Taxes in Dubai and UAE

Taxes in Dubai and UAE

UAE have based their foundations, on being one of the famous ‘tax havens’. Like many other Middle East countries, Dubai and UAE in general earn its revenue mainly through the oil industry and offers tax-free living to attract global companies and talent to diversify and enrich their economy further. Therefore, everyone thinks that in Dubai you do not pay taxes; but is it really like that? Is it really tax-free in the UAE? Yes, it is but only in certain circumstances!

However, in order to have a business in the UAE you need to pay an annual license fee (whose value depends on the type of business); and there are a number of other fees: the company may need resident visas for the entrepreneur, his or her family and their employees.

Most customs duties are very low and may even be excluded for certain categories of products like in the case of materials to be used for the production of goods to be re-exported. But in other cases they reach 100% of the value of the product (alcoholic beverages, energy drinks, tobacco).

Starting from 1st January 2018 the United Arab Emirates introduced VAT for the possible economic impact due to a depletion of oil resources: a true revolution in the economic and financial landscape. The VAT is set at 5%. Basic foodstuffs, education and health are exempted.

At present, companies with an annual turnover of between AED 187,500 and AED 375,000 can choose whether to register or not, while those with less than AED 187,500 will remain exempt for now. The change has far-reaching implications for companies that will need to make use of professional figures or service companies for their management. This will be also the occasion for whom want to open his own accountancy firm in Dubai and in UAE.

Taking a look at neighboring countries (in particular Qatar and Saudi Arabia), you can see that businessmen opening activities there need to consider the cost of setting up the companies, the possible share capital to be paid, the mandatory office that will pay 10% and 20% of taxes respectively on all that is generated with foreign countries. And even if all the generated income is foreign, a certified auditor needs to be accounted for.

So today opening a business in a Free Zone is still your best bet (not requiring the visa requirement, physical office, accounting records, share capital to be paid). Contact us for more information about best solution for you.

How to set up a company in Sharjah Media City Free Zone (Shams)

How to set up a company in Sharjah Media City Free Zone (Shams)

All UAE’s free zones serve up a host of benefits – 0% corporate and personal tax, 100% company ownership, 100% repatriation of capital and profits, no currency restrictions, and 100% import and export tax exemption, to name just a few.

As well as the benefits offered above, some Free Zones also boasts world-class facilities and extra advantages. Take Shams, for example: located in Sharjah, it’s a hub for the media, trading and creative industries – and offers a number of specialised business services and facilities to help its inhabitants grow both locally and internationally.

There are a number of steps that need to be undertaken, some complex, some less so. Usually the first thing to do is choose your business activity. From here you’ll need to decide on your company name, complete and file your registration paperwork with the relevant authorities, open a bank account, and apply for any visas that may be required.

However, the specifics of this process will depend on the type of licence you are applying for and the kind of business you wish to run. That’s why before starting any of these steps, the first port of call should always be to a company setup expert who will guide you through every part of the process, ultimately ensuring the entire application requires little more than a few hours of your time.

Setting up your own business has never been easier. We take care of it all so you can focus on what matters – building your business. For more information about company formation in the UAE mainland or free zones contact us.

1. Straightforward setup: Sharjah Media City’s incredibly straightforward two-step setup process makes it hugely popular with businesses of all sizes. Moreover you don’t need to be in the UAE to start the process; not only, even though you’ve never been in UAE you can apply for a company here.

2. Open to a broad range of business activities: Shams is open to a broad range of business activities – over 200 in fact, including bookkeeping, HR, plumbing, publishing, hospitality and wholesale.

3. Flexible office options: As Shams is a relatively new free zone, it currently only offers flexi-desk packages – these allow entrepreneurs use of the free zone’s state-of-the-art business facilities on an ad-hoc basis. A whole free zone city is currently under construction and when complete it will feature a range of physical office spaces as well as studios, showrooms and other creative units. The finished project will also include a residential boulevard, community plaza and a series of restaurants, shops and hotels.

4. Set up with multiple shareholders: While you have the option of applying for a flexi-desk package alone at Shams, you certainly don’t have to. It is possible to establish your business with multiple shareholders – up to a maximum of 50 – which can be either individuals, corporate entities or a combination of the two.

5. Apply for multiple visas: Sharjah Media City’s flexible visa options make it easy for solo entrepreneurs and beyond. Currently under the free zone’s flexi-desk package it is possible to apply for up to six visas, for you, and your shareholders or employees.

6. Easy to sponsor dependants: As well as applying for employee visas, it’s also very straightforward to sponsor your dependants for their visa applications as well. Whether you require a visa for a spouse, child, maid or driver, the process is four straightforward stages: entry permit, status adjustment, a medical fitness test, then Emirates ID registration and visa stamping. 7. Easy to arrange your corporate bank account: Once you’ve received your licence and established your business in Shams, you’re ready to set up your corporate bank account. The application process is quick and simple. Free zone staff can advise on the best bank to suit your needs – and can even arrange meetings in-branch for you, should you wish. A company formation specialist can also provide the same service – or alternatively, you’re welcome to approach any local or international bank on your own.

Setting up in Sharjah Media City

So you’re sold on the benefits of setting up your business in Sharjah Media City – what next?

There are a number of steps that need to be undertaken, some complex, some less so. Usually the first thing to do is choose your business activity. From here you’ll need to decide on your company name, complete and file your registration paperwork with the relevant authorities, open a bank account, and apply for any visas that may be required.

However, the specifics of this process will depend on the type of licence you are applying for and the kind of business you wish to run. That’s why before starting any of these steps, the first port of call should always be to a company setup expert who will guide you through every part of the process, ultimately ensuring the entire application requires little more than a few hours of your time.

Setting up your own business has never been easier. We take care of it all so you can focus on what matters – building your business. For more information about company formation in the UAE mainland or free zones contact us.

EChannel system Dubai UAE

What is the E-Channel Immigration System and how will it affect your company?

The country’s rapid expansion from a population of just one million in 1980 to around nine and a half million today has been largely underpinned by rising numbers of expatriate workers. Such is the influx of foreign workers in recent years that today approximately 90% of the UAE’s population is non-Emirati, according to the CIA’s World Factbook.

The UAE economy has also been bolstered by a huge rise in the number of overseas travellers visiting the UAE on tourist visas. Dubai alone attracted 14.3 million visitors in 2015, making it the fourth most visited city in the world, behind only London, Paris and Bangkok. This is up five million since 2010 when 9.3 million overseas arrivals came to the city.

The UAE has adjusted its immigration policies and procedures over the years to cope with this increase in demand for visas and to ensure a smooth application and issuing process. The latest changes – in the form of E-Channel immigration – look set to make the process even easier, cutting down admin time and paperwork for both businesses and individuals.

What is the E-Channel immigration system? 

Launched as part of the UAE 2021 vision under the slogan ‘Smart Services with Future Vision’ – the E-Channel Immigration System is a new, unified immigration system that has been implemented in six out of the seven Emirates. Dubai and Abu Dhabi continue to use their own independent immigration systems for the time being.

The most noticeable change to the current procedure is that now both businesses and individuals can apply for visas, residence permits, and entry permits through a single online portal – instead of visiting a typing centre or immigration office.

The new system – known in Arabic as the ‘Tahaluf’ system – removes the need for hard copy documents and aims to ensure that all applications are processed more efficiently with improved integration across the Emirates.

Once registered on the E-Channel portal, individuals and businesses can apply for their visas, or entry permits (residence, visit and tourist) – and for those of employees or relatives. The whole process, including payment can be carried out online and where applicable permits can be printed at home.

Registration fees vary depending on the Emirate you are in but are in the region of AED 7,500 with a refundable deposit component of approximately AED 5,000. Registration must be renewed annually at a cost of around AED 1,000.

How to register in the E-Channel portal

The online E-Channel immigration portal has been designed to be incredibly easy to use.

If you are a free zone incorporated entity, it is the free zone’s details which must be used for log in purposes. In this case, you must register to the E-Channel portal via your agent and/or free zone appointed and authorised typing centres.

Otherwise, to get started, visit the E-Channel website and select either individual or establishment services.

Next click on the ‘Registration’ button. You will be asked to input your email address – instructions on how to set up your account will be sent here. Once you have received your confirmation message from the Ministry of Interior (MOI), simply select the ‘Complete Registration’ link to continue creating your profile.

Once set up on the E-Channel immigration system portal, you can start using online services right away.

Benefits of the E-Channel system

The biggest benefit of the new E-Channel immigration system is its efficiency. The MOI calls the new system ‘…a pioneering step to ensure speedy process and accuracy in the visa and residency services.’ And it’s difficult to see how this won’t be the case. For the first time, license applications, visas, amendments, upgrades, renewals, and most other associated activities can now be managed from a single portal – with the whole process entirely online. The MOI is naturally confident that this will result in faster, more efficient processing. As well as freeing up your time, the E-Channel system is also designed to lower your administrative burden – removing the need to visit immigration centres to fill out excessive paperwork. Any required documents such as passport copies or ID cards can be simply scanned and uploaded to the portal with no need to produce hard copies. By the end of 2018, the E-Channel system is expected to have reduced the need for in-person visits to government centres by up to 80%.

Alcohol trading license in UAE

Alcohol trading license in UAE

Dubai being an Islamic State does not support the consumption of liquor but as the economy of this State is heavily dependent on tourism, it cannot apply a complete ban on the sale, purchase or consumption of alcohol.

Dubai unlike Sharjah is not a dry State but it has regulated the consumption and the transactions that take place for alcohol. Out of the few taxes that are imposed by this Emirate, one is imposed on Alcohol. Since the year of 1965, Dubai levies 30% tax on alcohol.

Import, export, manufacture, purchase, consumption or sale of liquor to third parties is all regulated by the Liquor Control Law No. 999 of 1972. This law requires a license to be obtained before indulging in any of the activities mentioned hereinabove in regards to liquor. There are also a number of provisions namely relating to the consumption, advertisement, and sale of alcohol in Dubai (e.g. Penal Code, advertisement laws, taxes and tariffs laws, etc.)  Liquor licences in Dubai are issued by the Dubai Police General Headquarter (‘DPGH’).

There are 4 types of liquor licenses.

  • Type A: Licence to import liquor.
  • Type B: Licence to sell liquor to third parties from a shop or warehouse.
  • Type C: Licence to serve liquor within a hotel, club, or restaurant.
  • Type D: Licence to purchase liquor.

In addition to the above licence types, Article 2 of the Liquor Control Law states that the DPGH may, on the basis of an application, grant a person a licence to export liquor outside the Emirate, subject to a specific quota restraint.

So, if you wish to obtain alcohol trading license in the UAE, you have two options to do that:

  1. Type A: you can open the liquor shop with ware house where you will store your imported products. In this case the best option for you will be license registration with RAK freezone and obtain the approval from RAK Tourism Authority. This solution is pretty expensive, since the approval from RAK Tourism authority costs more than 1 million USD.
  2. Type B: You can register whole sale import/export liquor trading company which will allow you to import and to sell your product to hotels, restaurants, etc. In this case the best option for you will be liquor license with Fujairah freezone with an investment of about 55,000 USD

Please feel free to contact us for further guidelines, requirements and assistance.

It is illegal to advertise the sale of alcohol beverages in Dubai.

Disclaimer: The information presented in this article does not constitute a legal advise.

Company Setup in Dubai South Free Zone

Company Setup in Dubai South Free Zone

But what are some of the advantages in setting up a company in Dubai South Free Zone? First of all, this free zone allows the establishment of a wide range of business activities, from IT to design, HR to consultancy, including trading. Setting up is affordable and allows businesses with a small starting budget to begin operations quickly.

Location is also a plus for the Dubai South Free Zone. Dubai is one of the world’s most dynamic and cosmopolitan cities where it is easy to do business. This zone is the closest to Expo 2020 site and Dubai World Central (DWC) Al Maktoum International Airport, a pivotal event in the area, and is widely accessible via land, sea or air.

Paperwork is also reduced to the minimum. Although procedures in the South Free Zone might not be as straightforward as in other areas (you will need bookin, with the help of a professional it would be extremely easy to set up a business. Up to three visas are available without a physical office space and just a flexi-desk option; dependents visa also can be obtained in an uncomplicated way. Assistance is available to choose and setup a bank account.

Dubai South free zone:
– does not require share capital (it will be mentioned in the documents 300,000 AED total share capital);
– require annual auditing report, however the first year is under grace period;
– allows General Trading license only if renting physical office space.

You can contact us to find out more about opportunities in Dubai.

Labour Law in the UAE

Hiring in the UAE comes with its own unique set of challenges in the form of standard work contracts, labour law understanding, different stipulations depending on the types of employment contracts offered, and whether or not your business operates from within a free zone and also in which Free Zone you are operating.

Labour regulations in the UAE are governed by the UAE Labour Law – Federal Law No. 8 of 1980.

  • Amendments include Federal Laws No. 24 of 1981, No. 15 of 1985 and No. 12 of 1986.

We, Zayed Bin Sultan Al Nahyan, President of the United Arab Emirates; After perusal of the provisions of the provisional Constitution; and Law No. 1 of 1972 regarding the competence of Ministries, powers of Ministers and Laws bringing amendments thereto; and in accordance with the proposal of the Minister of Labour and Social Affairs; the approval of the Council of Minsters and the Federal National Council as ratified by the Federal Supreme Council, decree as follows…

Here is the first part of the law.

UAE Labour Law 2012 download

Federal Labour Law Number 8 covers most of the essential rules and regulations you need to know with respect to salaries, termination, gratuity etc. It is (or was) available in English online at the UAE Ministry of Labour (MOL) website and in bookshops, and is worth familiarising yourself with.

You will probably hear many people complain that the employment contract is not worth the paper it’s written on. Certainly there are people who’ve had an unpleasant job experience somewhere where things did not seem to go according to what they understood from their contract. Or worse. To minimise the risk of problems, keep in mind the following points.

  • Legally, only the Arabic version of a contract is valid in the UAE.
  • Having a written contract is at least something. A verbal contract is worth much less.
  • You should read your contract carefully before accepting a position and resolve any questions or issues before signing it. Make sure you have a written copy of any changes negotiated, or a revised contract. That’s important. If an issue is unresolved before signing a contract, expect it to stay that way no matter what you are told.
  • You should be given an English version. Consider carefully the implications of what you are doing if you sign a contract in Arabic without understanding it.
  • Alarm bells should go off if a company will not send you a copy of the contract before you arrive, or they ask you to sign what appears to be a different contract when you do arrive.
  • If you do have a problem with your employer and want a legal opinion, there are many lawyers available (who charge a fee of course). See a list of possible lawyers in UAE to try.
  • It is possible that you end up in a situation where it is difficult to resolve things even if the law is apparently on your side. You can expect that the one with the most wasta (influence, power) will win, in which case, put your tail between your legs and hope the door doesn’t hit you on your way out.
  • Your embassy might be able to help by providing you a list of lawyers to contact.

Most jobs in Dubai have a probationary period of between one month and one year. During this time you can be dismissed without notice and are not entitled to any end of service benefits. It is not clear if this works both ways i.e. you can resign without notice. Some say the law says no, but people have successfully resigned from their jobs at short notice during probation.

The UAE Labour Law does not cover certain job categories (maids and other domestic workers, federal and government employees, agricultural workers) which seems to mean that people employed in those sorts of jobs have few, if any, rights. For example no gratuity payments, unless something is specified in a contract (but even then it sometimes seems as if a contract is not worth the paper it’s written on). The following worker categories are exempted:

  1. Employees of the Federal Government and of governmental departments of the emirates of the Federation, employees of municipalities, other employees of federal and local public authorities and corporations, as well as employees who are recruited against federal and local governmental projects.
  2. Members of the armed forces, police and security.
  3. Domestic servants employed in private households, and the like.
  4. Farming and grazing workers, other than those working in agricultural establishments that process their own products, and those who are permanently employed to operate or repair mechanical equipment required for agricultural work.

Pre-Requisite for an employment

For employment of any expatriate employee, an application will have to be made to the Labour Ministry in the UAE. This application should be approved by the Labour Ministry before the employee enters the UAE. Such employment permits have a validity of three years, subject to renewals for the same period. The Labour permit for an expatriate employee cannot be issued by the Labour Ministry, unless a formal written labour contract has been filed with the Ministry.

But, nationals in the UAE can enter into an employment contract at any time.

Employment contract

An employment contract should essentially include date of employment contract, date of commencement of employment contract, nature of contract (limited or unlimited), terms of contract, designation and compensation.

There are two types of employment contracts – Limited Employment Contracts and Unlimited Employment Contracts.

Limited Employment Contracts are for a specified duration with characteristics such as specific commencement and completion date, not more than four years. However, it can be renewed with mutual consent. The employment automatically terminates at the end of contract period.

However, in the case of unlimited contracts, there will be a true commencement date, but no completion date. The contract is terminated on mutual agreement by either party, by giving a 30 day notice of termination. The employee will, however, be entitled for compensation, if the termination of the contract by the employer is for an unjustified cause.

Period of probation

The Article 37 of the Law stipulates that the period of probation can be for a maximum period of six months. An employee or the employer can terminate the employment contract at any time during the probation period without the employer being liable to pay the end of service gratuity or the employee compensation for damages.

All wages and benefits during the probation period should be paid along with repatriation costs, provided, the termination of employment contract is at the behest of the employee.

On completion of the probation period, it will be considered as an employment with the employer, and the employee will be considered for calculating gratuity and other terminal benefits. However, the end-of-service gratuity or compensation in lieu of notice need not be paid by the employer during the probationary period. Probation is not compulsory, and is left to discretion of parties to agree upon the actual term of probationary period.

Payment of wages

According to the law, remuneration is paid to the employee in return for his services under a labour contract, whether in cash or in kind, annually, weekly, monthly, daily, hourly, on a piece-rate, or productivity linked. Wage also includes cost of living allowances and incentives in recognition of honesty or efficiency, provided, these incentives have been specified in the labour contract or are part of internal rules of the establishment.

The term ‘basic wage’ is the wage specified in the labour contract as agreed between the parties for the term of contract. Any allowances of any nature are not included in basic wage. The UAE labour law does not prescribe any minimum wage. Wages can be paid in any currency, including UAE Dirhams or other currency, as agreed by the parties mutually.

Part time work permits

Since last year, college and university students sponsored by the institute under which they are enrolled are allowed to work part-time under certain conditions, with a part-time work permit provided by the Labour Ministry. Part-time employment permit is also open to expatriate residents working full-time, holding a valid labour card. It is also open to expat wives sponsored by their husband. The part-time employment permit basically permits the holder to remain employed in more than one part-time job. Part-time work permits are available with a validity period of one year. However, female dependents and students with UAE residence visas, and expatriate male dependants who are sponsored by Emirati women do not need a work permit to work part-time.

Short-term and temporary labour permit

Expatriate workers over the age of 18, can seek short-term work permits valid for 60 days at a time, according to latest rules by UAE Labour Ministry. This 60-day work permit can be renewed up to 5 times, provided, the renewal is done prior to expiry date of the permit or last renewed period. Short term work permits are not open to UAE and GCC nationals, and they do not need a work permit.

Employment of juveniles and women

Employment of Juveniles under the age 15 is banned in UAE. However, effective January 2011, teenagers in the age group 15-18 years are allowed to work, on obtaining a teenage work permit from the Labour Ministry. However, there are certain restrictions on the type of work and hours of employment.

Employers, before employing a juvenile, should retain copies of certain documents in the juvenile’s personal file, such as birth certificate, physical fitness certificate issued by a specialized physician, written consent from juvenile’s guardian, etc. Further, the employment of a juvenile is prohibited when the job requires night shifts, or involves hazardous jobs or is harmful to health, such as underground jobs in mines, quarries, furnaces of melting metals, oil refining, asphalt industry and bakeries. Further, when working hours exceed six hours a day, one or more breaks should be provided. Juveniles are not permitted to work overtime, or on holidays. A Juvenile work permit has a validity period of one year.

Employment of women at night between 10:00pm and 7:00am is prohibited, except under certain situations such as during work stoppages due to force majeure, employees in technical and administrative position, or other jobs as determined by the Labour Ministry, wherein the woman employee is not required to perform a manual job. Women are also not to be employed in difficult tasks and other duties harmful to health or morals.

Working hours

The maximum working hours for an adult employee is eight hours a day (48 hours a week). This can be increased to nine hours a day, for specific jobs like those in cafeterias, hotels, trades and guards. The travel time is not included in working hours. If the nature of job requires overtime, employee shall be paid for the extra time, wherein the payment shall be equivalent of the wage paid during regular working hours, plus an increase of not less than 25 percent of his wage for overtime period. However, if the overtime hour of the employee falls between 9:00pm to 4:00pm, the employee will be paid an overtime equivalent to normal working hours plus increase of not less than 50percent of his wage for the overtime period.

If the employee is required to work on a weekend, he shall be given a day off during the week as a substitution, or will be paid a basic wage, plus minimum of 50percent of that wage. Under any circumstance, overtime hours shall not exceed two hours in a day, except if the work is mandatory to prevent huge losses.

However, all the above provisions may not be applicable to people in senior position, or in administrative supervisory role, or if such people have similar authority over employees or as the authority of the employer. This is also not applicable to crews of naval ships or marine employees.

Annual leave/sick leave/maternity leave

For every year of service, an employee is entitled to, an annual leave of not less than two days for every month, provided, his service is more than six months and less than a year. Thereafter 30 days annually if his service exceeds one year. At the end of the service, the employee is entitled to an annual leave for the fraction of the last year, he spent in service. During the employee’s annual leave, he/she will be paid basic wage plus housing allowance, if applicable, along with any other allowances, which he receives during normal working month.

The employee will have to report to the employer any illness or injury that prevents his from working, within maximum of two working days. The employee may not be entitled for any sick leave during the probation period. Following a three month period of continuous service following the probation period, the employee entitled to full wage during first 15 days of sick leave, half wage during next 30 days, and without pay for any following period.

Women employees are entitled for 45 day maternity leave with full pay, including the period before and after delivery, provided she has served the organization continuously for not less than a year. At the end of maternity leave, the employee can extend her maternity leave for a maximum period of 100 days without pay.

Law for safety measures

The UAE Federal Labour Law specifies certain provisions for employee safety and healthcare, stipulated under Article 91 to Article 101. The provisions of the law mandates that every employer should provide his employee with protection against occupational hazards during work, display instructions regarding fire prevention, make available first aid kit, provide clean and hygienic working environment, offer medical care up to standards determined by labour ministry, and ban entry of alcoholic drinks into the work premises.

An employer is also responsible for providing suitable transportation, accommodation, food, drinking water, and means of entertainment or sports activities to the employees. All these services, except food material, will be on employer’s account.

Disciplinary codes

The disciplinary codes includes fines, warning, suspension from work, prevention of periodical allowances, deprivation of promotion, termination of services and forfeiture of all or some of his gratuity. However, the forfeiture of gratuity shall not be imposed for any reason, other than for those stated in Article 120 of the labour law.

Termination of Contract

An employment contract can be terminated under circumstances such as, the two parties agreeing to cancel the contract mutually with the employee consenting to give this in writing, or, at the end of contract term according to rules of law, or if one of the two parties wish to end the contract, provided, they provide the notice as per the provision of the law, with acceptable reasons to cancel the contract without prejudice.

At the termination of the employment contract, an employee is entitled to any amount due in lieu of notice period, particularly, in case of unlimited contract. The employee is eligible for compensation (in case of unreasonable dismissal by employer) in case of unlimited contract, or compensation equivalent to the period until end of contract in case of limited contract, settlement of any balance of unutilized leave, or overtime payment balance, end of service gratuity calculated or repatriation expenses.

Repatriation of employee

An employer will have to sustain repatriation expenses of the employee, to the place of recruitment, or to any other place at the end of the contract, as agreed upon by the two parties. However, if the employee is responsible for termination of his contract, he will not be eligible for repatriation expenses, and he will have to bear his own expenses.

Gratuity payment

Any employee, who completes one year or more in continuous service, shall be eligible to gratuity at the end of the service. The gratuity is calculated as 21 day’s wages for every year of the first five years, and 30 day’s wages for each additional year thereafter, provided, that total gratuity shall not exceed the wages of two years.

Gratuity is calculated on annual basis, after the employee completes at least one year of service.

An employee may be deprived of gratuity if he has been dismissed for any of the reasons stated in Article 120 of labour law, or if he left the job at self-will to avoid dismissal, or if the establishment has a pension scheme, which could be beneficial substitute to the employee instead of gratuity.

Dispute settlement

In case of any unresolved dispute between employee and employer, an application will have to be made to the labour office in the emirate wherein the establishment is located. The employer or employee will be summoned to hear the argument at labour office, and should make the recommendation within two weeks from the date on which the application is filed. In case, the parties fail to settle the dispute at the Labour Office, the matter will be referred to the court to be litigated in normal manner.

Labour inspections

The Labour Inspection Department and the personnel employed therein shall undertake labour inspections. The visiting inspector will carry the identification card issued by the Labour Ministry, and shall be entitled to enter the premises for inspection. A Labour Inspector is responsible for supervising the proper enforcement of provision of labour law, providing necessary information and technical guidance, so as to adopt the best means of the provision of the law.

Retirement age

Maximum age for foreign workers to remain employed in the UAE is now 65 years.

Death compensation

In case the widow/widower lives with parents and offspring who were dependent on the deceased, the compensation will be divided as in a manner wherein the widow/widower will take one-eighth, and if more than one widow, this one eighth will be divided equally among them. The parents shall take one-third divided equally between them.

If there exists one or both of parents and a child, supported by deceased employee, who left behind no widow, the child shall take two-thirds, while the remaining third goes to the parent or parents in equal share.

In the absence of widow/widower, parents, brothers and sisters, the compensation will be distributed equally among children of the deceased. If the deceased has only dependent parents, then the amount will be distributed equally between the parents.

Employment ban/labour ban/work permit ban

These are all different terms for the same thing, which implies that the employee or the worker is not allowed to work in the UAE for a certain period of time. An employment ban can be usually for six months, one year, or permanent.

A six month ban is automatically imposed when leaving a job, unless there is reason not to, or when a longer ban in imposed.

A one year ban is imposed when a worker resigns before completing the limited contract period. A one year ban is imposed mostly in cases of expat workers leaving government jobs, expat workers who break the terms of their labour contract, in case of expatriates who lose a case with labour department against their employer if they were on temporary work permit and filed case with labour department, and possibly against workers who leave their job within a year of starting.

A permanent ban is imposed on absconding employees, or on those who break the labour law in any way.

During a ban, although nothing may be stamped on the employee’s passport, when a new employer submits an application to Labour Ministry, it will automatically be rejected, if a ban is already on the employee’s name in the computer file.

It may be possible to avoid or lift a ban by paying a fee, when transferring from one sponsor to another. However, it is best to check with the labour department of the particular emirate about transfer of sponsorship, ban lifting fee etc.

However, no labour ban will be imposed on UAE nationals who are not subject to labour bans, expatriate workers moving to a government job, oil company employees, expat workers moving to another employer within same free trade zone, expats having completed fixed term contract and having given notice in advance about not renewing it, expats who complete one year of unlimited contract and get NOC from current employer, expats sponsored by their spouse for residence visa, and in cases of expats having worked in the same company for more than two years (as of January 2011) on unlimited contract.

Other exemptions from employment ban or labour ban are for certain categories such as Engineers, Doctors, Pharmacists, Male Nurses, Qualified Accountants and Auditors, Agricultural Guides, Administrative Employees holding university degrees, Drivers licensed to drive heavy vehicles and buses, workers in private oil companies, and technicians operating on scientific, electronic instruments and laboratories, drivers licensed to drive heavy vehicles and buses and getting transferred on sponsorship to a similar party, and workers in private oil companies when the transfer is between such companies.

Points to be noted

To minimize the risk of problems, it is better to be aware of the following:

Legally, the Arabic version of the labour contract is more valid in the UAE. However, the employee should be given an English version of the contract, too.

A verbal contract is worth nothing. A written contract is a must, and the contract should be carefully read before accepting a position.

In case a company does not send a contract copy before arrival of the employee, or if the employee is asked to sign on a different contract, the employee should be more cautious in his approach.

In case of any issues with the employer, the employee can seek a legal opinion, as there are plenty of lawyers in the UAE to contact about such legal issues. However, it is better to be aware that the one with the most influence will win. Else, the employee can also contact his/her embassy for contact details of lawyers in UAE.

The UAE are planning to implement on 1 January 2018 - other GCC countries may do so at the same time or by 1 January 2019 at the latest.

VAT in Dubai and UAE

VAT (Value Added Tax) is expected to be introduced in UAE at a rate of 5% on 1 January 2018. This percentage is purposely kept low to limit impact on UAE cost of living.

The UAE Federal and Emirate governments provide citizens and residents with many different public services, paid from the government budgets. VAT will provide country with a new source of income which will contribute to the continued provision of high quality public services into the future. It will also help government move towards its vision of reducing dependence on oil and other hydrocarbons as a source of revenue.

Other GCC countries may do so at the same time or by 1 January 2019 at the latest. The UAE is part of a group of countries which are closely connected through “The Economic Agreement Between the GCC States” and “The GCC Customs Union”. The GCC group of nations have historically worked together in designing and implementing new public policies as we recognize that such a collaborative approach is best for the region.

Not all businesses will need to register for VAT; this really depends on their minimum annual turnover; that is, many small businesses will not need to register for VAT; however, they’ll be expected to record their financial transactions. Companies whose revenues range between Dh187,000 and Dh375 000 will have the option to either register under the system or not; companies in the UAE that record annual revenues over Dh375 000 will be obliged to register under a Value-Added Tax (VAT) system. All goods and services will be taxed with the exceptions of food, education and health services. The UAE Ministry of Finance is still taking decision about Free Zone, but the free zones may remain exempt to encourage on foreign investments.


Company formation Dubai & UAE

Company formation in Dubai is a relatively simple and speedy process with strong incentives, notably in the form of the UAE’s free zones.  There are other options as to the type of business you can set up in the UAE (for example, onshore or offshore), but free zones are particularly popular with foreign entrepreneurs and with good reason. Among the incentives they offer are 0% corporation and personal tax, 100% company ownership, 100% repatriation of capital and profits, no currency restrictions and 100% import and export tax exemption.

So why to setup a business in UAE now?

According to the IMF, the UAE is expected to lead economic growth in the Arabian Gulf in 2017, increasing by 2.5%, significantly ahead of the region’s biggest economy, Saudi Arabia, which is forecast to grow at 0.4%.

So how do you go about it?

While the technical, administrative and financial aspects of company formation in Dubai can seem daunting, by following a simple step-by-step process with the right support, it is far more straightforward and affordable than you might think. We have helped numerous companies establish themselves in various free zones and can break the process down into the following six steps.

1. Choose your business activity

The nature of your business can have a bearing on which free zones you can or should set up in. For example, some free zones only allow certain types of activity, such as media, medical or transport, and aside from the restrictions, it often makes sense to set up in close proximity to businesses in the same sector. Look at transport links too. If your business relies heavily on import and export, you will probably want to choose one of the free zones situated near an airport or port.

The final decision can be taken later in the preparation process, but establishing your business activity will certainly give you a steer and can help to eliminate some options early on. However, there is no need to pigeon-hole your business, as it is possible to have multiple business activities listed under one trade licence.

2. Choose your company name

The UAE has some strict naming conventions, so before you commit to a company name, make sure it conforms. Any names that include offensive language are forbidden, as are any company names that refer to Allah, Him or indeed any other religious, sectarian or political groups such as the FBI or Mafia. If you choose to name your business after a person, that person must be a partner or owner of the company and their full name must be used – no initials or abbreviations.
A business set-up expert will be able to give you chapter and verse on all the naming conventions. You can save a lot of time and effort by running your proposed name past them to check whether it passes and if it doesn’t they can help you come up with something that does.

3. Finalise all incorporation paperwork

You will be required to complete an application for your chosen company name and activity, to be provided along with copies of shareholders’ passports to the relevant government authorities. Some free zones will require additional documentation, such as a business plan or Non-Objection Certificate (NOC) – a letter from a current sponsor confirming that you are allowed to set up another business in the UAE. While perhaps the most arduous of all these steps, the paperwork does not have to be too taxing providing it is undertaken with expert help. Your business set-up partner can advise you on the paperwork required and help you complete it.

Some free zones will require additional documentation, such as a business plan or Non-Objection Certificate (NOC) – a letter from a current sponsor confirming that you are allowed to set up another business in the UAE.

4. Receive your license notification

This is the easiest step of all. Once your application has been processed, the government will issue you with your company licence. At Virtuzone we notify our clients when their documents are ready to be collected.
5. Process your visa (if needed)

And so to the final step of company formation in Dubai. As well as applying for your own visa, many free zones allow you to put in applications for staff and dependants – the exact number you can submit will depend on which free zone you choose to set up in. So, if you are looking to obtain visas for a spouse, child, maid or driver, it is best to seek expert advice to ensure that firstly, it is possible to do so in your chosen free zone, and secondly, that both you and anyone you are hoping to sponsor for a visa meet all of the entry criteria. Assuming this all checks out, the process is made up of four simple stages: entry permit, status adjustment, medical fitness test, then Emirates ID registration and visa stamping.

For some free zones / activities you may not be required to apply for a visa (NO visa package) saving money and time.

6. Open a bank account

Once your paperwork has been returned, you will have all the documentation you need to open your corporate bank account. The UAE is home to many banks, both local and international, including Emirates NBD, Abu Dhabi Commercial Bank and the Commercial Bank of Dubai, along with global names such as HSBC, Citibank and Barclays. You can either approach the bank of your choice or ask your business set-up partner to arrange meetings with a number of institutions to help you choose the most suitable option.

With some banks you can open a corporate bank account also without having the resident visa.