Four UAE obligations you are still being sold, and none of them exists any more

On 30 July 2024 a ministerial resolution removed the AED 50,000 bank guarantee that every branch of a foreign company in the UAE had been lodging since 2010. Quotes written this month still carry the line.

That is not an isolated lapse. Between September 2020 and October 2024 the UAE abolished four separate obligations that a large part of this market continues to price, schedule and invoice for. Each was removed by a named instrument on a knowable date. None of them is obscure. All four are still being sold.

The reason is structural rather than dishonest. A new obligation arrives with an announcement, a circuit of briefings and a fee attached, so every provider in the country hears about it inside a week — there is money in knowing. An abolition arrives as a clause nobody markets, because there is none. The requirement then lives on in the only place it was ever really recorded: a provider's checklist, and the quote template built from it.

The cost is not mainly the fee. It is that the same stale checklist is equally confident about what survived, and wrong about that too — which is how a founder pays for a filing that was abolished while missing the historic exposure that was not.

The four, and the instrument that ended each one

Read the right-hand column before the left one. Not a single line here says the obligation was replaced by nothing.

1. The Economic Substance filing stopped being annual, and the penalties for later years were cancelled outright

Economic Substance notifications and reports were a fixture from 2019. A UAE company carrying on one of the defined Relevant Activities — holding companies, intellectual property businesses and distribution and service centres among them — filed a notification each year, and where it earned income from that activity, a report as well. Missing either carried an administrative penalty.

Cabinet Decision No. 98 of 2024, effective 2 September 2024, confined the entire regime to financial years starting 1 January 2019 and ending on or before 31 December 2022. The Ministry of Finance announced it on 14 October 2024. For a financial year beginning on or after 1 January 2023 there is no notification and no report. There is no reduced filing, no simplified return, and no annual fee a provider can legitimately raise against it.

The Decision went further than stopping the filing. It cancelled the administrative penalties imposed for those later periods, and where such a penalty had already been paid, it falls to be refunded. That is the sentence most affected companies have never read: money handed over on a 2023 penalty is a claim, not a sunk cost.

What did not change is the principle underneath. Substance was never the filing — the filing was evidence of it. A bank assessing a corporate account application, an auditor forming a view, a tax authority testing whether a free zone entity's income qualifies, and a buyer running diligence all ask on their own account the question the notification used to ask on paper: are the decisions being taken here, by people who are here? Our page on corporate bank account opening sets out how bluntly that gets asked at onboarding. At a bank the question arrives as a request for paper: a tenancy contract or lease in the company's name, with Ejari or the free zone equivalent behind it; employment contracts, and residence visas actually issued rather than an allocation nobody has drawn; and the signed contracts, invoices and purchase orders that show a customer exists. A file that cannot produce them is delayed, and often declined, whatever the licence cost.

So the filing is gone and the test is not. A provider who dropped the annual ESR fee and told you substance no longer matters has made the second mistake in place of the first. For a company being formed now, what is left of the regime and who still asks the substance question is set out in economic substance for a company formed today.

The abolished regime still gives the clearest definition of substance

The filing went, but the instrument it was filed under — Cabinet Resolution No. 57 of 2020 — set down the most detailed description of substance this country has published, and it is still the text to read for what "decisions taken here, by people who are here" means in practice. Article 6 asked three things of a company carrying on a Relevant Activity: that the core income-generating activity was conducted in the UAE; that the activity was directed and managed here; and that, measured against the level of that activity, the company had an adequate number of qualified full-time employees physically present here, incurred adequate operating expenditure here and held adequate physical assets here.

Nobody files against that list any more. Read as a founder's checklist rather than a form, it still describes what a bank, an auditor, a buyer and the tax authority are each testing:

1. Decisions are taken here. The people who direct the company — its directors, or the shareholder, partner or manager who runs it — take its strategic decisions while they are in the UAE, and the record shows it. How to build that record is the next part of this page.
2. The work that earns the money is done here, and it is the work the licence names. The regime looked through the paperwork to the activity actually carried on. Income from an activity the licence does not carry is a problem before substance is even raised, and a bank reads the invoices against the licence.
3. There are people to do it. Qualified staff in proportion to the activity, physically present in the country. An allocation of visas that nobody has drawn is not staff.
4. There is somewhere to do it. Premises and assets that fit the business. A trading company holding stock is not credible from a shared desk; a one-person consultancy does not need a floor.
5. It costs something to run it from here. Rent, salaries and supplier bills paid in the UAE, in proportion to what the company says it does. A company whose costs all fall abroad has told anyone reading its accounts where it is really run.

None of the five carries a number. "Adequate" was always measured against the level of the activity, which is why a flexi-desk can be enough for one business and plainly inadequate for another. The combination that reads as no substance to every one of those parties is a familiar one: a desk nobody sits at, no staff, no visas drawn, an owner living abroad, and projections of serious turnover.

A free zone company claiming the 0% rate meets the same test again, this time as a condition of tax. Article 18 of Federal Decree-Law No. 47 of 2022 makes adequate substance a condition of Qualifying Free Zone Person status, and Article 8 of Cabinet Decision No. 100 of 2023 defines it in terms the old regime would recognise: core income-generating activities undertaken in a free zone — a Designated Zone, for distribution — with adequate assets, an adequate number of qualified full-time employees and an adequate amount of operating expenditure there, having regard to the level of the activity. Those activities may be outsourced to another person in a free zone, but only under adequate supervision. Fail the condition at any point in a tax period and the status is lost from the start of that period and, on the Federal Tax Authority's published guidance, for the four tax periods that follow. The other conditions are on our UAE corporate tax page.

Where the decisions are taken is proved by a record made at the time

The old regime spelled out what "directed and managed here" required, and the list still works as a template: board meetings held in the UAE as often as the decisions demand, a quorum of directors physically present, written minutes signed by those who attended and recording the strategic decisions actually taken, directors with the knowledge and expertise to take them, and the minutes and the company's records kept in the UAE. Where a shareholder, a partner or a manager ran the company instead of a board, the same conditions applied to them.

The Federal Tax Authority reads decisions the same way. Its guide to free zone persons works through a holding company with a small office in a free zone and no employees at all, whose investment decisions are taken by its board. The board's decision-making is the company's core income-generating activity, and the company meets the substance requirement provided those decisions are taken in the free zone — minutes of board meetings held at that office being the proof the guide gives as its example.

Few new companies have a board that meets. For a company of two or three people the equivalent is less ceremony and more trail. Dated resolutions, signed in the UAE, for the decisions that matter — a significant contract, borrowing, a hire, a change in pricing. Approvals that run through the company's own accounting system and its own email domain rather than a founder's personal inbox in another country. A bank mandate whose signatories are the people the minutes say are deciding. And where work is outsourced, the contracts and correspondence that show the company supervising it. Agreements, financial records and correspondence are exactly the evidence the Ministry of Finance's own Economic Substance guidance pointed to. The record-keeping duties further down this page make sure that what exists is kept. This is the part that makes sure something exists to keep.

The same trail answers a second question. The corporate tax law treats a company formed abroad but effectively managed and controlled in the UAE as resident here, and many other countries apply the idea from their side: a UAE company whose decisions are really taken elsewhere invites the country they are taken in to treat it as a resident there. UAE tax residency and what your home country still taxes sets out how that test is applied.

2. The 51% Emirati shareholder stopped being the default in 2021, and what remains is a far shorter list

Federal Decree-Law No. 26 of 2020, published in the Official Gazette in September 2020, removed both the requirement for a UAE national to hold a majority of an onshore company and the requirement for a foreign company's branch to appoint a national agent. The change reached applicants in Dubai through the economic department's own list of eligible commercial and industrial activities, applied from 1 June 2021 — so the federal instrument and the emirate's implementation carry different dates, and it is the second one that decides your file. The Commercial Companies Law was then replaced wholesale by Federal Decree-Law No. 32 of 2021, in force since 2 January 2022.

Two carve-outs survive, they are different in kind, and running them together is the standard error in this market.

The federal one is Cabinet Resolution No. 55 of 2021, the List of Activities with a Strategic Impact. It is short: security, defence and activities of a military nature; banks, exchange houses and finance companies; insurance; currency printing; telecommunications; Hajj and Umrah services; Quran memorisation centres; and fisheries and related services. Most of those are not flat prohibitions — the sector regulator sets the permitted foreign percentage case by case. If your activity sits there, the answer is not "you need a 51% partner". It is "the regulator decides the number, so ask before you design the cap table."

The emirate-level one is the local service agent, and it is not a shareholding at all. A professional sole establishment owned by a non-GCC national, and typically a civil company of non-GCC professional partners, is issued in Dubai against a notarised service agent agreement. The agent holds no shares, no profit entitlement, no signing authority over the bank account and no say in management, and can be replaced. It is a privately negotiated annual contract rather than a government tariff; quotes commonly land between AED 5,000 and AED 10,000 a year. The full position, activity by activity, is on our mainland company formation page.

Anyone presenting a 51% nominee structure as unavoidable for an ordinary trading or consultancy activity is selling a product the law stopped requiring five years ago.

3. Visa stamping stopped being a step in 2022, and the work the phrase used to describe still costs money

Since 11 April 2022 the Federal Authority for Identity, Citizenship, Customs and Port Security has not issued the physical residence sticker for the residences it administers. The Emirates ID is the document that evidences residency, the residence and Emirates ID applications were merged into a single form, and a digital copy of the residence stays retrievable through the ICP channels.

Nothing is stamped. A quote carrying "visa stamping" as its own line is therefore doing one of two things, and it is worth establishing which before anybody raises their voice:

• Mislabelling real work. The entry permit, a status change or an exit and re-entry, the medical fitness test, Emirates ID biometrics and issue are all real steps with real government fees, run in a fixed order. A provider using a dead label for a live sequence is untidy, not dishonest.
• Charging for a step with no content. If the quote already itemises the entry permit, the medical and the Emirates ID, and then adds stamping on top, ask what is being stamped.

One qualification most published pages skip: residence is administered by ICP across most of the country and by the General Directorate of Residency and Foreigners Affairs in Dubai, and the two do not always move in step. Establish which authority your file runs through before assuming the practice. The order these steps actually happen in is on our PRO services page.

4. The AED 50,000 branch guarantee was abolished in 2024, and nobody will return yours unprompted

A branch of a foreign company used to carry two requirements that have both now gone, and two that have not.

Two consequences follow, and the second is the one worth actual money.

The guarantee is no longer a cost of opening a branch. A quote that still budgets AED 50,000 of blocked capital is overstating the cash you need by that amount before a single other line is priced.

And if your branch was established before mid-2024 and lodged the guarantee, that money is still sitting with your bank. Nobody issues a refund on a repeal. Ask the bank in writing to release it against the current position, and expect to have to explain that position to them, because the instrument that ended the requirement was not written with banks as its audience.

What the repeal does not decide is whether a branch is the right vehicle at all. That is a separate question from what opening one costs, and the comparison against a subsidiary and a representative office — liability, the attested parent pack, and the tax treatment of each — is worked through in a UAE branch is your parent company standing in Dubai.

The fifth line, which was not abolished so much as made pointless

Employers hiring on the UAE mainland historically lodged a bank guarantee of not less than AED 3,000 per employee, renewed annually. Ministerial Resolution No. 318 of 2022 introduced an alternative: an insurance policy covering entitlements up to AED 20,000 per worker where those go unpaid on insolvency or default, at an annual premium of roughly AED 14.75 plus VAT per worker. Most employers moved.

This one belongs on the list for a different reason from the other four. The guarantee still exists as a route. It is simply that blocking AED 3,000 of your own cash per head, when AED 14.75 buys wider cover, is not a decision anybody would make on the facts. A budget still carrying the old line is not paying a phantom fee — it is idling working capital, which is the slower and quieter version of the same loss. The arithmetic at headcount is on our human resources page.

Set the removals out in the order they actually landed, rather than in the order a checklist happens to list them, and the reason none of this reached the market stops looking like negligence and starts looking like arithmetic: four years, six separate dated steps, and no two of them carried by the same instrument or the same announcement.

Nothing on that spine was hidden. Every station has a name, a date and a publisher, and any one of them could have been checked in an afternoon at the time. What none of them had was a party with a commercial reason to circulate it — the whole run travelled through official gazettes and authority portals rather than through the briefing circuit that carries a new fee. A checklist assembled in 2019 and never re-read is not wrong about any single one of these measures. It simply predates all six of them, and nothing since has forced it to notice.

These six are not the whole of it either. The wider dated record — the changes between 2018 and 2025 that made a body of standing setup advice wrong, rather than only these four requirements obsolete — is kept in the UAE rule changes that made older advice wrong.

What genuinely survives, and why the historic exposure is the part nobody mentions

Every one of the four left something behind, and none of the survivors is being marketed either.

Economic Substance, FY2019 to FY2022. Those years remain examinable. If your company carried on a Relevant Activity and did not file, or filed badly, the abolition of the regime for later years does nothing whatever for the earlier ones. For any company incorporated before 2023 this is the most valuable line on this page — and it is the precise opposite of what the invoice was worried about.

The exposure on those years was never only a penalty. Under the regime as it stood, a company that failed the test in any year had its details passed, under the UAE's international exchange agreements, to the authorities of the countries where its parent company, its ultimate parent and its ultimate beneficial owner reside — and an unfiled report counted as a failure to demonstrate substance. A second consecutive year of failure added the possibility of the trade licence being suspended, revoked or not renewed. A company that thinks the worst an unfiled 2021 can cost is a fine has read half the regime. Whether anyone reaches for those powers now, for a historic year, is not something this page can promise either way — which is the argument for putting an open year in front of an adviser before a bank review or a buyer's diligence puts it in front of you.

The records that would answer such a question. Article 27 of the Commercial Companies Law requires accounting records to be kept at the head office for at least five years from the end of the financial year, which puts a 2022 file inside its retention window as this is written. The corporate tax retention period is seven years, and Cabinet Decision No. 75 of 2023 sets an administrative penalty of AED 10,000 for failing to keep required records, rising to AED 20,000 on a repeat within 24 months — charged for the absence of the records themselves, independently of whether any tax was underpaid. Our audit and accounting page sets out which period binds which company.

The service agent on professional licences. Removed for branches and for commercial companies. Not removed for a professional sole establishment or a civil company owned by non-GCC nationals in Dubai.

Substance as a test rather than a filing — the reason a bank can still refuse an account long after ESR stopped being anybody's annual chore. It is not only the bank. The same test decides whether a free zone company keeps its 0% rate, and whether a company whose decisions are taken abroad is claimed as a tax resident by the country they are taken in.

Three questions that settle any line on a quote

None of this requires you to become a lawyer. It requires three questions, asked in order, and the second one does most of the work.

1. Which instrument imposes this?

A live obligation has a name: a Federal Decree-Law, a Cabinet Decision, a Ministerial Resolution, an emirate resolution, a free zone regulation. "It is a requirement" is not an answer, it is the absence of one. A provider who cannot produce the name within a day has not read it either.

2. What has happened to that instrument since?

This is where all four items on this page fail. Ministerial Resolution No. 377 of 2010 imposed a real AED 50,000 guarantee — right up until Ministerial Resolution No. 138 of 2024. A checklist that still says "AED 50,000 guarantee" is not lying about 2010. It has simply never been asked what year it is.

3. What happens if I decline it?

Every live obligation has a consequence with an edge on it: a fine with a number, a licence that will not renew, a permit that will not issue, a clearance that will not be given. Where the answer is soft — "it is recommended", "the authority prefers it" — you are looking at a service you may buy or decline, not an obligation.

Where challenging the invoice is the wrong move

This page is a lever, and it can be pulled at the wrong moment or in the wrong direction.

When the total is right and only the label is wrong. Providers bundle. If your quote covers a real sequence of work at a fair total and one line carries a term that stopped being accurate in 2022, you have found a documentation problem, not an overcharge. Renegotiating the total is a fair conversation. Treating a stale caption as evidence of bad faith is not, and it will cost you a working relationship worth more than the line.

When you are mid-file. An immigration file, a licence amendment or a bank onboarding already in progress is a poor place to open a dispute about a line item. The clearances are sequential, the queue is not yours to reorder, and a provider distracted by an argument is one who misses a renewal window. Settle it at renewal, in writing, with the instrument names in front of both of you.

When the obligation genuinely still applies to you. A company with unexamined FY2019–FY2022 Economic Substance exposure; a professional sole establishment that does need a service agent; an activity sitting on the strategic-impact list. For these the line is correct and the provider is doing their job. The value of this page is knowing which of them you are; the failure mode is deciding you are none of them because you would prefer not to be.

When you are inside DIFC or ADGM. Both financial free zones run their own company, employment and data protection rulebooks, administered by the centre's own authority rather than under the federal instruments named on this page. Several federal answers do not transfer cleanly across that boundary, and beneficial ownership is one of the places the difference bites. Check the centre's rulebook before carrying an answer in from the mainland.

When the honest answer is a different provider rather than a smaller invoice. If a firm is still quoting a 51% sponsor for an ordinary trading licence in 2026, the AED 50,000 line is the least of your problems. That quote tells you when their reference material was last updated — and everything else they are advising you on came out of the same material. It is a reason to leave, not to haggle.

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