When it comes to the process of voluntary company liquidation in the UAE, business owners would like to wind up the procedures without any delay while meeting the mandatory requirements. However, unlike in the past, you need to meet additional regulatory requirements to ensure that your mainland, free zone or offshore companies are liquidated without any delay. Company liquidators in Dubai, UAE can offer assistance in expediting the voluntary liquidation process.
Most business owners, due to a lack of knowledge, unwittingly ignore the latest compliance requirements to wind up a company in the UAE. This will lead to compliance failure, resulting in hefty penalties as well as unnecessarily delaying the process of shutting down a company in the UAE. To avoid such a situation, we have listed here some of the commonly seen non-compliance situations that might delay the process of company liquidation in the UAE:
Failing to Apply for VAT Deregistration
Business owners or shareholders will not be their regular selves while shutting down the company they took pains to grow. In such a situation, they may forget to fulfil certain mandatory obligations. VAT deregistration is a critical regulatory requirement that most business owners forget to meet while shutting down their companies. As per the regulations of VAT in the UAE, a company with an active VAT registration is required to apply for VAT deregistration within 20 days of cessation.
You must make a request to the Federal Tax Authority (FTA) within the stipulated deadline to carry out the deregistration. Failing to apply for VAT deregistration will lead to a penalty of AED 10,000. Apart from the penalties, you will be required to deal with the FTA at the time of liquidation. This will considerably delay the process of your company’s liquidation. However, this requirement won’t apply if you are not a VAT registrant.
Non-compliance with Economic Substance Regulations
The UAE introduced the Economic Substance Regulations (ESR) in 2019 to honour its commitment as a member of the OECD inclusive framework. The ESR requirements apply to mainland companies, free zone companies, and certain other business forms that carry out any of the nine relevant activities to maintain and show an adequate economic presence in the UAE. Most business owners think the ESR requirements apply only to companies that are operational. However, companies undergoing liquidation in the UAE are also required to meet the ESR requirements if they have carried out any of the nine relevant activities.
If a company undertakes a Relevant Activity in the year of liquidation, the company or its liquidators in the UAE need to ensure that it has met all ESR requirements for the period up to liquidation. The key ESR obligations are filing ESR Notification, submitting ESR Report and meeting Economic Substance Test. The nine relevant activities are Banking business, Insurance business, Lease-Finance business, Investment Fund Management business, Holding Company business, Headquarters business, Shipping business, Intellectual Property business and Distribution & Service Centre business. Failure to meet the ESR requirements will lead to hefty penalties and reputation damage.
Ignoring Ultimate Beneficial Ownership Requirements
The ESR is not the only regulation that business owners need to comply with while shutting down their companies in the UAE. You need to ensure compliance with relevant provisions in Cabinet Decision No. (58) of 2020 on Ultimate Beneficial Ownership (UBO). As per the UBO Law, a company under liquidation in the UAE must hand over the Real Beneficiary Register (RBR) and Partners or Shareholders Register (PSR) to the licensing Authority within 30 days of appointing the liquidator. Moreover, the liquidator or administrator must maintain the RBR and PSR for at least five years from the date of liquidation. Compliance failure will result in a delay in the liquidation process along with hefty penalties.
Expedite the Process by Hiring the Best Company Liquidators in the UAE
Business owners undertaking voluntary company liquidation in the UAE need to navigate a host of compliance requirements such as VAT deregistration, ESR and UBO obligations. Most business owners fail to comply with these regulations leading to penalties and last-minute shocks. Leading company liquidators in the UAE such as Jitendra Business Consultants (JBC) can help you expedite the liquidation process by eliminating compliance failures and the resulting penalties. JBC has a team of highly qualified company liquidators in Dubai, UAE who can complete the winding-up process complying with all the key requirements including ESR, UBO, VAT Deregistration etc. Avail of our robust company liquidation services in the UAE to peacefully close down your company.