Dormant or Dissolved? Making the Right Call for Your UAE Company

 When it comes to business setup in the UAE, the initial excitement often overshadows what happens later, when circumstances change, markets shift, and strategic priorities evolve. Many business owners eventually face a crucial question: should you keep your company dormant or close it completely? 

Both options carry implications for compliance, costs, and future flexibility. The right choice depends on your business strategy, budget, and market outlook. Here, we break down the key differences, regulatory requirements, and practical considerations, so you can make an informed decision. 

- The New Compliance Landscape in the UAE 

The UAE’s federal Corporate Tax (CT) regime, effective from 1 June 2023, introduced a 9% tax on taxable profits exceeding AED 375,000 (USD 102,090), with certain exemptions for small businesses and qualifying Free Zone entities. 

From January 2025, large multinationals will also face a 15% Domestic Minimum Top-up Tax under OECD rules, increasing compliance demands even further. 

Importantly, even non-trading or dormant companies are subject to corporate tax registration, return filing, and—often—annual audits. Failing to comply can lead to steep penalties, including AED 10,000 (USD 2,722) for late CT registration. 

This evolving environment means that whether you keep your company or shut it down, you need to understand your obligations. 

- Option 1: Keeping Your Company Dormant 

A dormant company in the UAE is still legally registered but has ceased trading or generating revenue. While the UAE Companies Law doesn’t formally define “dormant status,” both mainland and Free Zone jurisdictions recognize the practical scenario of a non-operational but compliant entity. 

1. Advantages of Dormancy 

  • Market Re-entry: Retains your licence, trade name, and approvals, making it easy to restart operations. 
  • Brand Preservation: Maintains goodwill with clients and partners, avoiding the disruption of closure. 
  • Bank Account Continuity: Keeps your existing UAE bank account active—saving you from the lengthy and KYC-heavy process of opening a new one. 

2. Ongoing Compliance for Dormant Companies 

Dormancy reduces operational costs but does not remove compliance obligations: 

  • Trade Licence Renewal: Annual renewal fees still apply. 
  • Annual Audit & Corporate Tax Filing: Required for all entities, even if inactive. 
  • VAT Filing: If you meet the registration threshold, zero returns must be filed. 
  • Bookkeeping: Maintain accounting records in compliance with Article 54 of the Corporate Tax Law. 
  • Visa & Bank Signatory Management: Active signatories must hold valid UAE visas to keep banking access. 

 
3. Typical Costs for Dormancy 

For a mainland company with two visas, expect: 

  • Licence renewal: AED 8,000–10,000 + service fees 
  • Bookkeeping: AED 1,000/month 
  • Annual audit & tax filing: ~AED 5,000 
    Total (excluding visas): ~AED 25,000/year 

- Option 2: Closing Your Company 

Liquidation in the UAE is the formal process of winding up your company, settling liabilities, and deregistering with authorities. This can apply to both mainland and Free Zone businesses. 

1. Advantages of Closure 

  • Finality: No more compliance costs or obligations. 
  • Clean Exit: Removes the entity from all government and tax records. 

 
2. Liquidation Steps 

  1. Board/Shareholder Resolution – Notarized in Dubai Courts (mainland) or submitted to Free Zone authority. 
  1. Statutory & Liquidation Audits – Final audited financials and a liquidation report from a licensed liquidator. 
  1. Regulatory Clearances – NOCs from immigration, labour, utilities, FTA, and landlords. 
  1. Public Notice – Mainland companies must publish intent to liquidate for 45 days. 
  1. Bank Account Closure – Signatories must be physically present to close accounts and transfer balances. 

 
3. Challenges with Closure 

  • Physical Presence: Certain steps require in-person appearances or a notarized Power of Attorney. 
  • Timeline: Typically 2–4 months, but delays are common if documents or clearances are incomplete. 
  • Costs: One-off liquidation expenses, including audits and government fees, can exceed AED 30,000. 

 
- Which Option Should You Choose? 

The decision between keeping your company dormant or closing it comes down to three main factors: 

  1. Future Market Plans – If you might re-enter the UAE market, dormancy keeps your setup intact. 
  1. Cost Management – Dormancy spreads costs annually; closure concentrates them upfront. 
  1. Administrative Burden – Closure ends all obligations; dormancy requires ongoing compliance. 

 
- Why Professional Advice Matters? 

Whether you’re considering dormancy or liquidation, engaging a corporate service provider is critical. Experienced advisors offering business setup services in the UAE can: 

  • Assess cost-benefit based on your business model 
  • Handle government filings and clearances 
  • Ensure compliance with the UAE’s Corporate Tax regime 
  • Coordinate with auditors, banks, and immigration 

This is especially valuable if you’re based overseas and cannot be physically present for certain steps. 

The Right Choice 

Deciding between dormancy and closure is not just about numbers; it’s about strategy, compliance, and future opportunity. 

If you value optionality, brand presence, and the ability to restart quickly, dormancy is your friend. If you’re leaving the UAE for good and want to eliminate all ongoing obligations, closure is the cleaner route. 

Either way, the UAE’s evolving regulatory environment means you can’t afford to overlook the details. The right partner in business setup in Dubai or across the Emirates can help you navigate the process smoothly, avoid penalties, and keep your business interests protected. 

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