A Comprehensive Guide to UBOs in the UAE

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Guide to UBOs in the UAE

In a few years, the United Arab Emirates (UAE) has taken several significant steps to increase transparency and decrease financial crime within the country. The introduction and regulation of the Ultimate Beneficial Owner (UBO) of business operating in this country is central to these efforts. Understanding UBOs in the UAE is essential to conduct your business. 

Do you want to know everything about the Ultimate Beneficial Owner (UBO)? If yes, you must keep reading this article. Today, we will discuss every essential element of UBO in the UAE. 


 

Ultimate Beneficial Owner (UBO) - Overview

The Ultimate Beneficial Owner (UBO) is a person who ultimately owns or controls a company in the United Arab Emirates (UAE), including your company. This person is the final receipt of the benefits of ownership, even if the company’s shares are in someone else name. The UBO reaps the most from ownership or control over the company. Also, its influence goes beyond the immediate shareholder or legal owner. 

Suppose you hold a substantial portion of a share in a company that has an enormous ownership stake in another. In that case, you will be considered as the Ultimate Beneficial Owner (UBO) in the second company. When you have understood who UBO is, you notice the complete image of who controls or benefits through the corporate ownership layer. 

 How to determine the Ultimate Beneficial Owner (UBO)?

We are sure that you might be currently wondering about how you can determine the UBO in your company. Article 5 of Cabinet Decision No. 109/2023 outlines the criteria that you can consider to determine the Ultimate Beneficial Owner (UBO) for a legal entity. According to the provision:

-   The beneficial owner is the person who ultimately owns or controls the legal entity (your business), either directly or indirectly having or owning 25 per cent or more of its capital, or possessing the right to vote in the entity by 25 per cent or extra. This includes ownership via a chain of control or other means, like having the authority in order to appoint or dismiss Directors.
-    The registrar considers the complexities of the legal entity’s structure when determining the UBO.
-    You can also identify the Beneficial Owner through numerous legal entities or different arrangements. 
-    If numerous people share control or ownership over a percentage of your entity’s capital, they will all be considered owners or controllers of your legal entity.
-    If there is no clear person with ultimate control or confusion arises about the controlling person, the individual performing control over other means can be a Beneficial Owner.
-    If no specific UBO is identified, the Beneficial Owner will become the natural person serving as the Senior Management Officer. 


Why is UBO essential in the UAE?


The Ultimate Beneficial Owner (UBO) in the UAE plays an essential role in preventing the misuse of corporate structure. The UBO concept has become integral to the UAE’s regulatory efforts, focusing on anti-money laundering and increasing the corporate sector's transparency. 

The United Arab Emirates (UAE) is taking proactive steps against financial crime by pinpointing the people who ultimately benefit from financial transactions. These people also uphold the reputation of the UAE as a reliable business hub.

Exemptions and special cases of UBO

Specific business entities are exempt from keeping detailed Ultimately Beneficial Owner (UBO) information. Exemptions to the UBO are given for publicly traded entities, subsidiaries of such entities, and those owned by the Federal or local government. In addition, entities in the DIFC or ADGM are not subject to these obligations. 

Entities owned by a company listed on the recognized stock exchange, subject to the appropriate transparency regarding their Beneficial Owners, or a company completely owned by such a listed entity, are also exempt from keeping detailed UBO information. 

Non-compliance with these rules may lead to numerous penalties. If you want to know about penalties, you should keep reading. You should notify every change in the UBO information and maintain confidentiality, with penalties falling for doing so. 

 Regulatory Framework and Compliance Measure

Cabinet Decision No. 109/2023 outlines the regulatory framework for identifying and documenting the Real Beneficiary for companies like yours registered within the United Arab Emirates (UAE). The decision mandates the establishment and maintaining a register including detailed information about the Real Beneficiary, ensuring transparency and accountability in the structure of the corporate ownership. 

According to Article 3(1) of Cabinet Decision No. 132/2023, the registrar may suspend the commercial license and end commercial establishment in case of repeated violation.  Moreover, Cabinet Decision No. 132/2023 supplements these efforts by imposing administrative charges or fees on entities found violating the Real Beneficiary Procedures outlined in Cabinet Decision No. 109/2023.  Administrative penalties have been established to ensure Compliance with UBO regulations, with fines ranging from AED 20,000* to AED 100,000* for numerous violations.

For example, suppose you fail to register the information related to the usufruct of the Real Beneficiary accurately. In that case, you must incur a fine of AED 20,000*, which can be increased to AED 40,000* for repeated offenses. Similarly, if you neglect to create the Real Beneficiary Register and maintain relevant data, you will get a fine of AED 50,000, which can be increased to AED 100,000* for subsequent breaches of this rule. 

Additional penalties are imposed on different violations, such as giving required data to the registrar or disclosing complex structures of ownership. These penalties are associated with warnings for taking required actions within the deadline. Therefore, you should ensure to be Compliance with UBO regulations to avoid these penalties. 


Registration and Licensing

The cabinet decision authorizes the maintenance and establishment of registers containing detailed information about the Real Beneficiary for all registered companies in the United Arab Emirates (UAE). All businesses must disclose relevant information during the registration and licensing process, ensuring accountability and transparency in the corporate ownership structure. 

How can Flyingcolour Tax Consultants help you?

The Ultimate Beneficial Owner (UBO) is an individual who controls or owns the legal entity in the UAE. However, registering your UBO might be complex for many people. Flyingcolour Tax Consultants can help you register your UBO in the UAE. In addition, our experts can guide you about other crucial aspects of UBO.

To learn more about Guide to UBOs in the UAE, book a free consultation with one of the Flyingcolour team advisors, simply call +971 50 5585305 or send WhatsApp messages to +971 4 4542366. you can also drop an email to info (at) flyingcolour (dot) com.

This article was published on 13-06-2024. The information provided in the article is based on the policies and rules applicable at the time of writing it. Talk to one of our consultants for any recent updates or changes.

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