Choosing Between Keeping UAE Company Dormant or Close It

Maintaining a dormant company in the UAE offers flexibility with ongoing compliance, while full closure provides finality but involves higher upfront costs and procedural complexity. Choosing the right path depends on strategic intent, budget, and future market plans.

When strategic objectives evolve or market conditions shift, UAE-based companies frequently confront a pivotal choice: formally exit the market through liquidation or maintain a dormant status on the corporate register. With the federal Corporate Tax (CT) regime now in force and mandatory annual audits extending to non-trading entities, each path entails significant regulatory and financial considerations.

Liquidation of a mainland or Free Zone company offers finality but demands court resolutions, multiple government clearances and substantial one-off fees—often stretching the process over several months. Conversely, dormancy preserves licences, banking relationships and the option for rapid reactivation, while still requiring license renewals, audit submissions and corporate tax filings.

This analysis unpacks both approaches across key dimensions—regulatory milestones, visa and banking requirements, cost structures and timelines—drawing on practical case insights. A clear understanding of these alternatives equips decision-makers with the foresight needed to balance flexibility, cost efficiency and compliance in the evolving UAE business landscape.

Why this decision matters

Regulatory landscape

The UAE’s federal CT regime, effective for financial years beginning on or after 1 June 2023, imposes a 9 percent rate on taxable profits above AED 375,000 (US$102,09), with specific carve-outs for small businesses and qualifying Free Zone entities.

From 1 January 2025, large multinationals meeting the OECD two-pillar thresholds will also face a 15 percent Domestic Minimum Top-up Tax on profits, further elevating compliance demands.

Financial stakes
Non-compliance carries substantial penalties. An administrative fine of AED 10,000 (US$2,722) is levied for late CT registration; although a conditional waiver may apply if the first return is filed within seven months of the period end, failure to meet this deadline exposes companies to the full penalty.

Moreover, missed audit submissions can attract additional fines, reputational risk and heightened scrutiny in subsequent years.

Strategic considerations

Deciding between dormancy and closure hinges on balancing three core factors:

• Market re-entry: Dormancy preserves licences, trade names and regulatory approvals, enabling rapid reinstatement of operations without undergoing a fresh incorporation.
• Brand preservation: Maintaining a legal entity (even if non-trading) retains goodwill with clients, suppliers and local partners, avoiding the disruption of dissolving and re-establishing business relationships.
• Keeping the bank account – opening the bank account in the UAE is time consuming process subject to detailed KYC by the bank that may take months. Under the dormant status, a legal entity can keep the bank account active.
• Cost control: While closure eliminates ongoing renewal fees, the process incurs one-off liquidation, audit and government charges. Dormancy concentrates predictable annual costs (such as licence renewals, audit fees and CT filings) often resulting in lower aggregate expenditure over a multi-year hiatus.

Understanding these regulatory, financial and strategic dimensions is essential for charting a compliant, cost-efficient path forward in the evolving UAE business environment.

Option 1: Keeping the company dormant

Definition and legal status of dormancy

In the UAE, a dormant company refers to a legally registered entity that has ceased trading or generating income but remains active on the corporate registry. Such companies retain their licences, legal identity, and bank accounts, but do not engage in any business activity. Dormancy is not formally defined under the UAE Companies Law; however, the concept has practical relevance across mainland and Free Zone jurisdictions in the context of ongoing compliance obligations, particularly under the CT framework introduced in 2023.

Key compliance obligations for dormant companies in the UAE

Dormancy reduces operational costs but does not exempt companies from core compliance requirements. The following obligations apply to dormant entities:

Trade licence renewal

Licensing authorities across the UAE, both mainland and Free Zone, require annual trade licence renewals regardless of revenue status. Failure to renew a licence within the stipulated deadline can result in fines, blacklisting, or even administrative deregistration by the licensing authority.

• Mainland Dubai (DED): Annual renewal is mandatory, with associated fees based on business activity type.
• Free Zones (such as DMCC, DIFC, RAKEZ): Dormant status is typically accepted informally, but renewal remains compulsory and often linked to lease contracts, number of activities, visas or flexi-desk agreements.

Annual audit and CT filing

The introduction of the UAE Corporate Tax regime mandates annual tax return submission for all legal entities, including those that are dormant or loss-making.

The UAE Federal Tax Authority (FTA) imposes a penalty of AED 10,000 (US$2,722) for late CT registration, and additional fines for delayed or incorrect filings.

VAT filing is mandatory if the company reached the threshold in either revenue or expenses (around USD 100,000). If the company has no local sales or dormant but reached the threshold, filing a zero return is a legal requirement (not a discretionary act).

Mainland and Free zone entities must appoint a registered auditor and submit audited financials in line with applicable authority guidelines.

Financial reporting and bookkeeping

Even without income, dormant companies are required to maintain proper accounting records and financial statements in accordance with Article 54 of the Corporate Tax Law and prevailing bookkeeping standards.

The FTA expects a complete audit trail that can verify the absence of activity, including zeroed-out trial balances and nil expense movements. The purpose is to prevent unreported or misclassified income and ensure that the dormant status is not being misused.

Visa and bank signatory requirements

Bank accounts remain active for dormant companies only if the authorised signatories maintain valid UAE residency visas. In the absence of valid visas, banks may suspend account access, impose administrative holds, or initiate closure procedures.

Visas must be renewed or formally cancelled—even for employees no longer in the UAE. Cancellation from outside the country often incurs additional costs and coordination with the General Directorate of Residency and Foreigners Affairs (GDRFA).

Practical challenges of keeping a company dormiant in the UAE

While maintaining a dormant company offers strategic benefits, several logistical and procedural challenges can arise.

Visa management

A dormant company may still have active visa allocations. Renewals typically require the physical presence of the visa holder in the UAE, medical test updates, and submission of valid lease contracts and Emirates ID renewals.

If a shareholder or manager resides outside the country, cancelling the visa remotely can cost upwards of AED 850 (US$231.42) per person in mainland, in addition to administrative delays and coordination with PRO services. The POA should be also issued to the trusted provider to handle the process on your behalf. The cancellation from the outside can be only done after 6 months of the expiry date and it is not possible to enter the country during this period.

Bank account continuity and physical presence

Most UAE banks require periodic face-to-face revalidation of account signatories, especially for entities with low or no transactional activity. Dormant companies without an active local representative may face difficulties in retaining banking relationships. In some cases, banks may require a fresh round of KYC documentation and in-person appointments to maintain account status. However, the bank account will remain active and it will eliminate the need to go through the new KYC again.

Bank account closure procedures also necessitate local action.  The signatories of the bank account must visit the bank in person for the closure. Only after the balance has been transferred to the shareholder, the process of the liquidation can begin, which adds another layer of complexity for shareholders abroad.

Estimated costs: Mainland case example

A recent advisory engagement for a mainland UAE company evaluating dormancy versus closure provides a clear illustration of the associated costs (assumption that company has non-regulated scope of activities with 2 visas):

These figures vary depending on company size, jurisdiction, and service provider, but reflect the typical financial footprint of maintaining dormant status in the UAE mainland.

Option 2: Closing the company

Overview of the liquidation process

Voluntary liquidation in the UAE represents a formal process through which a company ceases operations, settles outstanding liabilities, and is permanently removed from the commercial registry. Whether based in the mainland or within a Free Zone, the procedure is governed by company law and relevant licensing authority regulations. While closure offers regulatory finality and eliminates future compliance obligations, it also entails a multi-phase process involving statutory filings, financial audits, and government clearances.

In practice, liquidation is often pursued by companies that have permanently exited the UAE market, exhausted operational viability, or prefer to avoid future administrative costs associated with dormancy. However, the timeline and complexity of the procedure require careful planning and local presence.

Mandatory steps

The liquidation pathway includes several critical steps that differ slightly between mainland and Free Zone jurisdictions but generally follow a standard compliance sequence:

Board or shareholder resolution

The liquidation process begins with the passage of a formal board or shareholder resolution approving the closure:

• Mainland companies must notarize this resolution at the Dubai Courts.
• Free Zone companies typically submit resolutions through the Free Zone authority’s digital or in-person channels.

This step confirms the company’s intent to wind up and authorizes a liquidator to manage the process.

Statutory and liquidation audits

Companies must submit audited financial statements for the final financial year and appoint a licensed liquidator to prepare a liquidation report. This report verifies the company’s financial standing, confirms settlement of all liabilities, and supports deregistration filings with licensing authorities.

In some Free Zones, a final audit suffices, while others (including mainland Dubai) require both statutory and liquidation-specific audits.

Regulatory clearances

Before final deregistration, companies must obtain No Objection Certificates (NOCs) from various government bodies. These typically include:

• Immigration and labour authorities: Confirming all visas are cancelled and labour contracts terminated.
• Utilities and telecom providers: Settling any outstanding bills (such as, DEWA, Etisalat).
• FTA: Final clearance confirming that all VAT and CT returns have been filed and dues paid.
• Leasing entities and landlords: Releasing office space and cancelling Ejari contracts where applicable.

The process also involves publishing a public notice of the company’s intent to liquidate (in the case of mainland firms), typically for a 45-day period, to allow creditors to raise any objections.

Bank account closure and funds repatriation

Once all regulatory clearances are secured, the company must formally close its bank accounts. This requires:

• Presence of an authorized signatory with valid UAE visa; and
• Submission of final audited financials and deregistration letter from the licensing authority.

If signatories are abroad, banks may issue a manager’s cheque for the remaining balance, which must be collected and cashed within the UAE. Alternatively, power of attorney arrangements may be necessary to authorize a local agent.

Practical hurdles

Physical presence requirements

While much of the UAE’s business infrastructure is digitalized, certain liquidation steps still require physical presence. For mainland entities, shareholders may need to appear before the Dubai Court to notarize resolutions if the shareholder is the individual(s). Similarly, banks request in-person visits from signatories to authorize account closures or amendments.

Shareholders residing abroad may need to assign a local proxy through a notarized and legalized Power of Attorney (POA), which can add time and cost to the process.

Processing timelines and delays

The full liquidation cycle typically spans two to four months, depending on the complexity of the company’s operations, number of employees, tax exposure, and responsiveness of government agencies. Delays may occur if:

• Final audits are incomplete or disputed;
• Bank account documentation is inconsistent;
• Visa or labour cancellations are not properly processed; and
• Tax clearance is delayed by pending FTA assessments.

In the interim, licensing penalties may accrue if the company’s trade licence expires during the process, especially on the mainland.

Company dormancy vs. closure in the UAE: Comparative overview

The decision between dormancy and full liquidation is rarely straightforward. It depends on strategic priorities, budget flexibility, future market intentions, and compliance appetite. The following table outlines key differences:

Conclusion

Navigating the choice between maintaining a dormant company and initiating full closure in the UAE involves balancing compliance obligations, operational flexibility, and long-term strategic intent.

Dormancy allows businesses to preserve market presence and corporate infrastructure at a lower annual cost, albeit with continuing obligations such as licence renewals, audits, and tax filings.

Closure, while more administratively intensive and costlier upfront, offers a clean exit with no future liabilities.

As a general framework:

• Dormancy is suited to entities seeking to retain optionality, minimize disruption, or plan for future re-entry.
• Closure is preferable for those with no intention of returning to the market or wishing to eliminate all residual compliance burdens.

To move forward with either option, early engagement with experienced corporate service providers is essential. Advisors can help assess eligibility, coordinate government filings, and ensure that either route is executed with full regulatory compliance, avoiding unnecessary costs or penalties down the line.

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