The United Arab Emirates is one of the wealthiest nations in the Arab world and, with a GDP of over $370 billion, is the second-largest economy in the region. Bordered by Saudi Arabia and Oman, the UAE is strategically placed for access to the Persian Gulf states and MENA - and offers businesses one of the most liberal trade regimes in the Middle East. Producing around 2.81 million barrels a day, the UAE’s economy draws heavily on its oil reserves which are the seventh-largest in the world. Despite the ongoing prominence of the oil industry, the UAE has diversified its economy, with trade, tourism, banking, logistics, real estate and manufacturing becoming increasingly important. The UAE government is focused on investing and developing the country’s business infrastructure, and has introduced free trade zones, tax incentives, and a streamlined regulatory environment for foreign investors. The UAE offers its businesses a stable political environment in which to operate, and is one of the most developed nations in the Gulf Cooperation Council. In 2018, the UAE was ranked 21 on the World Bank’s Ease of Doing Business Survey.
Interested financiers will find a number of positive reasons to invest in the UAE, including:
The estimated timeframe for a legal entity incorporation process varies significantly based on the legal entity type. Free-zone entities can be incorporated in 2-3 weeks, while the registration of a legal entity outside a free-zone can take 2-3 months.
The process of registration of a legal entity outside a free-zone involves:
The key elements of a business plan are the executive summary, market analysis, company description, organization/management, product/service, market plan and financial plan.
A completed company registration application must be submitted, along with the proposed company name, to the Department of Development. Preliminary approvals from the license section of the Dubai Department of Economic Development(DED), regarding the classification of the limited liability corporation's capitalization, identity of partners, business activities and trade name, must be obtained before a company can be registered.
The DED will supply a standard Memorandum of Association--also called Articles of Association--that is signed in the presence of a notary.
The Memorandum of Association, the original and a copy; a letter issued from the DED confirming the company name approval; the original letter of company approval from the DED Committee of Limited Liability Companies; and the prescribed application form signed by a director or representative must be rendered to the Commercial Registry and the DED
After the notary at the Commercial Registry notarizes the memorandum, a license application is completed in Arabic and signed by the company representative and filed with the DED. You must then submit the original lease for the company's headquarters; a form setting out the business name in English and Arabic and a prescribed form for obtaining a clearance on the suitability of the premises from the Dubai Municipal Building Department, if incorporating in Dubai, with the license application.
The company is required to have a legal entity established in order to process a payroll in UAE.
All the applicable payroll registrations of the company are completed during the process of establishing of the legal entity.
It is mandatory to make payments to employees from an in-country bank account when the employee is registered under the Wage Protection System (the “WPS”). The WPS is mandatory for all the legal entities registered outside the free-zones. In addition, certain free-zones (i.e. JAFZA, Dubai Airport Free Zone, etc.) have implemented the WPS and the employees working in these free-zones must also work be paid through the WPS.
In general, the opening hours of Islamic banks in the United Arab Emirates are from 08:00 to 13:00, while opening days are from Saturday to Wednesday with an exemption on Thursdays (08:00-12:00).
Some banks also offer afternoon opening hours from 16:30 to 18:30 or even continuous opening during the day.
There are different options in UAE for making payments to the employees and/or authorities:
Payment methods may be restricted depending on the authority to which the company is registered.
1-2 working day for local bank accounts is required for funds to be transferred from the client account to employee bank account.
International transfers can take up to 4 working days; however, there may be restrictions depending on the authority to which the company is registered.
The working week in UAE is Sunday to Thursday from 8am to 5pm or in some instances, Saturday to Thursday.
The maximum normal working hours for adult employees shall be eight hours per day or 48 hours per week. During the month of Ramadan, normal working hours are reduced by two hours per day.
The United Arab Emirates lies on the southeastern edge of the Persian Gulf, neighbouring Oman and Saudi Arabia and sharing maritime borders with Qatar and Iran. The country actually consists of seven emirates: Abu Dhabi, Dubai, Ajman, Fujairah, Ras al-Khaimah, Sharjah, and Umm al-Quwain - each emirate is governed by an individual monarch, but together form the Federal Supreme Council. Like other areas of the Arabian Peninsula, tribal civilisations occupied the territory now known as the UAE for hundreds of thousands of years, and numerous powers fought for sovereign control throughout history. The discovery and exploitation of oil in the 20th century brought prosperity and independence to the UAE and today it is one of the wealthiest nations in the Arab world. The modern UAE has a reputation for its highly-developed, architecturally-elaborate urban centres, and Abu Dhabi and Dubai in particular generate tourism and business interests from across the world. Although the UAE is covered by vast desert terrain, its subtropical climate brings warm and hot temperatures throughout the year, and attracts holidaymakers to a number of luxurious coastal resorts.
Full Name: Kingdom of UAE
Population: 9.27 million (World Bank, 2016)
Capital: Abu Dhabi
Major Language: Arabic
Major Religion: Islam
Monetary Unit: United Arab Emirates dirham
Main Exports: Petroleum, Petrochemicals, Fishing, Aluminum, Cement, Fertilizers.
GNI per Capital: US $42,390 (World Bank, 2010)
Internet Domain: .ae
International Dialling Code: +971
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Like most of the Middle East states, the Government of the United Arab Emirates receives most of its revenues from the oil industry. There are currently no Personal Income Taxes applicable in the UAE.
Where a UAE entity employs UAE Nationals it is required to make Social Security contributions - but there is no requirement for an employer of an expatriate or an expatriate employee to make any Social Security contributions.
There is no Individual Income Tax in the UAE.
VAT was introduced in the UAE, by the Ministry of Finance, on 1 January 2018 at a rate of 5%. VAT represents a new source of revenue for the UAE’s government - with the funds designated to go towards delivering high-quality public services.
VAT-registered businesses and traders are required to charge VAT to all their customers at the appropriate rate, and will pay VAT on the goods and services they acquire from their suppliers. This means that businesses must carefully document their income, costs, and associated VAT charges.
There is no Social Security scheme available to expatriates in the UAE.
Expatriate employees are not required to make social security contributions.
Appropriate health care insurance is required in order for an individual to obtain a UAE Residence Permit. Since June 2016, it is mandatory for all employers to provide medical insurance to their employees.
It is compulsory for the employer to register a UAE national with the General Pension and Social Security Authority (GPSSA) after a month of hiring the employee.
Contributions should be made by both the employer & employee.
The monthly minimum salary subject to social security contributions is AED 1,000 and maximum is AED 50,000.
The 5% employee contribution will be deducted from the employee’s salary each month while the payment to GPSSA should be done before 10th of the following month.
The social security payments that have to be made for the UAE nationals cannot be processed through bank transfer, but by physically handing out a check at the government office.
The check has to be written in Arabic.
The UAE does not require any accounting reports to be filed. However, free-zone entities are required to provide audit annual statements to the free-zone authorities during their trade license renewal processes.
Payroll providers are responsible for producing the Year End Reports as per the client’s request.
Potential new hires must be registered with the Ministry of Labour at the time of employment. Employees must be registered with local authorities as soon as the employment contract has been signed, during the visa application process.
The employer and employee are required to sign a Federal Labour Contract, which is obtained from the Ministry of Labour and is written in both Arabic and English.
Should the employer wish to extend the terms of employment outside of Federal Labor Contract, a second contract must be created by the employer and attached to the Federal Labor Contract. In order to be legally binding, the second contract must be translated into Arabic.
The documents required to register Expat new starts are as follows-
Under the UAE’s Labour Law, employees can be hired on a probationary period - so long as that does not exceed 6 months. Contracts may not be terminated without notice during that time, but the employee is not entitled to End of Service Benefits. Employees who complete probation successfully, will have that period considered at part of their period of service.
When employment is terminated, leaving employees are entitled to certain benefits under the UAE’s Labour Law. These are broadly known as End of Service Benefits, and entitle employees to the following:
End of Service Gratuity (ESG): When employees complete one year of service in the UAE, they become entitled to ESG when they end their employment. ESG is a payment equivalent to 21 days remuneration for each year of the first five years of an employee’s service with their employer. This rises to 30 days remuneration for each additional year beyond that (providing the amount does not exceed two years’ remuneration).
Final payment of salary must be made upon cancellation of Employment Visa, and employers must notify local authorities when an employee leaves their company.
Employers in the UAE have certain responsibilities as part of the payroll process. Since the UAE has no individual or corporate income tax (with the exception of certain oil and gas businesses, and some branches of foreign banks), tax-withholding is not normally a consideration.
Employers are obliged to withhold pension contributions for local workers in the UAE - although foreign workers do not contribute to, or receive pension funds. Local employees must contribute 5% of their wage or salary as pension social security, while their employers must contribute 12.5%.
Wages must be paid to employees in the UAE within two weeks of the end of the pay period. It is possible to provide UAE employees with online payslips - and payroll reports must be kept for a minimum of 10 years.
Foreign businesses with employee populations working across international territories may want to consider outsourcing the UAE payroll process to a service provider in order to develop a global payroll solution. Payroll outsourcing companies in UAE are plentiful, and represent a way to import compliance expertise, along with speed and efficiency.