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The United Arab Emirates, or simply the Emirates, is a Western Asian nation. It is situated at the eastern extremity of the Arabian Peninsula and has borders with Oman and Saudi Arabia, as well as marine borders with Qatar and Iran in the Persian Gulf. The capital is Abu Dhabi, while the most populated city, Dubai, is an international center.
The United Arab Emirates is a federation of seven emirates, including Abu Dhabi (the capital), Ajman, Dubai, Fujairah, Ras Al Khaimah, Sharjah, and Umm Al Quwain. Each emirate is led by an Emir, who together comprise the Federal Supreme Council. The Federal Supreme Council elects a president and a prime minister from among its members. In reality, Abu Dhabi's emir functions as president, while Dubai's ruler serves as prime minister. The nation has a population of 9.2 million in 2013, including 1.4 million Emirati citizens and 7.8 million expats. The population of the United Arab Emirates is expected to be 9.9 million by 2020.
The UAE has been inhabited for more than 125,000 years. Many civilizations, including Mesopotamia, Persia, and India, used it as a commercial crossroads.
The official religion is Islam, and the official language is Arabic. The United Arab Emirates has the world's sixth and seventh biggest oil and natural gas reserves, respectively. The ruler of Abu Dhabi and the country's first president, Zayed bin Sultan Al Nahyan, led the growth of the Emirates by spending oil money in healthcare, education, and infrastructure. Among the Gulf Cooperation Council members, the United Arab Emirates has the most diverse economy. In the twenty-first century, the nation has grown less dependent on oil and gas and has shifted its economic emphasis to tourism and business. The government does not charge income tax, although there is a business tax and a 5% value-added tax was implemented in 2018.
Human rights groups such as Amnesty International, Freedom House, and Human Rights Watch have described the country's human rights situation as generally deplorable, with citizens criticizing the regime imprisoned and tortured, families harassed by the state security apparatus, and cases of forced disappearances. Individual liberties such as assembly, association, press, speech, and religion are also severely restricted.
The UAE is regarded as a medium power. It is a member of the Arab League, the Organization of Islamic Cooperation, OPEC, the Non-Aligned Movement, and the Gulf Cooperation Council (GCC).
Employees who have worked for at least one year are entitled to 30 days of paid vacation every year.
The United Arab Emirates recognizes seven holidays, and a total of fourteen days are considered non-working days for UAE employees.
After 3 months of employment starting from the end of the probation period, an employee is entitled to 90 days of sick leave.
The first 45 days of sick leave are paid as follows:
1. First 15 days of illness: leave is paid at 100% of the regular salary
2. 15-30 days of illness: paid at 50% of the regular salary
3. From the 46th day onwards, sick leave is not paid.
Within the first 2 days of the sickness, the employee must give notice to their employer and secure a medical certificate from a doctor.
If a woman has worked for at least one year, she is entitled to 45 days of fully paid maternity leave.
If a woman has worked for at least one year and is covered by the DIFC employment legislation, maternity leave is 65 days. The first 33 days are paid at 100% of usual salary, while the last 32 days are paid at 50% of normal pay.
Paternity leave is enclosed in parental leave.
Both parents are entitled to 5 days of paid leave for private-sector employees. The leave can be taken till the kid is six months old.
Pregnant employees are entitled to paid leave for prenatal care under the DIFC.
Contracts of employment can be cancelled by any party. Termination must be in writing, and normally, notice is necessary. The notice period varies between seven and thirty days, depending on the nature of the work and the length of service of the employee. In a limited number of cases, such as for breach of contract conditions or misbehavior, no notice is necessary before terminating an employment contract.
After one year of service, employees are eligible to severance pay. Severance normally ranges between 21 and 30 days per year of service, subject to a cap.
To terminate a contract, the terminating party must provide the other party with written notice. A notice period of at least one month and up to three months is required. If the contract was renewed prior to January 1, 2016, and the notice period was not specified in the contract, the three-month default notice period applies.
The UAE Labor Law stipulates a six-month probation period.
At the conclusion of their employment, any employee who has completed one year or more of continuous service is entitled to end of service compensation. When calculating the period of service, only compensated days of work are considered. The remuneration is as follows: twenty-one days' pay for each year of service during the first five years and thirty days' pay for each subsequent year. The total remuneration, however, shall not exceed two years' pay. End of service pay will be prorated for fractions of the year if the employee has worked for the company for at least one year in a row.
The standard workweek is 48 hours per day (Sunday through Thursday). It is six hours per day during Ramadan, the month of fasting. At least one hour of rest per day is required (employees should not work five consecutive hours without a break), and Fridays are reserved for 24 hours.
Overtime pay is calculated at 125 percent of regular pay for hours worked between 9 p.m. and 4 a.m.; however, overtime pay is calculated at 150 percent of regular pay for hours worked between 9 p.m. and 4 a.m.
Friday work entitles the employee to an additional paid day off and overtime pay equal to 150 percent of the regular rate of pay.
The minimum wage in the United Arab Emirate (UAE) nationals is set at AED 25,000 (US$6,800).
Employee and dependant insurance coverage for expats is based on their pay, classification, and so forth. Currently, two Emirates require employer-provided health insurance coverage: Abu Dhabi and Dubai. The employee, as well as the employee's spouse and dependents, must be supplied with health insurance. While not required in other Emirates, companies in the UAE are often required to offer workers with employer-sponsored health insurance.
The Hajj is an annual Islamic pilgrimage to Mecca, Saudi Arabia, which Muslims are required to perform at least once in their lives. Employees may be given a one-time pilgrimage leave of up to 30 days without pay under UAE Labor Law.
There is no federal business income tax system in the United Arab Emirates. Instead, corporate income tax is calculated on a territorial basis in accordance with the Tax Decrees published by the government of each individual Emirate (of which there are seven that make up the United Arab Emirates). Some Emirates have also enacted Banking Tax Decrees that levy corporate income tax on branches of international banks operating in their respective Emirates.
Corporate income tax is levied at a progressive rate of up to 55 percent under the Tax Decrees. Foreign bank branches are liable to corporate income tax at a fixed rate of 20%.
Despite the above, corporate income tax is presently solely applied to foreign oil firms involved in upstream petroleum operations and branches of foreign banks.
Furthermore, free zones in the different Emirates have their own laws and regulations, and they often provide “tax holidays” or tax exemptions (usually referring to corporate income tax) to companies who establish themselves in the respective free zone for a period of 15 to 50 years (generally renewable).
Based on the above, most companies registered in the UAE are presently not obliged to submit corporate tax returns in the UAE, regardless of where the company is registered.
Given the current tax environment, issues such as expense deductibility, (potential) double taxation of dividends and gains, and the ability to carry forward tax losses are currently of limited practical relevance to most businesses operating in the UAE from a domestic corporate income tax perspective.
In the United Arab Emirates, there is presently no personal income tax. As a result, there are no requirements for individual tax registration or reporting.
The United Arab Emirates (UAE) implemented VAT on January 1, 2018. The standard VAT rate is 5% and applies to the majority of products and services, with certain items and services entitled to a 0% rate or VAT exemption (subject to specific conditions being met).
The 0% VAT rate applies to goods and services exported outside of the VAT-implementing Gulf Cooperation Council (GCC) member states, international transportation, the supply of crude oil/natural gas, the first supply of residential real estate, and certain specific areas such as health care and education.
Furthermore, according to Cabinet Decision (No. 46 of 2020) dated 4 June 2020, a person is considered to be ‘outside the State' and thus subject to zero-rating export of services if they only have a short-term presence in the State for less than a month and the presence is not effectively connected with the supply.
Certain financial services, as well as the following supply of residential real estate, are free from VAT. Furthermore, bare land sales and domestic passenger transportation are free from VAT.
Certain goods transactions between businesses formed in UAE Designated (Free) Zones (DZs) may be exempt from VAT. However, the provision of services inside DZs is liable to VAT in line with the general application of UAE VAT law.
The obligatory VAT registration barrier for UAE-resident companies is 375,000 UAE dirham (AED), while the optional registration level is AED 187,500. There is no registration threshold for non-resident companies that make supplies subject to UAE VAT.
VAT grouping is permitted if certain criteria are fulfilled.
There are particular documentation and record-keeping requirements, such as the need to produce tax invoices and file VAT reports (quarterly or monthly, depending on the allocation by the Federal Tax Authority (FTA)).
Excess input VAT may, in theory, be recovered back from the FTA, subject to certain conditions. VAT credits may also be carried forward and subtracted from future output VAT.
Businesses that fail to meet their VAT requirements may face fines and penalties. Fixed and tax-geared fines are available.
Any foreigners who want to work in the UAE must register with the UAE immigration authorities. All foreigners must have a work offer from a firm operating in the UAE, and certain positions may need special credentials as determined by the minister of foreign affairs.
A UAE Employment Permit/work permit is necessary to work in Dubai. In general, they are valid for up to two years and grant the ability to reside and work in the UAE for the period of the visa, which is renewed after two years.
Employment contracts in the United Arab Emirates (UAE) must be written in Arabic. The following clauses should be included in the contract:
Employer and employee names and addresses
Employee nationality Start date
The contract's duration and renewal conditions (for fixed-term contracts)
Probation term, which cannot be extended beyond 180 days.
Salary, payment mechanism (bank transfers), payment intervals, and bonuses are all factors to consider.
Leaves and benefits
Working days and hours are specified in the job description
Contributions to and deductions from social security
Non-competition and non-disclosure agreements
Observance of the standards and regulations of the employer
Benefits for termination and end-of-service
Early termination compensation
Coverage of non-UAE citizens' recruiting charges and residence permits
Employers are obligated to notify the labor office of any new employment and to keep adequate records.
There is no set length for assignments. This is usually indicated in the employment contract for fixed-term employments.
United Arab Emirates Dirham
Establishing a subsidiary in the United Arab Emirates is not a choice to be taken lightly by your organization. You should think about a variety of elements when deciding what you'll need for your incorporation and where you'll put your headquarters. Business considerations such as your sector, the nationality of the employees you want to recruit, and any trade agreements may all make a significant impact in the process of establishing a subsidiary in the United Arab Emirates.
Because the UAE is divided into numerous areas, the criteria for a subsidiary may change depending on your location. If you incorporate on the mainland, you must obtain a local sponsor who owns 51% of your company or a local service agent (LSA) with the investor owning 100% of the firm. Either structure has a cost connected with it. You will encounter less restrictions and procedures in the country's free zones, but you must pick which trade zone best suits your needs. You will also need a particular amount of starting capital and will be limited to the activities listed on your trade license.
While Arabic is the native language of the UAE, distinct groups speak a variety of dialects and languages. The Emiratis, for example, speak the Gulf dialect of Arabic. Persian, Nepali, Bengali, Pashto, and other languages are also widely spoken in the UAE. Because the UAE was a British territory until 1971, the majority of the population still speaks English, which may be advantageous for U.S. firms developing there.
If you want to open a company on the mainland, you must first contact the Department of Economic Development of the relevant emirate to receive preliminary clearance and to register a trade name. After it has been accepted, you may proceed with the following stages.
Because of their simplicity, many businesses choose to incorporate as a limited liability corporation. Other business kinds include Public Joint Stock Firms (PJSC), PrJSC Companies, civil companies, and professional sole proprietorships. The following are the steps to establishing your business:
1. Choose a location for your setup.
2. Determine the best legal form for you.
3. Determine the best business license depending on your economic operations.
4. Set aside a firm name.
5. Get a business license.
6. Create a local bank account.
7. Setup and operation
The subsidiary laws of the United Arab Emirates differ depending on the kind of organization you choose to form. A limited liability corporation (LLC) must have at least two partners and a maximum of 50. Each partner's liability is restricted to the amount of capital contributed as part of their share participation.
The capital requirements for a corporation differ depending on its legal type. Previously, LLCs were required to have a certain amount of capital. The nation now demands "sufficient money," as determined by the DED of the emirate in which you are incorporating. Foreign corporations are urged to consult with an adviser or another company familiar with UAE subsidiary legislation to establish the appropriate minimum share capital.