What are the 3 Essential Factors to Consider When Starting a Business in UAE
The United Arab Emirates is one of the world's most sought-after business destinations.The UAE has a diversified economy with strong oil and gas, tourism, and financial sectors. The country is also a major transportation hub, with a busy port and airport. The country has a well-developed infrastructure, a strong economy, and a favourable business environment that make it an ideal place to start a business.
Hence, if you are planning to start a business, there are three essential factors to consider. These include obtaining the tax, complying with regulations, and accounting.
In this article, we will discuss the three essential factors that you need to consider when starting a business in the UAE.
Tax factors to consider when starting a business in the UAE
Starting a business in the United Arab Emirates (UAE) can be a great way to tap into the country's burgeoning economy. But before you get started, it's important to understand the tax implications of doing business in the UAE.
The UAE has a federal tax system, which means that taxes are levied by the central government. The UAE does not have a personal income tax or a corporate tax till now, but it is going to introduce and implement it in June 2023, so the companies will have to get all the necessary information about the corporate tax as well. There is also another tax, like VAT (value-added tax), that businesses should be aware of.
The United Arab Emirates (UAE) introduced a value-added tax (VAT) on certain goods and services supplied in the UAE on January 1, 2018. The standard VAT rate is 5%.
Businesses registered for VAT must charge VAT on the taxable supplies of goods and services they make. They can recover the VAT they have paid on their own business inputs as a tax credit.
Businesses must register for VAT if their taxable supplies and imports exceed the mandatory registration threshold of AED 375,000 per annum. Voluntary registration is also possible if the business’s taxable supplies and imports are below the mandatory registration threshold.
Accounting factors to consider when starting a business in the UAE
When starting a business in the UAE, there are a number of accounting factors to consider. One of the most important is correctly classifying your business activity. This is important as it will determine which taxes and fees are applicable to your business.
Another key factor to consider is bookkeeping. It is important to keep accurate records of all your financial transactions from the outset. This will not only help you to comply with UAE tax laws but will also make it easier to manage your finances and prepare financial statements.
Lastly, you will need to choose a suitable accounting software package. There are many software packages available, so it is important to select one that is compatible with your business needs.
Compliance factors to consider when starting a business in the UAE
If you're thinking of starting a business in the United Arab Emirates (UAE), there are a few compliance factors you'll need to consider.
First, you'll need to obtain a trade licence from the Department of Economic Development (DED). Once you have your license, you'll need to register your company with the Ministry of Economy (MOE).
And then, you'll need to comply with the UAE's visa requirements, which include obtaining a work permit and medical insurance. Finally, you will need to comply with the UAE's laws and regulations, which include "Economic Substance Regulations (ESR)", "Country-by-Country Reporting ("CbCR")", and "Ultimate Beneficial Ownership (UBO)".
Failure to comply with any of these requirements can result in hefty fines, so it's important to be aware of them before you get started. But don't let the compliance process deter you from starting your business in the UAE—with a little planning, you can easily navigate the requirements and get your business up and running in no time.
The above three factors are the basic elements that must be kept in mind before setting up a business in UAE. Tax compliance, a proper accounting system, and an enhanced compliance framework are the three main pillars that improve the growth of businesses. If your business is having difficulty coping with any of these factors, approach CDA to get professional consultation to improve it.
How Can CDA help you?
CDA has been providing enhanced tax consultation services, accounting and auditing services, and facilitating the firms' implementation of strict compliance frameworks for a decade. With CDA’s veteran experts, you can ensure that you follow all the mandatory conditions and requisites regarding setting up a business in UAE and you can also identify opportunities to outwork the competition. Approach our experts now to prosper your business goals.