The UAE is one of the most dynamic business environments in the world. With investor-friendly policies, a robust legal framework, and a rapidly diversifying economy, it continues to attract entrepreneurs from across the globe.
But before launching your venture, you need a solid understanding of three key pillars:
✅ Labor laws
✅ Tax obligations
✅ Licensing and company registration requirements
This complete guide unpacks the UAE’s business compliance framework so you can build legally, operate efficiently, and scale confidently.
1. 🧑⚖️ UAE Labor Laws: Employee Contracts, Rights, and Benefits
Employment Contracts: Limited vs. Unlimited
All employees in the UAE must have contracts registered with the Ministry of Human Resources and Emiratisation (MOHRE). These fall into two categories:
• Limited contracts (fixed term with start and end dates)
• Unlimited contracts (open-ended, requiring notice for termination)
Working Hours & Overtime
• Private Sector: Max 8 hours/day or 48 hours/week
• Public Sector: 7 hours/day
• Ramadan: 2 hours less per day
• Overtime: Paid at 125%–150%, depending on the time worked
Leave Policies
• Annual Leave: 30 calendar days (after one year of service)
• Maternity Leave: 60 days (45 paid, 15 half-paid), plus 45 unpaid if needed
• Public Holidays: Guaranteed national holidays like Eid, National Day, and New Year
End of Service Gratuity
• First 5 years: 21 days of basic salary per year
• After 5 years: 30 days per year
2. 🔒 Employee Rights and Workplace Compliance
Wages Protection System (WPS)
The WPS ensures timely, trackable salary payments via approved UAE banks. Non-compliance can result in fines, blacklisting, and labor bans.
Health & Safety
Employers must:
• Conduct risk assessments
• Provide protective equipment
• Offer safety training
• Ensure medical insurance (mandatory in Abu Dhabi and Dubai)
Dispute Resolution
Employees can escalate issues (unpaid wages, wrongful termination, etc.) through MOHRE, which may refer the case to Labor Courts if mediation fails.
3. 🧾 UAE Taxation: Corporate, VAT, and Excise Tax
Corporate Tax
• 0% on annual profits up to AED 375,000
• 9% on taxable income above AED 375,000
• Applies to Mainland, Free Zone, and foreign entities with UAE presence
• Filing deadline: 9 months after fiscal year-end
Value Added Tax (VAT)
• 5% VAT on most goods and services
• Mandatory registration for businesses with AED 375,000+ turnover
• Voluntary registration available at AED 187,500+ turnover
• Must file returns and maintain VAT-compliant invoicing
Excise Tax
• 50%–100% on harmful goods like tobacco, soft drinks, and energy drinks
• Businesses must register with FTA, file returns, and maintain detailed stock records
4. 📜 Licensing and Permits in the UAE
Understanding License Types
• Commercial License – Trading and retail
• Professional License – Services, education, healthcare
• Industrial License – Manufacturing, production
• Tourism License – Hotels, travel agencies, tourism services
Step-by-Step Licensing Process
1. Identify your license type (based on business activity)
2. Submit documents to the DED (Mainland) or Free Zone Authority
3. Secure additional approvals (e.g., Ministry of Health for clinics)
4. Pay fees and collect your license
Permit Requirements
• Additional permits may be needed for:
• Health & safety
• Environmental protection
• Food handling
• Construction and engineering
Renewals
Licenses are renewed annually, requiring updated documentation and payment of renewal fees. Delays or failure to renew may lead to fines or license suspension.
5. 🏢 Company Registration in the UAE: From Idea to Entity
Mainland vs Free Zone
• Mainland: Operate anywhere in the UAE; access to government contracts
• Free Zone: 100% foreign ownership, tax benefits, streamlined setup
(But cannot trade directly in the UAE without a local distributor)
Key Registration Steps
1. Choose a business structure – LLC, sole establishment, or branch
2. Select and register a trade name
3. Apply for a license – Commercial, Professional, or Industrial
4. Secure required government approvals
5. Register for VAT, if applicable
Required Documents
• Passport copies of shareholders and managers
• No Objection Certificate (NOC), if needed
• Business plan
• Lease agreement for office space
• MOA and AOA (for LLCs)
Post-Setup Obligations
• Annual license renewal
• VAT filing, audits, and corporate tax compliance
• Employee visa sponsorships and WPS registration
🧠 Final Thoughts
Whether you’re hiring your first employee, planning your tax strategy, or choosing the right license — compliance matters. Getting your setup right from day one protects your business from legal pitfalls and positions it for sustainable success in one of the world’s most competitive markets.
🚀 Ready to Launch Your UAE Business?
Compare Free Zones, check pricing, and complete your business setup — fast, clear, and hassle-free.
👉 Visit www.licensemarket.ae