Abu Dhabi legal and accounting and tax considerations in 2023
- Companies in Abu Dhabi do not have to pay any corporate tax. The only entities that pay corporate tax are i) oil and gas companies at 55% and ii) branch of foreign banks at 20%;
- The UAE is also exempt of other taxes including i) personal income tax ii) capital gains tax iii) VAT and iv) withholding tax;
- Custom duties of 5% are imposed on imports from non-GCC countries. All goods imported into the UAE require customs clearance, which may only be obtained upon payment of the applicable customs duty. If the importer fails to settle the duty, the customs authorities are empowered to sell the goods to recover the due amount;
- Annual audited financial statements are submitted to the federal Ministry of Economy and the Abu Dhabi department of Economic Development within 4 months after the end of the accounting year. This is required for renewal of the company’s commercial license;
- UAE does not impose any exchange controls;
- Social security contributions for UAE citizens are based on the monthly basic monetary salary plus monthly allowances. Employers contribute 12.5% and employees contribute 5%;
- UAE has signed DTAAs with 66 countries including Canada, China, India, Germany and Singapore;
- Healy Consultants will assist our Clients with i) documenting and implementing accounting procedures ii) implementing financial accounting software iii) preparation of financial accounting records iv) preparing forecasts, budges and sensitivity analysis;
- It is important our Clients’ are aware of their personal and corporate tax obligations in their country of residence and domicile; and they will fulfill those obligations annually. Let us know if you need Healy Consultants’ help to clarify your annual reporting obligations.
|Penalty type||Penalty amount|
|Failure to keep the required records and other information specified in the tax laws||AED 10,000 for each violation, or AED 20,000 in each case of a repeated violation|
|Failure to submit data, records and documents related to Tax in Arabic to the Federal Tax Authority (FTA)||AED 5,000 for each violation|
|Failure to file a Tax Return within the specified timeframes||AED 500 for each month (or part thereof) for the first 12 months, and AED 1,000 for each month (or part thereof) from the 13th month onwards.|
|Failure to settle the Payable Tax||Monthly penalty of 14% per year|
|Submitting an incorrect Tax Return||AED 500 unless the Tax Return is corrected before the deadline for submission|
Legal and compliance
To support Abu Dhabi business setup, Healy Consultants Compliance Department assists our Clients efficiently and completely discharge their company legal and tax obligations.
- The legal framework of the Emirates is a dual acting system which comprises of mainly Islamic shariah and aspects of conventional law;
- Company directors are appointed, replaced, and dismissed by the shareholders. Only the directors have the power to manage the day to day operations of the company. The identities of shareholders and directors are on the public register;
- In accordance with the Commercial Companies Federal Law No. (8) of 1984 each Abu Dhabi US$ must have a minimum of one individual shareholder ordinarily resident in UAE, holding at least 51% of the company shares. If our Client requires nominee services, Healy Consultants will be pleased to assist. Our fee for a country resident director or shareholder amounts to US$15,600 per annum;
- In accordance with Commercial Companies Federal Law No. (8) of 1984, the issued share capital of US$41,000 must be deposited to the company bank account before company setup is completed. To optimize engagement efficiency and minimize delays, Healy Consultants is happy to deposit these funds on behalf of our clients;
- The memorandum of association is a contract between the shareholders and comprises i) company activities ii) registered office address iii) shareholder and director details iv) share capital v) profit distribution method;
- Each business entities must appoint a manager. The manager is appointed by the memorandum of association or by a separate management contract. Unless otherwise stated in the MOA, the company manager shall enjoy full powers of administration, and his acts shall be binding to the company, provided that it is supported with stating the capacity he enjoys;
- Following company formation, every company must lodge an annual return confirming relevant details of the company for the public register including names and addresses of all directors, address of principal place of business and details of shareholders and their shareholdings;
- All business activities receive government approvals and permits and licenses. There is an obligation to register particular products with the government, including food, medical equipment, cosmetics, and medicine;
- UAE is a full member of i) the World Intellectual Property Organization (WIPO) ii) World Trade Organization (WTO) iii) the Paris Convention iv) the Patent Cooperation Treaty (PCT) v) the WIPO Copyright Treaty vi) the WIPO Performances and Phonograms Treaty (WPPT) and vii) the Rome Convention;
- Foreign countries may only conduct business after it is licensed by the Department of Economic Development (DED). The DED is the statutory body that regulates and controls the licensing procedures for all business entities. Every entity must apply for one of the following licenses:
- A commercial license for buying and selling of goods including wholesale or retail trade enterprises, contractors, hotels, transport and storing establishments, etc;
- An industrial license to discover natural resources or transform raw materials into manufactured products;
- An occupational license to practice any profession such as engineering consultancy, auditing and accounting, business set up, medical, and educational services;
- Tourism license: issued to hotels, travel offices, tourist restaurants, tourist boats rental and floating restaurants, etc.
- It is not possible to incorporate company in one Emirate and setup office in another Emirate;
- An LLC is required to transfer 10% of net profits each year to a legal reserve until such reserve reaches a level of 50% of the paid-up share capital;
- The Department of Economic Development does not permit two different classified business activities under one license e.g. trading and manufacturing;
- The process of deregistering a company is dictated by the government. This process will take a minimum of 6 months. Healy Consultants fee to project manage company de-registration is US$1,450. During this 6 months period it is mandatory to maintain a resident company secretary and a legal registered office.
- UAE recently approved measures to increase the Emiratisation rate for private sector.
- Mainland registered private sector employers with more than 49 skilled employees are required to hire UAE nationals and will be required to increase Emirati employees by a minimum of 2% annually until 2026. Refer to the table below for clarify. A skilled employee is defined here;
- The deadline for compliance with this new targeted increase is 1 January 2023. Non-compliant companies will be subject to fines of AED 6,000 per month. Other sanctions will additionally apply.
Number of skilled workers Number of UAE nationals be hired each year 0-49 exempted 50 One UAE national 51-100 Two UAE nationals 101-150 Three UAE nationals 151 and above One UAE nationals for every 50 skilled workers