Planning to Set Up or Move Your Company to the UAE? Here’s Your All-Inclusive Guide to Getting It Right from Day ONE

The UAE’s Evolution as a Global Business Hub

For decades, the United Arab Emirates (UAE) was globally known as a tax-free business hub with minimal compliance requirements. This reputation attracted entrepreneurs, multinational companies, and investors from across the world.

While the UAE no longer operates in a zero-tax environment, it is important to understand that:

• Tax rates in the UAE remain among the lowest globally

• The compliance framework is transparent, structured, and predictable

• There is no personal income tax

• The UAE continues to rank as one of the most business-friendly jurisdictions

With the introduction of Corporate Tax (CT), VAT, and strengthened AML regulations, the UAE has aligned itself with international best practices while maintaining its competitive edge. As a result, companies are not leaving the UAE, in fact, more businesses are moving in than ever before.

However, with opportunity comes responsibility.

However, this shift also means that business owners must move beyond the assumption that company formation alone is sufficient. Understanding ongoing compliance requirements and the penalties associated with non-compliance is now essential to building a sustainable and defensible business in the UAE.

A Real-Life Example: Why Compliance Cannot Be Ignored

We recently worked with a client who had set up a Real Estate Brokerage company in the UAE about two years ago. As business grew and income reached several million dirhams, the client began receiving reminder emails from the Federal Tax Authority (FTA) and other regulators.

On review, we discovered:

• The Corporate Service Provider (CSP) who assisted with incorporation had not explained ongoing compliance requirements

• The company had not complied with AML regulations, despite operating in a high-risk regulated activity

• Bookkeeping records were not maintained, as the client did not have an operational team in the UAE

• Submissions to the FTA and Licensing Authority were delayed or missing

At this stage, the company was exposed to:

• Severe AML penalties

• Late filing penalties from the Licensing Authority

• FTA penalties for missed or incorrect tax obligations

We worked closely with the client to:

• Streamline internal processes and contracts

• Conduct client screening and AML remediation

• Regularize bookkeeping and compliance filings

• Bring the company back on track before penalties escalated

💡 Setting up a company may look easy from the outside, but staying compliant is where the real work begins.

You know your business best, but a professional advisor understands the regulatory landscape and helps you navigate it safely and efficiently.

Key Compliances Every UAE Business Must Understand

1. Corporate Tax (CT) in the UAE

Is Corporate Tax Mandatory?

Yes. Corporate Tax is mandatory for most business types in the UAE, particularly:

• Limited Liability Companies (LLCs)

• Free Zone entities (subject to conditions)

• Branches of foreign companies

• Permanent Establishments

• Companies with economic nexus in the UAE

Different rules apply for:

• Sole Establishments

• Permanent Establishments

• Foreign companies with UAE nexus

Each structure must be assessed individually.

Corporate Tax Registration & Return Filing

• CT Registration is mandatory once your company is incorporated or falls within the scope

• Corporate Tax Returns must be filed annually

• Returns are generally due within 9 months from the end of the financial year

Late Registration Penalty

• A penalty applies for late CT registration

• Amnesty is currently available if:

  • The Corporate Tax Return is submitted within 7 months from the financial year end

• Eligibility for the waiver can be checked via the official FTA link

Corporate Tax Deregistration

• In case of company closure or license cancellation:

  • CT deregistration must be completed within 3 months from the cancellation date

  • Delays can trigger penalties

2. VAT Registration & Compliance

VAT Registration Thresholds

VAT registration depends on:

• Mandatory registration when taxable supplies exceed the prescribed threshold, i.e. AED 375,000

• Voluntary registration available under certain conditions, I.e. AED 187,500

VAT Return Filing

• VAT returns are typically filed quarterly

• Payments must be made within the prescribed timelines

Penalties for VAT Non-Compliance

Penalties may apply for:

• Late registration, i.e. AED 10,000

• Late return submission, i.e. AED 1,000 for first time non-compliance and AED 2,000 for any re-occurrence

• Late payment

• Incorrect filings or misstatements

These penalties can accumulate quickly if ignored.

VAT Deregistration

VAT deregistration is required to be completed within 20 Business Days of:

• Business activities cease

• Turnover falls below the deregistration threshold

Strict timelines apply, and delays may result in penalties.

3. FTA Portal Management & Updates

The FTA Portal is a living compliance system, not a one-time setup.

Mandatory Updates

Any changes to company details must be updated within 20 business days, including:

• License renewal or expiry

• Change in shareholders or directors

• Change in business activity

• Change in contact details or legal structure

Penalties

Under the revised law, failure to update information on time attracts penalties, even if no tax is payable.

4. WPS (Wage Protection System) – Mainland Companies

For Mainland companies, WPS compliance is mandatory.

Key Requirements

• Salaries must be processed via SIF (Salary Information File) transfers

• Payments must be made through approved banks or channels

Alternative Solutions

If your bank faces processing issues:

• Approved exchange houses can be used as WPS providers

• Choosing the right provider ensures uninterrupted compliance

Failure to comply can lead to:

• Labor bans

• License suspension

• Fines

5. AML Compliance in the UAE

Who Must Comply?

Businesses engaged in Designated Non-Financial Business and Professions (DNFBPs) such as:

• Real estate brokers

• Auditors and accountants

• Corporate service providers

• Dealers in precious metals and stones

Key AML Requirements

• Customer Due Diligence (CDD)

• Ongoing client screening

• Transaction monitoring

• Risk assessments

• Suspicious Transaction Reporting (STR)

Penalties for Non-Compliance

AML penalties in the UAE are severe and may include:

• Heavy financial fines

• License suspension or cancellation

Criminal exposure in serious cases

6. Other Practical Suggestions for Running a Compliant Business in the UAE

Beyond tax registrations and regulatory filings, day-to-day operational discipline plays a critical role in keeping your business compliant, bankable, and defensible in the UAE. Many penalties and disputes arise not due to intent, but due to lack of documentation and weak internal practices.

A. Always Route Transactions Through the Company Bank Account

All business-related income and expenses should be conducted strictly through the company’s bank account, not personal accounts.

This:

• Reduces the risk of bank account freezes or closures

• Creates a clear audit trail for FTA and regulatory reviews

• Strengthens your position during tax audits and compliance checks

• Improves credibility with banks, investors, and authorities

Mixing personal and business transactions is one of the fastest ways to attract unwanted scrutiny.

B. Always Have Proper Contracts in Place with Customers

Every customer or client relationship should be governed by a formal written contract, clearly defining:

• Scope of services or deliverables

• Commercial terms and pricing

• Payment terms

• Rights, obligations, and termination clauses

To reduce compliance and legal risk:

• Avoid excessive reliance on informal communication such as WhatsApp messages or phone calls

• Ensure key commercial terms are documented via signed agreements or official email correspondence

In regulatory reviews, verbal agreements and chat messages carry little weight. Contracts are your first line of defence.

C. Employ Staff Only with Proper Work Permits or Attested Employment Contracts

For Mainland companies, employees must:

• Hold a valid UAE work permit and residence visa, and

• Be hired through the Ministry of Human Resources & Emiratisation (MOHRE)

For other structures:

• Ensure employment contracts are issued and attested by the relevant licensing authority

Hiring staff without proper authorization can result in:

• Fines on the company

• Labor bans

• License suspension

Compliance in employment is not optional, it is closely monitored.

D. Ensure Employees Are Registered for Unemployment Insurance

All eligible employees in the UAE must be registered under the UAE Unemployment Insurance Scheme.

While registration is done by employees:

• Companies may also be exposed to penalties if employees are not registered

• Non-compliance can create complications during labor disputes or inspections

As a best practice, employers should:

• Educate employees on this requirement

• Obtain confirmation of enrollment as part of onboarding

E. Maintain Proper Bookkeeping & Supporting Documentation

Up-to-date bookkeeping is essential, not just for tax, but for:

• License renewals

• Bank reviews

• Investor or partner due diligence

Ensure that:

• Accounting records are maintained regularly

• Supporting documents (invoices, contracts, bank statements) are properly archived

• Records are readily available for FTA or authority reviews

Delayed or reconstructed bookkeeping often leads to errors, penalties, and compliance gaps.

F. Apply for a Tax Residency Certificate (TRC) Where Applicable

Businesses and individuals earning income in the UAE should consider applying for a Tax Residency Certificate (TRC).

A TRC can help:

• Reduce or eliminate tax exposure in home countries

• Claim benefits under Double Taxation Avoidance Agreements (DTAA)

• Strengthen tax position during cross-border income assessments

This is especially relevant for:

• Foreign shareholders

• Consultants and service providers

• Groups with international operations

Each case should be evaluated based on residency, income source, and treaty availability.

G. Engage Professionals for Ongoing Compliance - Not Just Set-Up

Company formation is only the beginning.

Ongoing compliance support helps:

• Track regulatory changes

• Meet filing deadlines

• Avoid penalties and last-minute firefighting

• Allow founders to focus on growth rather than administration

A professional advisor acts as a compliance partner, not just a service provider.

Final Takeaway

The UAE continues to be one of the most attractive jurisdictions in the world to set up and scale a business, but it is no longer a “set it and forget it” environment.

Today, success in the UAE is not defined only by revenue or growth, but by how well your business is structured, documented, and compliant. Most regulatory issues do not arise because business owners intentionally do something wrong, they arise because critical compliance requirements are missed, misunderstood, or never explained properly at the time of set-up.

Penalties in the UAE are real, cumulative, and increasingly enforced across:

• Corporate Tax

• VAT

• AML

• Employment & WPS

• Licensing Authorities

Getting compliance right from day one:

• Protects your license and bank accounts

• Prevents unnecessary fines and last-minute firefighting

• Gives you peace of mind to focus on growing your business

Compliance is not a cost, it is risk management.

Why Work With Arzonell

At Arzonell, we believe company formation is only the beginning.

We work with founders, investors, and growing businesses to ensure that what looks good on paper actually works in practice. Our approach goes beyond registrations, we focus on long-term compliance, sustainability, and protection.

Whether you are:

• Setting up a new company in the UAE

• Expanding or relocating your business

• Already operational but unsure if you are fully compliant

• Receiving reminders or notices from authorities

Our team helps you:

• Understand your exact compliance obligations

• Structure your business correctly from the start

• Stay ahead of deadlines, filings, and regulatory changes

• Avoid penalties before they arise, not after

Many of our clients come to us when something has already gone wrong. Our goal is to ensure you never reach that stage.

Reach out to us: info@arzonell.com | +971 52 191 5973