A Glimpse into the UAE Business Laws

by Zaara 27, Jul 2021

A Glimpse into the UAE Business Laws

Before starting a business in the United Arab Emirates (UAE), it's better to understand different business laws provided by the country. The UAE has issued several regulations related to the economy, trade, license and investment since its formation in the year 1971.

The Emirates has several regulations in place for smooth and fair conducting of businesses. As an entrepreneur, you must comply with laws that -

  • govern your business
  • protect health and environment and ensure safety
  • protect labour rights, consumer rights and intellectual property rights
  • govern the free zone in which your company is set up in

Before understanding different business laws, let's first know the various jurisdictions in the UAE.

  1. UAE Mainland
  2. UAE Free Zone
  3. UAE Offshore

Business Regulations Related to Mainland Companies

The UAE Federal Law No. 2 of 2015 on Commercial Companies, as amended applies on any economic entity which practice any commercial, financial, industrial, agricultural, real estate or other kinds of economic activity on the mainland except the following:

  • companies excluded by resolution of the UAE Cabinet
  • companies wholly owned by federal or local governments and companies held in full by such companies, if a special provision to this effect mentioned in the company's memorandum
  • companies operating in particular gas, oil, and power sectors in which the federal or local government directly or indirectly holds 25%, provided a provision to this effect is mentioned in its MoA

Business Regulations Related to Free Zone Companies

Your business will be governed by the free zone authority in which your business is set up and in some cases might be additionally controlled by another government entity.

Specific laws relating to the type of business activity you conduct will also govern your business.

General business/commercial laws except for the Federal Law No. 2 of 2015 regarding Commercial Companies Law apply. Also, your business shall be governed by laws relating to your specific business activity, in terms of practice, observance of property rights, QHSE compliance and those of the respective free zone authorities.

Other vital laws are -

Commercial Companies Law

The law specifies that the UAE should be the nationality of every company established in the country. All mainland companies are subject to Commercial Companies Law, whereas free zone companies are exempt from the provisions of this law. The new UAE Commercial Companies Law (Federal Law No. 2 of 2015) ("CCL") came into force on 1st July 2015.

As per the new CCL, all companies with public accountability are required to use full IFRS as issued by the IASB. IFRS standards play a pivotal role in global financial reporting as countries across the globe are embracing them. Companies listed on NASDAQ Dubai, Dubai Financial Services Authority (DFSA), and Abu Dhabi Securities Exchange need to comply with IFRS standards.

Anti-Money Laundering Law

Money launder­ing, illegal transfers of money and criminal activity are well monitored in UAE, and the country maintains a robust Anti-Money Laundering (AML) system. To better scrutinize cash flows and combat terrorist financing, the government has taken various steps. This includes the enactment of Anti-Money Laundering law and the counterterrorism law. Two rules serve as the basis for the country's Anti Money Laundering (AML) and counterterrorist financing (CTF) efforts Law No 4/2002, the Anti Money Laundering law, and Law No. 1/2004, the counterterrorism law.

Tax Law

The landmark Federal Law No. 7 of 2017 (Law No. 7) issued by The United Arab Emirates (UAE) Ministry of Finance (MoF) "sets the foundations for the planned UAE tax system, regulating the administration and collection of taxes and clearly defining the role of the Federal Tax Authority (FTA)." The law deals with tax procedures, tax implementation, tax rates, tax obligations, cases of tax exemption, as well as guidelines and rules of tax registration and cancellation.

Bankruptcy Law

The Federal Bankruptcy Law (under the federal decree No. (9) for 2016) identifies various techniques to avoid bankruptcy cases and the liquidation of debtors' assets, that include consensual out-of-court financial restructuring, composition procedures, financial restructuring and the potential to secure new loans concerning the rules and regulations.

There are many more laws in the UAE, and these are just some of the significant laws that primarily concerns businesses. It's the responsibility of every one of us to follow and respect the laws of a country if we wish to live and work there.

We at Commitbiz can help you start a business in the UAE. Contact us today for more information.