Other BriefingsStarting A Business In The UAE? Points To Consider
The UAE and Middle Eastern are booming and attracting huge volumes of new businesses wanting to set up in the region. However, this has coincided this year with significant changes in the UAE corporate tax regime, which came into effect from June 1st this year.
This is a landmark move that has marked a departure from the UAE’s previous tax-free commercial environment. Instead, the UAE’s corporate tax regime brings fresh challenges and opportunities to startups and early-stage companies. The ability to understand this properly is a key element of setting up a new business.
It is vital that new UAE startups comprehensively understand the new corporate tax laws, in order to properly plan for the most effective way of structuring your company and its tax efficient, operational strategies. For startups, which often operate on tight budgets and thin margins, efficient tax planning can make a significant difference in terms of profitability and growth. We provide six examples that UAE startups and new-age technology-led businesses should be focusing their attention on.
Restructuring
The first step is to consider if your existing business (if you have one) would benefit from legal restructuring. This is because UAE Free Zones are not subject to tax, provided certain conditions are satisfied. If there’s a business case for setting up the entity in the free zone, it may prove beneficial to find and implement tax-efficient structure, as well as being an excellent starting point.
Strong Accounting Procedures
New startups often ignore the boring tax issues and concentrate on their entrepreneurial project development. However, this can lead to later problems that could have been resolved from the outset had attention to detail been paid from the start. To ensure tax compliance, startups should consider their financial management systems. Maintaining accurate financial records has become a non-negotiable requirement. Companies should consider hiring qualified accountants or investing in efficient accounting software that can facilitate record-keeping and filing of tax returns.
A Compliance Culture
Startups should aim to foster a compliance-oriented culture within their organization. This involves ensuring that all employees understand the importance of complying with the new tax laws and are actively involved in maintaining tax compliance. Penalties can be quite stringent and regularly reinforcing the importance of ethical business practices and adherence to the law can help ingrain compliance into the fabric of the company’s culture.
Industry Associations
Startups should actively engage with industry associations and other professional bodies such as Chambers of Commerce in the UAE. They can provide valuable support, information, and advocacy services during this early business development period. It is essential to stay abreast of changes, especially given that these are happening rapidly and will impact your business sector.
Being Customer Centric
New businesses often initially operate on small margins. This can lead to the temptation of passing off new tax burdens to customers. Despite the new financial burden that may be possibly imposed by the corporate tax, startups should be wary of passing this cost as it becomes a false economy. It is far better to bite the bullet and pay your tax due rather than inflate client invoices instead.
Finding innovative ways to add value, and building strong relationships can help maintain customer loyalty and market position. Striking the balance between maintaining profitability and offering value to customers is a key challenge for startups in the UAE. It is far better to start in the correct way rather than try and cut corners.
Seek Professional Assistance If Needed
Given the complexity of tax compliance, it may be beneficial to seek professional assistance, especially in the early stages of the tax transition. Even though hiring would incur extra costs, it could potentially save a lot more in the long run. This website also has a ‘search’ function – use it for complimentary advice.
The new corporate tax era in the UAE presents an opportunity to reassess, restructure and streamline operations for better efficiency and profitability. Navigating this new landscape requires preparation, understanding, and strategic planning. With the right approach, new business startups companies can thrive, and develop. Getting it right from the start is far better than getting it wrong later – and in the long run, much less expensive.
For UAE new business planning, please contact Maria Kotova at Dezan Shira & Associates for assistance. The firm has over 30 year’s experience of handling investment into Asia. Initial consultations are free of charge. Contact: dubai@dezshira.com
Please also see our ‘Doing Business in Dubai” guide below.
Related Reading
An Introduction to Doing Business in Dubai 2023
About Us
Middle East Briefing is one of five regional publications under the Asia Briefing brand. It is supported by Dezan Shira & Associates, a pan-Asia, multi-disciplinary professional services firm that assists foreign investors throughout Asia, including through offices in Dubai (UAE), China, India, Vietnam, Singapore, Indonesia, Italy, Germany, and USA. We also have partner firms in Malaysia, Bangladesh, the Philippines, Thailand, and Australia.
For support with establishing a business in the Middle East, or for assistance in analyzing and entering markets elsewhere in Asia, please contact us at dubai@dezshira.com or visit us at www.dezshira.com. To subscribe for content products from the Middle East Briefing, please click here.
