Penalty fees in the UAE


Ministry of Economy enforces dual licensing

The UAE's Ministry of Economy enforces existing statutory dual licensing of non-independent branch offices. Contrary to the existing 20-year administrative practice of the Department of Economic Development (DED) in Dubai, companies now face penalties.

Until recently, it was possible to license and operate non-independent branch offices of companies located in Dubai. This was already possible by registering with a status of self-employment at the Department of Economic Development (DED).

Dubai set up this special arrangement more than 20 years ago to simplify the process of establishing a company. Even back then the regulation contradicted the provisions of the Commercial Companies Law, which required dual licensing for the branches of foreign companies issued by the corresponding DED and the Ministry of Economy (MoE).

Due to the clear legal requirements, companies without licensing have always been haunted by the “Sword of Damocles” hanging over their heads as a result of the chance of being “discovered” by the Ministry of Economy. As supervisory authority for foreign branches, the Ministry has always insisted on the fact that an office branch had to obtain the initial and then annually renew the Ministry license from the date of the initial licensing. The law stipulates that

  • all branches require dual licensing (MoE and DED) regardless of the activity of foreign companies,
  • Licensing is interconnected, and MoE licensing is the framework for DED licensing
  • In the case of missing licensing, annual penalty fees are charged through the MoE

The amount of MoE fees for licensing is:

  1. Initial licensing: AED 5,000.00
  2. Annual licensing: AED 10,000.00
  3. Bank guarantee in favor of the MoE: AED 50,000.00

The following costs are to be expected by an existing branch of a forneign company, currently only licensed by the DED, which will now rectify its licensing with the Ministry

  • The fees for registering the branch (as above)
  • Annual renewal fees (payable for each year since issuance of the initial DED license
  • Bank Guarantee in Favor of the Ministry
  • Penalty to be defined by and negotiated with the Minstry

Recommended Action

If licensing has not been done so far, all fees, including the annual license fees, must be paid. An additional payment of arrears in the form of a fixed penalty will come as a prerequisite for renewal of the license for the coming year. Since a valid license is a prerequisite for many aspects of the daily business, missing an up-to-date license will constantly lead to economic activity being halted at various turns.

Following complaints of affected foreign companies, the Ministry is currently investigating how it deals with subsidiaries of foreign companies. Many companies have relied on DED licensing. Discussions include the capping of penalty fees. The amount, however, has not yet been determined, but is the subject of a cabinet resolution to be adopted. A waiver of the additional fees through the MoE is not possible due to legal regulations.

If your branch is solely registered with the authorized Department of Economic Development, we will gladly check your status. We develop approaches to solutions before the Ministry of Economy imposes charges within the framework of the annual license renewal process.

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Tags: #Branch of a Foreign Company in the State Territory, #Department of Economic Development, #Dual Licensing, #Ministry of Economy, #United Arab Emirates

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