Mandatory Compliance Services

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We have a dedicated team of experts who will guide you through the UAE’s regulatory requirements for businesses, including Economic Substance Regulations (ESR) and Ultimate Beneficial Owner (UBO).

Our Mandatory Compliance Services

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The Economic Substance Regulations require that all UAE onshore and free zone companies and other UAE businesses must maintain an adequate economic presence in the UAE relative to the activities they undertake.

Our team will review your activities and nature of business to assess if you meet the Economic Substance Test.

If you do, then we will proceed with filing the ES Notification and ES Report on your behalf.

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The UAE requires the registration of Ultimate Beneficial Owners to ensure transparency across all mainland and free zone companies operating in the country. The exceptions to this rule are businesses licenced in certain jurisdictions and entities directly or indirectly owned by the Government.

Our team will assist you in completing your UBO declaration to ensure you are fully compliant with the UAE’s laws.

Your Guide to Business Compliance Services in UAE

Running a business in the UAE can be challenging because there are many laws and regulations that you must comply with. This is where business compliance services come in.

A good business compliance service will help ensure that your business practices are legal and correct, and they will keep you up-to-date on all the latest changes to the law.

If you’re looking for reliable business compliance services in UAE, then read on! We’ll tell you everything you need to know about business compliance in Dubai.

What Is Business Compliance?

Business compliance is the process of ensuring that your business practices are in line with the law. This includes making sure that you are aware of all the relevant laws and regulations, and taking steps to ensure that you are compliant with them.

It can be difficult to keep track of all the different laws and regulations applicable to your business, but a good business compliance service like ours can help make things easier.

Why Do I Need Business Compliance Services?

If you’re running a business in the UAE, then you must have a good business compliance service. The reason for this is simple, UAE has several complex laws and regulations, and if you’re not compliant with them, you could face serious penalties.

Penalties in the UAE can be much stricter than in other countries and include prison terms, enormous fines and restrictions.

What Do I Need to Know About Business Compliance Services in UAE?

There are many things you should know about business compliance services in the UAE. The first thing is that there is no single standard for business compliance services, so it’s important to make sure the service you choose is right for your business.

Important questions to ask a potential compliance expert in Dubai should include:

  • What services do you offer?
  • Are you familiar with the laws and regulations in the UAE?
  • How often do you update your clients on changes to the law?
  • Do you have any case studies or success stories from previous clients?

These questions will help you determine whether a particular compliance service is right for your business.

Business Compliance Issues

Noncompliant business practices can lead to legal trouble, fines, and even jail time. It is therefore crucial that a business complies with the law at all times.

Some examples of noncompliance with Dubai law are as follows:

  • Operating without a valid trade licence
  • Not registering employees with the Ministry of Human Resources and Emiratisation (MOHRE)
  • Trading in banned goods or services
  • Failing to pay taxes

These are just a few examples.

In the UAE banned goods could include things like alcohol and pork products, as well as weapons or drugs. It would be a shame if a business was in legal hot water for serving alcohol at a work reception or some ham sandwiches, but it could technically happen!

Dubai is an emirate within the United Arab Emirates (UAE). As such, it has its laws and regulations that are separate from those of other emirates in the UAE.

Operating Without a Valid Trade Licence

Not registering employees with the Ministry of Human Resources and Emiratisation (MOHRE) is a common mistake made by businesses in Dubai.

All employees must be registered with MOHRE, regardless of their nationality or visa status.

The penalties for violating these laws can be quite severe. For example, operating without a valid trade licence can lead to a fine of up to AED200,000 and/or imprisonment for up to two years. A 250 AED fine may also be imposed if a trade licence is not renewed.

Trading in Banned Goods or Services

Trading in banned goods or services is another common offence, and it can result in hefty fines.

It’s important to be aware of what goods and services are banned to avoid any penalties. Some items, like alcohol and pork, might surprise you.

In 2020, several old laws were decriminalised, including drinking alcohol without a licence. Alcohol, on the other hand, may still only be consumed in private homes and licensed public locations. In the UAE, to drink legally, a person must be at least 21 years old.

So, to trade alcohol, your business should still be fully licensed, even though rules about drinking have somewhat relaxed.

Failing to Pay Taxes

Failing to pay taxes is an offence that can result in imprisonment for up to six months and/or a fine of AED100,000.

It’s important to be aware of your tax obligations so you don’t get into any trouble with the law.

Taxes are different in Dubai Free Zones as compared with the rest of the UAE and the UAE is imposing new tax regulations in 2023.

How Can Virtuzone Business Compliance Services Help?

Our business compliance service will help guide you through the complex laws and regulations in UAE. We will keep you updated on any changes to the law, so you won’t get caught out by unexpected changes.

We can also help with other areas of compliance such as Registering employees with MOHRE, obtaining a trade licence and filing tax returns.

UBO and ESR: What You Need to Know

Economic Substance Regulations (ESR)

The ESRs require companies operating in the UAE to preserve a strong UAE economic presence. This is to show that the financial status of the company is transparent and that off-shore accounts are not being abused.

If your company earns income from any Relevant Activities, you must complete annual filing requirements. Otherwise, your company could face penalties for not complying with the law.

“Relevant Activities” under this law include:

  • Shipping
  • Insurance
  • Banking
  • Holding company
  • Intellectual property
  • Lease-finance
  • Investment fund managing
  • Distribution or servicing centre
  • Headquarters

Even if you call any of these activities by another name, if they serve the same function, they would still count as a Relevant Activity under the law. There is no minimum income threshold that is applicable to this law either, so individual UAE entities must all comply regardless of size.

If your company conducts any of the Relevant Activities listed, it must file within six months before the end of the financial year on the Ministry of Finance’s (MoF) ESR portal. You’ll have to disclose which activities were conducted, income earned, and whether or not this income was taxed outside of the UAE.

Companies with income from Relevant Activities must then prove that they have adequate economic substance in the UAE. To do this, you will have to satisfy the following Economic Substance Tests:

  • Core Income Generating Activity Test
  • Directed and Managed Test
  • Adequacy Test

High-risk companies will be required to take enhanced Economic Substance Tests. This would companies that have work that includes intellectual property.

The impacts of COVID-19 are also considered, including travel restrictions, but the facts should be carefully reviewed by companies and documentation should still reflect any changes made.

If your company has earned income from Relevant Activities, it must file a report on the MoF online portal within 12 months of the end of the related financial year. During this time, your company will disclose a lot of information, such as:

  • Whether Economic Substance Tests were completed
  • Details surrounding outsourced providers
  • Operations expenditure and number of full-time employees per Relevant Activity

Part of the reason this transparency is required is so that companies are not able to come up with overly-complex corporate arrangements to commit fraud, launder money, dodge taxes, or conceal wealth. When you have a strong economic presence in the UAE, this is showing clarity regarding your company’s financial status and allows the government to see that you’re not trying to hide your crucial assets.

If your company conducts any of the Relevant Activities listed, it must file within six months before the end of the financial year on the Ministry of Finance’s ESR portal.

Our team at Virtuzone can help you check whether or not you’re meeting the Economic Substance Tests requirements. If you do meet the requirements, we can also help you file the ES Notification and ES Report.

Ultimate Beneficial Owners (UBO)

An Ultimate Beneficial Owner is a person that is the leading beneficiary when an establishment originates a transaction. Who comprises a UBO will vary from jurisdiction to jurisdiction, but it is usually defined as a specific person that has capital or voting privileges in the base entity.

Generally, this is the person that owns or manages their own company.

To identify UBOs, a bank will:

  • Obtain and review the organisation’s credentials
  • Look at the chain of ownership
  • Determine who falls under the definition of UBO
  • Perform an AML or KYC check

To stay compliant with UBO regulations, you must register your UBOs. Article five of the UBO Regulations provides an outline for how you can determine who your UBO is (before the bank does).

Your UBO needs to have the right to vote, own, or control with a minimum of 25% shareholding in the company. This is through direct or indirect means of ownership. They also may have the right to dismiss or appoint directors and managers within the company.

If no one satisfies these requirements from your company, then the UBO is anyone else that exercises the main control over the company. If there is still no sure answer, the UBO would be the person in charge of senior management.

Next, the company must have a register of nominee directors and managers. This register needs to be detailed about the individuals nominated and must contain information about acting on behalf of a third party’s instructions.

The company must also have a register of shareholders. This will include the number of ownership interests that each shareholder in the company owns. It will also explain the voting rights of each party and the date that these rights were acquired.

This information will help ensure that you’re selecting the correct UBO before you register. It also helps you stay compliant with the new laws, as well as the Commercial Companies Law.

Regulators have been targeting money laundering and terrorism financing in the past couple of decades. Some defrauding groups use off-shore accounts to conceal their financial activity.

Investigators trace any transactions that seem suspicious. They often lead to fake addresses, fictional PO boxes, or the addresses of people that have no involvement. Due to this, UBO regulations have started to appear across the world, including in the UAE.

Every company has a specific risk with these issues, so it’s crucial to take measures that mitigate the risk! The UAE requires that Ultimate Beneficial Owners are registered so that transactions are transparent across all free zone and mainland operating companies.

These regulations are in place to ensure that you know who you are doing business with, avoid criminal transactions, and stay within the confines of UAE law.

By working with our team, you can register your UBO and complete the UBO declaration easily. We will offer our mandatory compliance services regarding the UAE’s law. This way, you can avoid fines or penalties from the government.

Book a consultation with one of our professionals today so that you can get started!

The Importance of Business Compliance

If you’re looking for the best business compliance services in Dubai, then Virtuzone can help. We have a team of experts who are knowledgeable about the laws and regulations in the UAE and can help your business to stay compliant.

Get in touch today to find out more about the benefits of business compliance services.

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