Sanjana Ramaseshan

New E-Invoicing Requirements in the Kingdom of Saudi Arabia

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E-Invoicing requirements in Saudi Arabia

With Saudi Arabia mandating e-invoicing to increase transparency and compliance with tax regulations, ZATCA (Zakat, Tax, and Customers Authority), formerly known as GAZT, has issued new regulations for controls, requirements, and technical specifications.

The Generation stage commences on 4th December 2021, and businesses are required to generate, issue, and store electronic invoices and notes and should notify the Authority if any technical error arises. The second phase, Integration commences 1st June 2022, by which time taxpayers must mandatorily integrate their systems with ZATCA’s (the Authority) systems by using an Application Programming Interface (API).

In accordance with ZATCA’s regulations, all the transactions that earlier required tax invoices to be issued must comply with and follow e-invoicing requirements:

  • Supplies of goods and services that are either subject to the standard VAT rate or zero rates;
  • Export of goods and services from the Kingdom;
  • Intra-GCC supplies in accordance with the Agreement, VAT law, and it’s Implementing Regulation;
  • Nominal supplies by the taxpayer in accordance with the Agreement, VAT, and Implementing Regulation; and
  • Any payments related to the supply of goods or services and received by the taxpayer before the actual supply.

The transactions for which notes are issued as per Article 40 and 54 of the VAT Implementing Regulation shall also have to comply with the latest regulation in the following instances:

  • Cancellation or suspension of the supplies after their occurrence, either wholly or partially
  • In case of essential change or amendment in the supply, which leads to the change of the VAT due; and
  • Amendment of the supply value, which is pre-agreed upon between the supplier and consumer, in case of goods or services refund.

Transactions that are not required to follow the regulations are:

  • Transactions with Exempted Supplies;
  • Any payments related to exempted supplies received by a taxpayer;
  • Supplies subject to VAT pursuant to Reverse Charge Mechanism; and
  • Import of goods to the Kingdom.

What changes should businesses observe from 4th December 2021?

During the transition phase, businesses will be required to adjust their accounting systems and internal processes to meet the e-invoicing requirements through an ‘e-invoice generation solution’. The ‘e-invoice generation solution’ will be considered as compliant after prior verification of its conformity to all specifications and requirements by the Authority, third party, or self-certified by the person subject to e-invoicing regulations.

Business entities and banks must ensure that their accounting system has enhanced capabilities both for VAT compliance and e-invoicing solution:

  • The compliant solution should be able to connect to an internet connection and integrate with external systems by using an Application Programming Interface (API). Taxpayers will be required to work with their IT team to ensure that technical requirements are met.
  • The e-invoices and associated notes must contain mandated fields as specified by ZATCA, which will help with integration.
  • Business entities should be able to generate e-invoices in XML format or PDF/A-3 format (with embedded XML) and share the same with customers.
  • The Authority shall create a Cryptographic stamp (an electronic stamp created via cryptographic algorithms to ensure the authenticity of origin and integrity of content) after receiving the e-invoices and electronic notes pursuant to the integration procedures starting from the date determined by the authority.
  • Businesses need to prepare themselves to share tax invoices or their associated notes that have been generated electronically in XML format or PDF/A-3 format (with embedded XML) in the same format of such invoice or note with customers.
  • Businesses should be able to export generated invoices and associated notes into an external archival system.

What should the compliant e-invoice generation solution be able to do?

  • The compliant solution must be able to generate invoices and their associated notes in the XML format or PDF/A-3 format (with embedded XML) as per the requirements of electronic invoice formats.
  • The compliant solution must be tamper-resistant and include a mechanism that prevents tampering and should reveal any tampering attempts that might occur by the user or any third party in accordance with the specifications and requirements specified by the Authority. The Authority has the power to verify the e-invoicing generation solution to the specifications and requirements.
  • The compliant solution must be able to protect the generated electronic invoices and electronic notes from any alteration or undetected deletion and contain some functionalities which enable the person subject to e-invoicing regulation to save electronic invoices and electronic notes and archive them in XML format without an Internet connection.
  • The compliant e-invoice generation solution must be able to generate a Universally Unique Identifier (UUID) in addition to the invoice sequential number, which identifies and distinguish each VAT Tax Invoice, Simplified Tax Invoice, and their associated notes in accordance with the specifications, requirements, and timelines. This shall be for each electronic invoice or electronic ote as per the requirements and timelines. UUID is a 128-bit number generated by an algorithm chosen to make it unlikely that the same identifier will be generated by anyone else.
  • The compliant solution, which is used for generating Simplified Tax Invoices and their associated notes, must be able to generate a Cryptographic Stamp for each electronic invoice or electronic note. Such cryptographic stamps must have an identifier as per the requirements and timelines.
  • The compliant solution must be able to generate a hash (an enciphered text obtained by applying a one-way algorithm upon data which prevents the return to the original data or amending or tampering with it) for each generated electronic invoice or electronic note within the sequence of the electronic invoices and electronic notes. The hash of the invoice is then embedded in the next invoice in the sequence. This hash is used to protect the sequence of Invoices from tampering, whether by deletion or replacement.
  • The compliant solution must be able to generate a QR code which is a type of matrix barcode, with a pattern of black and white squares that is machine readable by a QR code scanner or the camera of smart devices in order to enable basic validation of electronic invoices and electronic notes.
  • The compliant solution must have a tamper-resistant invoice counter that cannot be reset. The counter must increment for each generated invoice or associated note, and the compliant solution must record the value of this counter in each invoice or associated note. This counter is used to ensure that invoices cannot be deleted from the end of the invoice sequence without detection.

Will there be any fines or penalties for non-compliance?

Yes, all provisions related to tax invoices in the VAT Law are applicable to electronic invoices, including fines and penalties.

Further regulations relating to the generation of e-invoices shall be made available by ZATCA in the coming months.

Affiniax has collaborated with Pagero, a digital solution provider, to ensure all our clients are compliant with the forthcoming E-invoice mandate.

Not sure if these requirements apply to you? Read our blog on applicability, as well as other commonly asked questions, to learn more.

If you would like to know more about the E-Invoicing Requirements, please feel free to approach our team.

New E-Invoicing Regulations in the Kingdom of Saudi Arabia

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Mandatory E-Invoice in Saudi Arabia

New regulations have recently been issued by Saudi Arabia to mandate electronic invoicing (e-invoice) effective from December 4, 2021, for all registered entities and businesses. The Zakat, Tax and Customers Authority (ZATCA), formerly known as the General Authority of Zakat and Tax (GAZT), has published a framework about the implementation which focuses on increasing transparency and compliance with tax obligations, which, in turn, leads to high consumer protection.

Who does it apply to?

The new invoicing regulations are applicable to all taxable persons (excluding non-resident taxable persons) who are a resident in KSA. Any customers or third parties that issue a tax invoice on behalf of a taxable person who is a resident of the Kingdom shall also be required to comply with this regulation. Taxpayers who are not residents of KSA are excluded from these regulations.

What is the KSA e-invoicing regulation all about?

Taxpayers under the KSA e-invoicing regulation are expected to issue invoices and amendments (such as debit and credit notes) electronically for all their purchase and sale transactions (including exports which may be zero rated).

The taxpayer residents and business entities will have to comply with a standard electronic format and be prepared to issue, receive and store e-invoices in a particular electronic format with predefined data fields.

But firstly what is an e-invoice and electronic notes, and what will be the content?

An e-invoice is simply a tax invoice that is issued in an electronic format. Electronic notes comprise of debit and credit notes which shall also be issued in an electronic format. A handwritten or scanned invoice will henceforth not be considered an electronic invoice, even if they are sent digitally. Only e-invoices generated in the specified format are acceptable.

The terms, requirements and conditions applicable to tax invoices as per Article (53) of VAT Implementing Regulation will be determined at a later stage by ZATCA for a smooth transition.

Can I issue scanned copies or PDF documents for invoices?

No, scanned and PDF invoices will not be considered as an e-invoice. Invoices that are handwritten, Microsoft Word invoices and any unstructured invoice on a webpage or email will not be accepted.

Should a taxable person generate the e-invoices for sales outside the Kingdom (exports)?

Yes, it is mandatory for all taxable persons to issue and store the e-invoices starting from December 4, 2021, for all taxable supplies, whether it is subject to standard rate or zero rate for resident and non-resident consumers.

When will this be implemented?

ZATCA will be implementing e-invoicing in two stages. ZATCA issued their first e-invoicing regulations on December 4, 2020, by giving a period of 12 calendar months from the date of publication for businesses to start generating invoices.

Hence, the first phase of Generation shall commence from December 4, 2021, and it will be mandatory for businesses and entities (excluding non-resident taxable persons) to generate, issue and store electronic invoices and electronic notes, related to their processing and record keeping as well as any other third party issuing tax invoices on behalf of a taxable supplier.

From June 1, 2022, all taxable persons must integrate their internal systems with ZATCA’s system through an API (Application Programing Interface). The timelines for integration with the system and phases are yet to be announced.

Affiniax Partners has collaborated with Pagero, a digital solution provider to ensure all our clients are compliant with the forthcoming E-invoice mandate.

In case you would like to learn more about the E-Invoicing requirements mandated under the regulation, read our blog on the subject.

If you would like to know more about the E-Invoicing Regulations, please feel free to get in touch with our team.

Affiniax Partners collaborates with Pagero for KSA Compliance

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Saudi Arabia Business Advisors

Affiniax Partners is very pleased to announce it has collaborated with Pagero, a digital solution company with 20+ offices worldwide that has dedicated itself to the success of multiple conglomerates since its founding in 2009. Pagero is offering support to companies through the digitalisation of the accounts receivable and payables process; and distribution of electronic invoices in line with their ERP system. It provides access to an open, global, cloud-based network that makes on-boarding, connecting and compliance effortless.

The e-invoicing mandate in the Kingdom of Saudi Arabia, implemented from December 4 th 2021 (Phase 1), means that each invoice issued by the resident taxable person in KSA will be required to meet certain format specifications laid down under the law. The taxpayers are required to generate and archive invoices electronically according to the new content requirement. Under the implementation plan, ZATCA will be notifying taxpayers within 6 months’ before 1 st December 2023 (Phase 2) to connect with the invoicing platform.

Our collaboration will ensure that our KSA clients are compliant with the local laws of the country, implementing changes within their existing model where necessary. We continually seek new ways to better meet the needs of our clients by sharing ideas, training programs, and technical expertise. We look forward to being an active contributor in this digital transformation phase in the Kingdom of Saudi Arabia.

To know more about the project or the compliance requirements in KSA, please contact our Affiniax Partners team.

STANDARD OPERATING PROCEDURES

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“Why do we need a procedure or a process? What is so important about having set standards?”

This might be the most frequently thought of answer when someone refers to Standard Operating Procedures (SOPs).

But do you know what a SOP is?

SOPs are documented processes that organisations maintain to have consistency in all their service and product offering, thereby ensuring that work remains uninterrupted at the absence of a specific key employee(s).

At every organisation and level, it is very important for every employee to have clarity in their work process, identify their roles, responsibilities and accountabilities at each level. SOP’s help in adding the necessary foundation for most activities within an organization.

WHY SOP?

  1. Consistency – Consistency is required at every stage and for each and every product or service we deliver, starting from initiation, development, production and delivery. SOP’s clearly specify a step-by-step process for a job, ensuring quality in every work done and delivered.
  2. Clarity – Every employee will have clarity in their job roles and responsibilities resulting in increased productivity and decrease in probability of errors.
  3. Compliance –By having a set standards, we can ensure that your organisation’s standards for quality and consistency are met during every single delivery.
  4. Communication –Job related process and procedures shall be clearly communicated to the employees thereby reducing the risk of errors. Employees can directly refer to the SOP to understand how to get a work done.
  5. Time Saving– Documented procedures can reduce training time and can act as references for employees to work independently without support of superiors.
  6. Upgradation– Digitalisation and migration to new systems shall be made easier with SOPs as various meetings/discussions can be avoided to understand the process followed in the organisation.

 

If you would like to have a free consultation with our team to discuss, please reach out to sanjana@affiniax.com

How to Use your ISO 9001 Accreditation to Grow Your Business

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Why you should get your business ISO 9001-accredited

Whatever the reasons for seeking compliance and certification, many organisations fail to capitalise on the potential benefits that ISO 9001 accreditation can bring. These organisational benefits can include process improvements, reputation benefits, and cost savings, as well as ensuring consistency of product and delivering customer satisfaction.

MAKING THE MOST OF ISO 9001

The sooner an organisation realises that an ISO 9001 accreditation is actually a marketable tool, the sooner that organisation will be able to expand its business using that very accreditation as a foundation. The organisation should know that new markets are open to operate in that previously would have been closed, for example:

  • Ability to tender for local and national government contracts: These opportunities will increase due to most entry levels stipulating ISO 9001 accreditation. However, these contracts will not come looking for the organisation- your appropriate departments will need to investigate, register, and prepare the team for the bidding and presentation process ahead.
  • Ability to trade with larger businesses: Many blue-chip organisations simply refuse to trade with organisations that do not have ISO 9001 as a starting point. The organisation will now be qualified to seek associations and partnerships with larger operations showing that it cannot only provide added value to their supply chains but can use ISO 9001 accreditation as proof of its credibility and commitment to customer satisfaction.

USING ISO 9001 AS LEVERAGE IN BUSINESS

Presenting your organisation as an ambitious and capable partner can be challenging; but, using ISO 9001 principles, it is a task you can embrace. Whether on a face-to-face level or presenting at trade shows, or even recording video marketing presentations – which is a modern, but effective marketing tool – your organisation can promote the use of ISO 9001 quality management principles to advertise its qualities:

  • Customer Satisfaction – Your organisation can correctly claim that the desire to be accredited against ISO 9001 comes from the intrinsic company ethos, which is to provide unrivalled quality of product and service to the end user.
  • Customer Focus – One of the advantages your organisation can claim over larger conglomerates is better customer focus and service. A more timely and effective reaction to the customer and any problems can be seen as an excellent selling point, and utilising examples of its customer feedback and corrective action processes, your organisation can demonstrate an edge in this area.
  • Emphasize Your Operational Control – If you are in a service or manufacturing environment, almost nothing is more impressive than displaying operational control and consistency of product. Again, this is something that many larger organisations find more difficult to control, and whether providing non-conformity rates, displaying process documents, or offering facility visits, this is another area in which your organisation can claim advantage over the larger corporation.
  • Continual Improvement – The ability to improve and demonstrate to a potential customer is a valuable bargaining tool. Evidence of continual improvement can demonstrate a willingness to listen, take action, and improve – again, a quality that is often slower to be demonstrated within larger organisations where things often happen more slowly.

ADVERTISING ISO 9001 TO THE BENEFIT OF THE ORGANISATION

Your organisation should understand the rules of advertising its ISO 9001 accreditation by ensuring that the correct logo is used on your website and stationery, if desired. Look to join local trade organisations, which will allow you to network with new potential customers and partners. Consider throwing an open house to celebrate your ISO 9001 accreditation, where you can gain some new contacts, attract some media attention, and say “thanks” to everyone who has worked hard to gain accreditation (and who will need to continue to do so to maintain compliance and improve standards in the future). Use your ISO 9001 accreditation to leverage your organisation’s ability to move in higher circles, and use the elements suggested above to drive home the advantages a small organisation can have over a larger business. Use 9001 as the leverage to take you from being a smaller organisation to a bigger organisation. Nobody else will do it for you.

WHY IS ISO 9001 A GOOD IDEA FOR YOUR ORGANISATION?

The benefits of ISO 9001 are not overstated; companies large and small have gained great benefits from using this standard by discovering cost and efficiency savings. Here are the explanations of six main benefits and why they are important:

Improvement of your Credibility and Image – Because ISO 9001 is an internationally recognised standard, it has become the basis for creating a quality management system around the world, replacing many previously published requirements. When a company is looking for a supplier, it is often a requirement to have a QMS based on ISO 9001 in order to be considered. This is particularly the case if you are competing for public sector jobs in many countries. Attaining ISO 9001 certification can be a powerful marketing tool.

Improvement of Customer Satisfaction – One of the quality management principles that are the foundation of the ISO 9001 requirements is to improve customer satisfaction by planning for and striving to meet customer requirements. By improving your customer satisfaction, you will retain more repeat customers since happy and satisfied customers are the key to keeping customer loyalty. And such customers bring in additional revenues.

Better Process Integration – By looking at the overall process interactions through the process approach of ISO 9001, you will be able to more easily find improvements in efficiency and cost savings. This is done through eliminating the waste that can occur when processes are maintained without a view of the inefficiencies that can arise during process hand-off. The better process flow can also be used to drive efficiency towards fewer errors and resulting reworks, which can improve cost savings.

Improve your evidence for decision making – A second quality management principle of ISO 9001 is the need to use evidence-based decision making. By driving your decisions based on the evidence, rather than on “gut feelings,” you can be more focused on applying resources to the areas that will improve efficiency and increase cost savings with less trial and error to find the right decision. In addition, by monitoring the process you are improving, you will be able to see how much improvement has happened based on the data.

Create a continual improvement culture – Continual improvement is a third quality management principle of ISO 9001. By adopting this culture to improve your processes and organisational output, you will find efficiency and cost savings, including the use of systematic processes when problems occur in order to reduce the impact of the problem and increase the speed of recovery. By making this continual, improving year after year, the company can see continuing benefits from this.

Engagement of employees – Employees who are involved in the improvements of the processes they work with are happier and more engaged employees. Who better than the people working on the process to best identify the areas that need improvement, and to help to test and advance these improvements when they are implemented? Engaged employees are more productive and will help the company better improve and save, especially when they understand how the quality of the process depends on them.

If you want to know more about how ISO 9001 can help grow your business contact us on mail@affiniax.com or call on 04 425 6616.

How to Achieve continuous growth and improvement

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Grow your company using ISO systems and checks

Within today’s Quality Management Systems, ‘Continuous Improvement’ is one of the most important principles, especially within the ISO 9001:2015 Quality Management System.

It plays an important part in keeping the organisation competitive, and must be a permanent objective within the organisation.

In reality, history shows that many organisations go out of business simply because they are not able to improve as quickly as their competitors!

So, what is Continuous Improvement? It is defined as “a recurring activity to increase the ability to fulfil requirements.”

Within ISO 9001:2015, its focus is on increasing the ability to fulfil quality requirements. Improvement activities are similar to problem solving activities. The big difference is that improvement activities are planned and usually organised as part of a larger program, whereas problem solving is usually more reactive and unplanned.

WHAT DRIVES CONTINUAL IMPROVEMENT?

Continual improvement is driven by the objectives set by the Senior Management Team.

As a minimum, quality objectives should address:

  1. The improvement of internal efficiency
  2. Individual customer requirements
  3. The level of performance that your market sector expects

There is no requirement that the organisation should set objectives for improvement of all its processes at any one time. It would be unrealistic to expect an organisation to make progress in all potential improvements simultaneously.

Each improvement will require the commitment of resources, which should be prioritised by top management, especially if investment is required.

HOW DO YOU IDENTIFY SOURCES OF IMPROVEMENT OPPORTUNITIES?

Inputs for improvement opportunities are obtained from the following sources:

  • Customer satisfaction
  • Customer complaints and feedback
  • Market research and analysis
  • Inputs from employees, suppliers, and other interested parties
  • Internal and external audits of the quality system
  • Records of product or process non-conformances
  • Data from process and product characteristics and their trends

Opportunities for improvement may also be identified on a special project basis. The following are examples of such projects:

  • Non-value-added use of floor space
  • Excessive inspection/testing
  • Excessive handling and storage
  • Excessive failures and costs to quality
  • Machine set-up changeover times

The majority of organisations with a Quality Management System use some form of the PDCA cycle.

Where:

P – Plan

  • Resolve a problem: define, analyse, and identify root cause
  • Improve a process: change to create improvement

D – Do

  • Resolve a problem: devise a solution
  • Improve a process: encourage changes on a small scale to induce improvement

C – Check (Monitor)

  • Resolve a problem: confirm outcome and identify deviations and issues
  • Improve a process: investigate selected processes to verify if changes are working

A – Act

  • Resolve a problem: standardise solution, review and define next issue
  • Improve a process: to secure the greatest benefit from change

The PDCA cycle is a repetitive four-stage model used in business for the control and continual improvement of processes and products. The PDCA model is also known as the Deming circle/ cycle/ wheel. The Deming cycle, or PDCA Cycle consists of a logical sequence of the following four repetitive steps for continuous improvement and learning: Plan – Do – Check (Monitor) – Act.

If you want to know how to drive continual improvement in your company, please  contact mail@affiniax.com or call 04 425 6616 and we will work with you to show you how!

The Importance of Correctly Managing Your Team

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How to manage employees effectively using ISO Management standards

Many businesses, no matter what the size, forget their most important asset. Their staff! It’s not easy when you, as a business owner, CEO, or General Manager, are constantly trying to balance profit and loss, fight suppliers, or chase debtors to remember that there is a team below you waiting for leadership, decisions, and support.

Communication, as we all know, is key in any business. However, it is all too often overlooked when it comes to internal communications. Business leaders need information to make good, solid business decisions. So, they need accurate, timely information from their Heads of Departments (HoDs). These HoDs need to collect and collate the information required from their teams. But if the teams don’t know what information, in what format, when, and why, that information will be slow, possibly incomplete, or inaccurate.

A team is created by working together towards a common objective, supporting each other, and providing clear and consistent input to the next in line’s process. This requires leadership, knowledge, and support. Every member of a team is important. Every member of a team needs to know why they are important and feel important. A team needs developing, which means that each team member needs developing, not just within the business, but within the person.

The 3 main ISO management systems, all now in a new and improved format, help place the individual staff member, no matter what role, within the system. It helps business leaders to put in place those processes and procedures that will enable staff to feel part of the team, support them, develop them, and, in doing so, provide consistent, high quality, and safe services and products to your customers in order to meet or, better still, exceed your expectations for them.

If you want to know more about how ISO management systems can improve your company, please contact mail@affiniax.com or call 04 425 6616.

Affiniax Participates in Dubai Chamber Sustainability Week 2020

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How to create a healthy working environment

Affiniax Partners was one of the 51 participants of the Dubai Chamber Sustainability Week 2020 Campaign from 18th October – 5th November.

We actively organized sessions to create a healthy and happy atmosphere for our employees. We organized an in-house virtual Hatha Yoga session to kick off this campaign.

Yoga session was followed by the Breast Cancer Awareness webinar organized by Zulekha Hospital and Friends of Cancer Patients. The major highlight of this webinar was Awareness on Breast Cancer and the Importance of Early Detection.

We then organized Weave the People session where we discussed issues faced due to Work from Home (WFH) by engaging leaders, managers and employees in honest discussion, and involving them in generation of practical and permanent steps to overcome those issues.

We also participated in Stretch and Stabilize webinar for a brief discussion and practice on stretching by Yoga Acharya from ‘Pratimoksha‘ and an Intense HIIT training session of 30 minutes by the Wellness Coach of Oman Insurance.

We concluded this campaign by organizing the session on the topic- Mental and Emotional Wellbeing during WFH. We witnessed the highest participation in this session. We formed groups and discussed with our group members the 3 things EVERYONE can do to manage their mental wellbeing.

We checked the happiness rate of the participants through an anonymous post campaign survey. 67% of the employees said that they were Happy with the sessions and 33% of them were Very Happy with these sessions.

Categories HR

LIQUIDATIONS IN THE UNITED ARAB EMIRATES (PART 1)

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How Liquidations Work in UAE

Introduction

Liquidation can be defined as the winding up of a Company by selling off its assets to convert them into cash to pay off the firms unsecured creditors. The secured creditors take control of the respective pledged assets upon obtaining foreclosure orders. Any remaining amount is distributed among the shareholders in proportion to their shareholdings. It is an event that usually occurs when a company is insolvent, meaning it cannot pay its obligations when they come due.

Types of Liquidations

There are two types of liquidations in the United Arab Emirates.

  • Voluntary Liquidation

In case of voluntary liquidation, the owners or shareholders of the firm decide that to close and wind up the Company as they do not have enough funds to pay off their creditors and other liabilities.

  • Mandatory Liquidation

In case of mandatory liquidation, the liquidation order is put forward by the courts. It is not in the will of an owner or shareholders to liquidate their company. This usually occurs when a company fails to pay creditors multiple times. Because of this, creditors can file a request for the liquidation of a company.

Here the assets of the Company are distributed to the creditors and contributors based on the priority of their claims.

Roles and Duties of a Liquidator

A liquidator must be appointed in order to liquidate a Company in the UAE.

Below are 7 points that describe the role of a Liquidator.

  • The liquidator appointed by a Company in its liquidation stage shall represent the Company in any litigation that may occur.
  • The assets of the Company are sold by the liquidator in order to settle the debts of the Company.
  • Certain debt is considered a priority, and these are settled before other debt. This mainly includes outstanding employees’ salaries.
  • Once all debt has been settled, the remaining funds are distributed among the shareholders or the owner.
  • In case the funds generated from the sale of the Company’s assets are insufficient to pay off the debts, the deficit will be adjusted against the share capital of the shareholders.
  • The Statement of Affairs and Liquidation Report has to be prepared by the liquidator after conducting the necessary procedures.
  • The liquidator would also be responsible to request for the removal of the Company from the Commercial Register.

Documents required for Liquidation of a Company in the UAE

  • Copy of the license
  • Memorandum of Association
  • Shareholder’s Resolution to Liquidate the Company
  • Power of Attorney
  • Passport copies of all shareholders, along with Emirates ID’s
  • Application for deregistration
  • Statement of Affairs and Liquidation Report
  • Letter from Labour and Immigration department that there are no visas.

To learn more about liquidation procedures in the United Arab Emirates, read Liquidations in the United Arab Emirates (Part 2)

For more information, Email us at mail@affiniax.com

LIQUIDATIONS IN THE UNITED ARAB EMIRATES (PART 2)

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Liquidation in UAE (PART 2)

In my previous article, titled, Liquidations in the United Arab Emirates (Part 1), we came across the roles, and duties of a Liquidator, the necessary documents required, and the different types of Liquidations in the UAE.

We now take a look at the Procedures for Liquidation.

Procedures for Liquidation

Mainland Company

In the case of a mainland Company the following steps and documents are required for its liquidation:

  • Shareholders resolution confirming the liquidation of the Company. This would usually be in the form of the minutes of the meeting which is held by the shareholders in which they decide on the liquidation of the Company and appointment of the liquidators for the same.
  • An acceptance letter from the liquidators accepting their appointment.
  • Application for cancellation of the Company from the Department of Economic Development (DED)
  • Receive a liquidation certificate from the Department of Economic Development (DED) once the above steps are completed.
  • Once the liquidation certificate is received from the DED, the Company has to publish a notice of liquidation in two local newspapers.
  • After the notice has been published, there is a notice period of 45 days for the debtors to submit their claims (if any).
  • Once the notice period of 45 days is over, the Company must submit the following documents:
    • A declaration stating that all parties have no objection relating to the liquidation of the Company
    • Approval would be required from other government agencies for the cancellation of the Company’s license.
  • The Company must then cancel its firm card with the Ministry of Human Resources and Emiratisation
  • Cancellation of the foreign partner’s visas which are sponsored by the Company.
  • The last step is to pay the DED fee, and the company will be successfully liquidated.

Free Zone Company

In the case of a free zone Company, the procedure is slightly different and involves the following steps:

  • Every free zone in the UAE has a portal. The Company intending to liquidate must notify the free zone by applying on the member portal.
  • Once they have notified the respective free zone, they need to submit their application for termination of the Company.
  • After submission of the application, they need to publish the notice in a local newspaper.
  • The free zone will file a final Company termination letter, and the Company will be liquidated.
  • A letter is to be obtained from the Labor and Immigration Department that there are no visas.

Bank Accounts, Employee Contracts, Utilities, and Other Services on Liquidation

In all cases, the Company will need to cancel the employees’ visas and their work permits. Dubai portal explains that this requires coordination with both Department of Naturalisation and Residency and the Ministry of Human Resources and Emiratisation.

As per the UAE’s Labor Law, employers are required to give their employees a two-month paid notice period before terminating their contracts. In many cases, employees can keep their residency visas until the company’s trade license runs out. Then, the company needs to cancel utilities and telecommunication services and close all its bank accounts. Collect a NOC from the utilities providing company and bank closure confirmation for processing the closure.

Company liquidation can be a complicated process. However, we can assist you in case you decide to liquidate. Our procedures for preparing the required documents and completing the process shall help you liquidate your Company smoothly.

To learn more about liquidation procedures in the United Arab Emirates, read Liquidations in the United Arab Emirates (Part 1)

For more information, Email us at mail@affiniax.com

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