates have made UAE their second home due to various factors such as inclusive culture, world-class infrastructure, access to the right talent, affordability and minimal regulatory hassles provided by especially by dedicated Freezones. In addition, the geographical location of the UAE is more favourable for businesses to serve both the Middle East and African markets.
Infrastructure plays a vital role for an entrepreneur to become successful. A robust infrastructure that provides a modern outlook with hyper-connectivity and a world-class banking system has made the UAE one of the top destinations to carry out any business. First, however, the entrepreneurs should lend an ear to the recent developments and amendments in the UAE affecting their business.
Stimulus Package and Investor Confidence
The UAE Government has recently issued a stimulus package in the UAE to raise investor confidence and encourage entrepreneurship among the residents. The scheme has led to an ever-increasing number of new company registrations across the country and has broken the previous records.
The ongoing covid-19 pandemic has affected the lives and livelihoods of people across the world. The UAE is also similarly affected by the pandemic and had to postpone the planned global event like Dubai Expo 2020 that has affected the local businesses. The Dubai Government has recently launched an AED 1.5 billion stimulus package to support local businesses affected by the crisis to withstand the post-pandemic uncertainty. The other measure taken by the Government includes rent relief, interest-free business loans and payment deferrals to boost the business scenario in the region.
Changes to Foreign Direct Investment
The UAE Government has recently amended the rules, which now allows 100% foreign ownership in the Onshore/mainland of the UAE and reducing the minimum share capital required to set up a mainland company in UAE for foreign investors and entrepreneurs. Additionally, the Government is offering numerous options to foreign investors interested in starting a business in the country.
Previously, the mandatory requirement of an Emirati sponsor with at least 51% of ownership (not applicable in Free Trade Zones) has been a major hurdle for foreign investors to start a company in the UAE. The other difficulties, which involved finding and collaborating with a trustable local shareholder, had discouraged the business plans of foreign investors.
The amendment in FDI rules has come to effect starting from Dec 1, 2020, thereby allowing full foreign ownership of UAE mainland companies. Because of the amended FDI law, the business scenario in the country is to take a giant leap forward as many foreign investments flow in. The newly amended law also allows the shareholders to sue the business at a civil court in applicable jurisdiction over the failure of duties.
KYC Compliance and Corporate Bank Account
Since the pandemic, the Know-Your-Customer compliance requirements are comparatively eased in UAE banks. As a result, entrepreneurs and start-ups with limited or no banking history or any relevant business experience are successfully able to open a corporate bank account. These measures are initiated as part of the special Covid-19 relief incentives by the banks operating in the UAE. It will positively affect the business landscape in the coming months.
Another significant development that the UAE entrepreneurs keep in mind is that the UAE government has joined over 100 other countries worldwide in agreeing to a Common Reporting Standard (CRS) system. CRS is an exchange of data between tax authorities of member countries to increase transparency. The new CRS system means the UAE Central Bank now demands that all local banks are more stringent in carrying out due diligence and compliance. As a UAE resident or a non-resident, it will impact everyone in particular as the bank accounts would now be reportable under the new CRS system, in case the banks ascertain an individual is non-resident for banking purposes.
Entrepreneurs should be cautious as the business activity choices are under greater scrutiny as banks further clamp down on details they deem ‘high-risk’ or possibly ‘vague’ activities. Even after accepting the account opening application, things may come under scrutiny further down the line, like audits. The company can face questions about suppliers or customers and face strict fines for any irregularities. But any discrepancies can be avoided by the assistance of a specialist consultant with a good reputation for providing a high-quality service.
VAT Registration Compliance
VAT is comparatively a new tax introduced in the Gulf nation. After the initial hiccups, companies across the UAE are adopting changes affected by the new tax. As per the VAT rules, tax registration is mandatory for businesses with an annual turnover of AED 375,000. However, the companies looking to avail of the VAT benefits can opt for voluntary registration for VAT, although the annual turnover is less than AED 375,000.
It is vital for companies registered under VAT law to file the VAT returns as specified at the time of registration. Also, the entrepreneurs should file for any VAT refund for business supplies if applicable, maintain a VAT record for a specified period, and pay the due taxes to FTA accordingly.
Why Us?
Over the last many years, Jaxa Chartered Accountants have successfully worked with entrepreneurs from many parts of the world looking to establish business operations. Our consultants inform and guide the entrepreneurs regarding any new laws and amendments that may affect the business. Please Contact Us to know more about our service offerings. We’d be delighted to assist!
