What Are the 3 Essential Factors to Consider When Starting a Business in UAE?
Starting a business in the United Arab Emirates gives people and companies a chance to grow in a leading global economy. UAE stands out for its strong oil, tourism, and financial sectors. Dubai, as a business hub, attracts people from around the world. The UAE has modern infrastructure and a business-friendly climate, which makes it perfect for starting a business.
But, if you want to start your own company, you should know the most important things that can affect your success. There are three essential factors to consider: tax, accounting, and compliance. In this article, you’ll learn what each factor means and why it matters when starting a business in the UAE.
Tax Factors to Consider When Starting a Business in UAE
Understanding tax rules is the first important step when starting a business. The UAE is known for its low-tax environment, but things are changing. The country does not have personal income tax, but now businesses must learn about corporate tax and VAT.
- Corporate Tax: The UAE announced a federal corporate tax that will begin in June 2023. This means most companies must pay a 9% tax on profits above a certain threshold.
- VAT (Value-Added Tax): Introduced in 2018, VAT applies to most goods and services at a rate of 5%. If your business makes taxable supplies or imports over AED 375,000 a year, you must register for VAT.
What Must You Do About Taxes?
- Register for VAT if your business meets the threshold.
- Learn the rules for corporate tax and make sure your company is ready before June 2023.
- Keep records of all business transactions, including VAT collected and paid, to claim tax credits.
Pro tip: Always check for new tax rules so your business stays out of trouble.
Accounting Factors to Consider When Starting a Business in UAE
Good accounting is the backbone of every successful business. If you keep accurate records, you can see where your money goes, spot problems, and plan for growth. When you start a business in the UAE, you need to focus on some important accounting steps.
- Business Activity Classification: You must properly classify your business activity when registering your company. This will help you find out what taxes or fees apply to your business.
- Bookkeeping: Start bookkeeping from the first day. Record every sale, purchase, and expense. Good records help you file accurate tax returns and make smart business decisions.
- Accounting Software: Choose an accounting software package that fits your needs. Look for one that matches UAE tax laws and can handle VAT.
Pro tip: Hire a qualified accountant or firm that knows UAE rules if you feel unsure about managing your books.
Compliance Factors to Consider When Starting a Business in UAE
Complying with the law is another key part of starting a business in the UAE. The country has strict rules to keep businesses honest and safe. Before you open your doors, check these main compliance steps:
- Trade License: Get a trade license from the Department of Economic Development (DED) in your chosen emirate.
- Company Registration: Register your company with the Ministry of Economy (MOE).
- Visas and Insurance: Make sure you and your employees have work permits and medical insurance.
- Ongoing Regulations: Follow special rules like Economic Substance Regulations (ESR), Country-by-Country Reporting (CbCR), and Ultimate Beneficial Ownership (UBO).
If you miss any compliance step, you might face fines or other penalties. But if you plan well and get good advice, you can avoid these problems and run your business smoothly.
Here’s a quick checklist for compliance:
- Obtain a valid trade license.
- Register your business with the correct authorities.
- Comply with visa and labor laws for all employees.
- Stay updated on any new rules or regulations.
Why Should You Focus on Tax, Accounting, and Compliance?
These three factors are the basic building blocks for business in the UAE. If you ignore any of them, your business might get into trouble. But if you handle them well, you’ll have a strong foundation for growth.
Remember:
- Tax keeps you legal and helps you avoid fines.
- Accounting shows you where your money goes.
- Compliance keeps your business running without problems.
How Mubarak Al Ketbi (MAK) Auditing Can Help You
Mubarak Al Ketbi (MAK) Auditing gives expert advice to businesses that want to start in the UAE. Our team helps you:
- Register for tax and VAT.
- Set up accounting systems and bookkeeping.
- Follow every rule and regulation for compliance.
- Prepare for changes in business law or tax rules.
Our experienced consultants can guide you step by step, so you don’t feel lost at sea. If you need help with any of these factors, reach out to us—because when it comes to business in the UAE, it’s better to be safe than sorry!
For more information, visit our office:
- Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates
- Or contact/WhatsApp: +971 50 276 2132
