UAE COMPANY FORMATION 101: A FOUNDER’S GUIDE TO FINANCE COMPLIANCE
The most common question I get from company founders is:
“How do I know I’m compliant?”
“I’m worried about getting fined.”
“There’s so much conflicting information!”
I get it!!
Before starting FeeFi, I had lived in the UAE for almost 11 years and thought I knew how things worked here.
Yet, starting my business led to confusion and even filing a police case – on the day after forming my company!
This guide is for anyone looking for straightforward, practical advice on financial compliance in the UAE.
1. Setting Up Your Company
Your first big decision: Mainland LLC or Free Zone?
If you plan to hire employees long-term, a mainland LLC is often the cheaper option.
Free Zones offer flexibility, cost savings, and changing incentives. However, they may have restrictions on doing business directly with UAE mainland companies.
Regardless of your choice, you will always find people who agree or disagree with your decision. It’s not easy!
For us, Meydan Free Zone has been fairly straightforward.
2. Registering for Corporate Tax (Within 90 Days!)
✅ Register with the Federal Tax Authority (FTA) and submit ownership documents within 90 days of company formation.
✅ Receive your Tax Registration Certificate—this states your financial year period (typically Jan–Dec).
✅ Tax is due 9 months after year-end (e.g., tax for 2024 is due by Sep 2025) for SME’s.
✅ If you already own a foreign company and plan to trade with your UAE entity, you need a transfer pricing agreement to ensure transactions are at fair market value.
✅ Tax applies to net income over AED 375,000 (but this may change over time).
3. Registering for VAT
VAT registration is based on revenue:
• Voluntary VAT registration: Once you bill AED 187,500 in total invoices.
• Mandatory VAT registration: After billing AED 375,000.
Once registered:
🔹 You receive a Tax Registration Number (TRN)—this must be on all invoices.
🔹 If you’re billing another UAE-registered company, you must show their TRN too.
🔹 VAT is either 0% or 5%, depending on place of supply rules.
Understanding VAT Payable
VAT works on a net basis—you pay the difference between:
VAT collected from customers – VAT paid on business expenses.
Example:
💰 You invoice AED 10,000 (+AED 500 VAT) to a client.
💰 You pay AED 5,000 (+AED 250 VAT) for purchases.
💡 Your VAT payable = AED 500 – AED 250 = AED 250.
⚠ Important: VAT is due once you raise an invoice, even if the client hasn’t paid yet.
4. Appointing an Accountant
• A good accountant ensures you meet tax deadlines, you are compliant you and don’t overpay. They also provide advice on any new situations that arise in your business and how to ensure compliance in uncertainty.
• FeeFi provides fractional finance consultancy and partners with quality local accounting businesses to help businesses stay compliant.
