5 New Laws for SME's and Startups

by commitbizadmin 12, Aug 2020

5 New Laws for SME's and Startups

According to the United Arab Emirates Ministry of Economy, the Small- and medium-sized enterprises (SMEs) sector portrays more than 98 per cent of the total number of operating companies in the UAE. It contributes towards 53 per cent of the UAE's GDP. Substantially, these SMEs contribute to growth, job creation, innovation and development of the economy as a whole. Therefore it is essential to improvise the SME sector.

The National SME Programme was established according to Federal law no 2 of 2014 under the umbrella of Ministry of Economy. The UAE SME council supervises the programme.This programme mainly implements policies to improve small and medium-sized entrepreneurs.

All About SME's

The employee and revenue thresholds for each classification are given in the table.

 

Service Sector

Trading Sector

Manufacturing Sector

Micro Enterprise

<= 5 employees; or <=AED 2 million annual revenues

<= 5employees; or <=AED 3 million annual revenues

<= 9 employees; or <=AED 3 million annual revenues

Small Enterprise

6-50 employees; or <= AED 20million annual revenues

6-50 employees; or <= AED 50million annual revenues

10-100 employees; or <= AED 50million annual revenues

Medium Enterprise

51-200 employees; or <= AED 200 million annual revenues

51-200 employees; or <= AED 250million annual revenues

101-250 employees; or <= AED 250 million annual revenues

However, there is a confusion about whether a company with 100 employees but a turnover well over AED 250 million is still classified as a medium company. There are some other corporate laws which tell about some exceptional cases.

Growth of SME's

The ministry of economy is targeting 60 per cent contribution of SMEs by 2021. Below graph depicts the number and funding of SME's(Dubai).

Number and funding of SME's

News UAE Laws for SME's and Start-ups

1. Some of The Federal Government Services Fees are Reduced or Cancelled

UAE Ministry of Finance reduced by up to 50 per cent of over 1500 government service fees.

2. Abu Dhabi Promises AED 535 million for Hub71 Start-ups

The UAE government - both Abu Dhabi and Dubai - has been at the forefront to offer all the support for the start-ups to unlock their potential and help the nation build better and smarter tomorrow.Abu Dhabi launched a significant initiative to support technology start-ups by inaugurating Hub71 at Abu Dhabi Global Market Square.

The government has pledged AED 535 million to attract start-up companies to set up shop in the UAE capital. Hub71 aims to make Abu Dhabi a world-class tech start-up ecosystem, driving entrepreneurship, job creation and innovation.

The government provides these funds through subsidies. The government offers these subsidies to start-ups that are in Hub71, with those having five or fewer full-time employees receiving 100 per cent subsidy for two years, and those with 6-25 employees receiving 50 per cent subsidy for three years.

3. 5% Of Government Capital projects is Allocated to SME's and Also Payment is Made Within 30 Days

Government plans to allocate about US$270 million worth of projects to joint ventures between public and private sectors to attract private-sector investment and reduce the burden on the budget. Additionally, the government plans to allocate 5% of its capital projects to SMEs to allow them to get projects worth up to about US$109 million.Adding to the above initiative, the Dubai government shortened the payment periods for SME's(the 90 days is cut to just 30 days).

Working capital is a tight and a significant concern for the start-up and SME sector. This shortening of the payment time period will help them to execute business operations in a smoother way while increasing their interest and ability to work with the government.

4. UAE is Providing Long-term Residency Permits to Entrepreneurs, Investors and High-earning Ex-pats

This change is probably the most significant change of the decade; UAE opens its borders to a vital sector of its residents. While it started with high-net-worth investors, it began the long-term residency permit to tech start-up entrepreneurs as well as high-earning ex-pats.

5. UAE 13 Sectors for 100 Per Cent Ownership

The UAE cabinet has approved 122 economic activities across 13 sectors eligible for up to 100% foreign ownership. Few examples of the financial activities include solar panels, power transformers, green technology, and hybrid power plants; while the sectors include renewable energy, agriculture, e-commerce, manufacturing, space, transportation, hospitality, professional, scientific and technical activities.

Why Commitbiz?

New amendments made in some corporate laws taken provides more liquidity for SME's and starting a business in UAE has become a bit risk-averse. If you are looking forward to setting up a business in UAE, then we at Commitbiz can help you with it. Our advisors have tons of knowledge in this field and make the process hassle-free. Contact us today – we'd be happy to help you!