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Penalties Up to 100,000 AED for Non-compliance in Free Zones

27/5/2022

Recent regulations are strictly enforced to confirm that entities legitimately earned profits corresponding to the commercial activities and registered licenses.

There are over 50 freezones in the UAE, 20 out of which are in Dubai, that offer investors 100% foreign ownership of their organizations and exemption of tax schemes. Dubai has also added 98 new economic activities with business models, thus requiring the imposition of strict regulations to confirm that the entities’ earnings profits legitimately correspond to the duly licensed commercial.

Accordingly, the free zones in Dubai have increased their strictness to check for trade compliances with the companies and licenses issued by the respective authorities. Recently, in free zones inspection patrols have been launched to verify if these entities are registered under their respective jurisdictions; examine their operational activities, and services provided to check if they coincide with their registered activities.

It is legally not permissible for a commercial entity to practise any economic activity or have a branch of activity without acquiring due licenses. And as a punitive measure, any non-compliance may be punishable with fines ranging from AED 50,000 to AED 100,000.

Interestingly, some companies may have had correct licenses or activities at the time of incorporation, however as regulations have evolved, some licenses have become outdated and need amending.

Therefore, commercial entities ought to be cautious, up to date, and immediately rectify any non-compliant trade cases from corporately and legally sound organizations.

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