The United Arab Emirates (UAE) offers enormous potential for foreign companies having an eye on International Expansion into the Middle East. Since forming in 1971, this federation of seven Emirates has grown into the 34th largest economy in the world and third in the region, behind Saudi Arabia and Iran. These are compelling reasons for making a move there – but underline why it is essential to tick all compliance boxes from day one, mainly when operating payroll services in the UAE. The seven Emirates are Dubai, the most populous, and Abu Dhabi, the capital, alongside the lesser-known but equally innovative Ajman, Fujairah, Ras Al Khaimah, Sharjah and Umm Al Quwain.
The Emirates has moved forward from a labour-intensive economy towards diversity in tourism, renewable energy, aluminium production, aviation, telecommunications and advanced technologies. World-class airlines such as Etihad and Emirates have added to international prestige. The country has been ranked in the top 30 globally for business services to multinationals. The World Economic Forum ranked the UAE in the top 30 of the ‘most networked’ nations, ahead of all other Arab countries, Italy, Turkey, and India. The UAE’s magnetism for foreign companies and workers is highlighted by 90% of the population being expatriate workers.
Bradford Jacobs’ will navigate all these potential pitfalls effectively and efficiently thanks to our Professional Employer Organisation (PEO) services. We recruit the staff in-country and then implement our comprehensive knowledge of tax and payroll regulations. As part of our service, Bradford Jacobs files returns and remits associated payments for tax and social security contributions directly from our payroll system to the relevant authorities. Your new staff members can be up-and-running in days rather than weeks or months to establish a legal entity in the country.
Remote payroll – This option allows businesses to operate under a single payroll system by adding employees in the UAE to the parent company’s payroll. However, these employees must operate under different regulations, which is likely to cause problems.
Internal payroll – You may operate payroll for your subsidiary, especially if you are committed to growing your company’s presence in the Emirates. However, this does require hiring dedicated HR staff who understand the UAE’s employment and compliance laws.
Emirati payroll processing company – If you are considering outsourcing, then working with an Emirati payroll company will help in processing your payroll – but not when it comes to compliance.
Emirati payroll outsourcing – However, another option is available to solve both concerns – by working with Bradford Jacobs. We can handle payroll and compliance for all your employees in the UAE. We lift the administrative stress from your shoulders so you can focus on what you do best.
Most international companies intending to run payroll services in the UAE choose to establish a subsidiary as a separate legal entity. Employers must still deal with the Federal Tax Authority of the Ministry of Finance and the General Pension & Social Security Authority. The responsibility of operating payroll is one element that companies must balance against the opportunities of expanding into the seven Emirates that form the federation of the UAE – Dubai, Abu Dhabi, Ajman, Fujairah, Ras Al Khaimah, Sharjah and Umm Al Quwain.
Incoming companies must understand the complexities involved in setting up a subsidiary, which is a legal requirement for being able to operate payroll for their staff. Opening a limited liability company is the most popular option, but restrictions apply. Under the Commercial Companies Law (2015), 51% of shareholding had to be with Emirati nationals, although proposals to remove this requirement were announced in late 2020. Outsourcing payroll services in the UAE will streamline your operations by dealing with the following procedures for onboarding staff:
Note: There is no social security scheme for expatriates.
In the case of registering non-Emiratis for employment, companies face additional protracted procedures, including:
The complexity of these procedures highlights why most foreign companies entering the UAE’s employment market hand their payroll services to Employer of Record (EOR) experts such as Bradford Jacobs. By outsourcing payroll, your company complies with employment regulations without risking sanctions or financial penalties for late, incorrect or incomplete registration. You focus on your goals and expansion, free of any concerns over payroll while your staff get to work.
International companies planning to run payroll services in the UAE must establish a legal entity and decide on the best business structure to suit their expansion plans. There are other considerations. The UAE comprises seven states; each may have different rules for setting up a subsidiary. Also, deciding to set up ‘offshore’ in a Free Trade Zone brings different considerations to establishing the entity on the mainland, ‘onshore’.
The Commercial Companies Law (2015) dictated that businesses incorporating onshore had to have 51% shareholding with an Emirati national or entity. Still, proposals to remove these restrictions were announced in late 2020. This brings onshore companies into line with those operating in FTZs, which have always been permitted 100% foreign ownership. Opening a limited liability company is the preferred option for foreign companies establishing an entity in the UAE. Requirements for setting up a subsidiary onshore generally include the following:
Each of the UAE’s seven Emirates has ‘offshore’ Free Trade Zones (FTZs) that can apply varying regulations for taxation, customs and imports. Different criteria affect companies established in an FTZ, generally including such as: