How to properly close a company in the UAE and avoid fines

As a rule, the registration of a company in the UAE is given a lot of attention by the owners due to the understanding that a legally competently constructed process affects the future success of the business. However, these same entrepreneurs, some having faced losses, some having switched to other projects, or for some other reason having decided to close the company, treat the liquidation process much less carefully, and often even indifferently.

And in vain, because this process in the UAE is not such a simple and one-step action. In order to avoid further fines and problems with local government bodies, it is necessary to carry out everything properly from beginning to end or to save time, entrust this work to professionals. The office of the international law firm Antwort Law has been in Dubai for more than 3 years and we know all the nuances of this multi-stage procedure.

Unfortunately, many company owners are convinced that the termination of the license is actually the liquidation. In fact, they will face fines, a ban on entering the country or a refusal to register another company. The company must be formally closed, not simply suspended, and here's why:

• The tax system continues to consider it active: it still has an open VAT (value-added tax) registration and a personal corporate tax account, which means that the company is required to file quarterly VAT returns and annually file a corporate corporate tax return. If reports are not filed, the system automatically charges fines for each violation, even if the company is not actually operating.
• The Ministry of Human Resources & Emiratisation (MOHRE), the body that keeps records of all employees and employers in the private sector in the UAE, still registers your employees, which entails the imposition of fines for leaving employees without pay and without status.
• The country's migration services also record active, unpaid visas of employees, for which fines may be imposed.
• An abandoned bank account will most likely be closed by the bank.
• Independently, Frisians cannot close the company, they need confirmation from MOHRA and migration authorities

Thus, without completing all the mandatory formal steps to close the company, you only accumulate fines from state authorities and risk getting more serious problems. So, what actions need to be taken to complete the project according to all the rules? On average, in our experience, they require from 10 to 14 and they may vary depending on the requirements of the Frisian:

1. A full legal audit of the company, which includes checking:

• active visas;
• the presence of employees in MOHRE;
• VAT and CT status;
• filed and unfiled declarations;
• UBO filing (confirmation and updating of data on the ultimate beneficiaries of the company);
• ESR (if there was economic activity);
• fines in migration authorities;
• status of bank accounts.

Without this, it is impossible to understand the real amount of liabilities.

2. VAT Closure: for this it is necessary to provide the Tax Service (FTA)

• zero debt;
• closing all declarations;
• final tax declaration;
• official application for VAT Deregistration.

3. Corporate Tax Closure (CT Deregistration): one of the most difficult stages, because the new corporate tax law has obliged all companies to undergo CT registration. For complete closure, we:

• close the CT account,
• submit the final declaration,
• submit documents for CT Deregistration,
• remove the company from the FTA system.

We warn that fines for failure to submit CT declarations are accrued daily.

4. ESR and UBO are mandatory hidden stages. If the company:

• conducted activities,
• had affiliated companies,
• was a holding company,

i.e. is obliged to close:

• ESR Notification;
• ESR Return;
• UBO Filing.
• If UBO is not closed – freezone blocks liquidation.

5. Cancellation of all visas (employees, partners, owner): this is done through ICP/GDRFA. It is necessary to:

• cancel employee visas,
• cancel partner visas,
• close Emirates ID,
• close health insurance,
• remove all employees from MOHRE,
• close Establishment Card.

6. Removing the company from the MOHRE register, one of the strictest state organizations. This requires:

• letter from the company;
• confirmation of absence of employees;
• confirmation of final payments (Final Settlement);
• clearing report.

Attention: MOHRE pass is a common reason for the owner’s entry ban into the country.

7.  Closing bank accounts: at this stage you may need the following documents

• SoF/SoW (confirmation of income/source of funds from the owner)
• liquidation documents,
• explanation of lack of movement,
• confirmation of lack of debts.
• Without closing the bank account, the freezone will not issue a Liquidation Certificate.

8. Final liquidation of the license. Only after:

• VAT is closed,
• CT is closed,
• visas are canceled,
• MOHRE is closed,
• bank is closed, freezone or DED closes the license and you can receive an official certificate of liquidation of the company.

It is necessary to allocate sufficient time for this process, at least a month, maximum 16 weeks in case of employees, debts, fines, omissions in filing declarations and other individual situations. The good news is, as we mentioned earlier, this process can be fully delegated and not tied to your current residence in the UAE. During our consultation, we can give you an idea of ​​the amount of time required.

We at Antwort Law work with all jurisdictions in the UAE, including the Mainland, and specialize in the proper liquidation of businesses. Closing a company with us is more profitable than doing it yourself, because you will be able to avoid fines, bans or an increase in your rating in the risk assessment systems that are unofficially maintained by all banks and organizations in the UAE.

Lidia Ivanova

International lawyer
Antwort Law