Jenny Hunt
- 5 min read

Overview Of Legal Changes/Updates Affecting Abu Dhabi Businesses In 2015

21st September 2015

2015 has seen a variety of updates to laws directly affecting businesses in Abu Dhabi, as well as high profile media coverage of existing laws which need to be adhered to. Following is an overview of these changes and key comments to provide you with a quick reference.

Commercial Companies Law (Federal Law No. 2 of 2015).

We covered the key updates in an article on 1st July 2015 when the law became active. It should be noted that the legal documents of all existing companies need to be updated before 30th June 2016 {this has subsequently been extended by a further year and failure to comply will result in fines accruing on a daily basis}, otherwise the company will be considered dissolved. The new law is designed to encourage Emirati entrepreneurship and reinforce corporate governance requirements for all companies.

Investment Law (proposed)

This is currently under review and is expected to include changes in foreign ownership limits of businesses (these were expected in the new Commercial Companies Law, but not included). This law is promised to allow 100% foreign ownership of businesses in some sectors according to the Minister of Economy. It is anticipated to affect certain key sectors where the UAE lacks knowledge/skills to encourage innovation. At the time of writing it is not known which sectors will be opened up and what the conditions/regulations will involve; however, it will certainly be a welcomed initiative for Foreign Direct Investment. This law has been approved by the Cabinet and still needs to be approved by the Federal National Council (FNC), then the Rulers of each Emirate before being enacted.

Bankruptcy Law / Insolvency Law (in process)

The UAE Cabinet has approved a new insolvency law in July 2015. The new law aims to assist companies struggling financially. It is understood that strategies are being developed to help companies avoid bankruptcy by regulating accumulated debts and easing restructurings. Previously the criminalization of bounced cheques has been considered a key barrier for companies looking to enter the UAE market and the new law is expected to address this. It is understood that the new law is based on Chapter 11 bankruptcy proceedings in the US. The new law will have to be approved by the FNC before the Rulers of each Emirate and it finally coming into play.

Anti-discrimination Law

This was enacted in July 2015 and applies to everyone in the UAE. It covers discrimination on the grounds of religion, race and colour expressed in any manner, whether spoken or written and therefore reinforces the UAE's policy of inclusivity. Those breaching the law face prison terms from six months to more than 10 years and fines from AED50,000 to AED2million. The new law reinforces the country as welcoming to all and provides them with a safe place to live and work, accordingly.

VAT and Corporation Tax (proposed)

Whilst businesses and residents have enjoyed the tax free existence in the UAE, it has long been known that taxes are on the cards. This move will compliment the country's strategy to diversify away from its reliance on oil, as well as government subsidies, which are not sustainable indefinitely. A further example of this was the removal of government subsidies on fuel in August 2015 and a reduction in government subsidies on utilities in Abu Dhabi in January 2015. At the time of writing, media reports are suggesting that VAT will be introduced within two years and companies will be able to pay over an 18-month grace period. It is reported that the IMF has suggested a rate of 5% and it is expected that VAT won't be applicable for all goods/services, but predominantly the luxury goods market.

With regards corporation tax, whilst some sectors already pay taxes, such as oil and gas, as well as banking, it is not yet clear how corporation tax will be implemented, the value or the timescales. However, I would expect the implementation to be planned carefully to ensure that the UAE remains attractive for foreign direct investment and that there isn't a sudden panic of onshore companies relocating to free zones.

Whilst taxes aren't liked, it does demonstrate the country's maturity and management of assets/income and being a developing economy, there are still plenty of opportunities for businesses and the post year have showed how the country has a 'can do' attitude and makes things happen to maintain its reputation as forward thinking.

Cyber Crimes (Federal Law No. 5 of 2012)

Whilst this isn't a new law, high profile media coverage of its breech has brought it to the forefront of people's minds. The law is applicable for social media and instant messaging. In essence, publishing, news, comments and pictures in such a way that it offends or defames someone is a breach, as is doing so without their consent. Penalties include a minimum of six months in prison and fines ranging from AED150,000-AED500,000. For the full extent of the law, CLICK HERE.

Other laws that businesses need to be aware of when operating in the UAE are the Penal Code, Employment Law, Commercial Code and Civil Code. If in doubt, please seek legal advice.

How can Gateway Group help your company expand to the UAE?

Gateway provides concierge company formation and unique local sponsor packages to foreign companies expanding to the UAE. Gateway protects its clients’ businesses and their profits. It provides foreign companies with the peace of mind their business is secure, they have full operational control, their profits are protected and their local sponsor is responsive whenever they might need support doing business in a new market. We can also assist with ongoing compliance requirements, such as visas & Emirates IDs and trade license renewals. Furthermore, from a human capital perspective, we can help your organisation to ensure you have the right people in place, appropriately motivated and maximizing productivity - ideal for getting your multicultural teams to work. To discuss how Gateway can help your organisation to expand into the UAE, email us: info@GatewayToUAE.com