Have you decided to shut down your business operations in Dubai? If yes, you should cancel your company’s trade license with the relevant authorities to protect yourself from penalties. If you do not, your business lies under tax and legal obligations. Therefore, you have to fulfill all the obligations even after the closure of your business.
Are you also unsure about what steps to take and how much it costs to cancel your trade license in Dubai? In this article, we provide you with the complete details regarding the cancellation of your business’s trade license in Dubai.
We explain the reasons, the step-by-step process, the required documents, and the costs involved, and address common challenges businesses face during the cancellation of a trade license in Dubai. Our experts at Now Consultant help you cancel your trade license without any risk of penalties and legal repercussions.
Why Is It Necessary to Cancel a Trade License In Dubai?
When a business decides to discontinue its operations in Dubai, canceling the trade license is mandatory according to Federal Law No. 2 of 2015 on Commercial Companies. The following points highlight the necessity to cancel a trade license in Dubai:
Keep Legal Compliance
If your business operations have ceased, keeping an active, unused trade license can make you legally liable. Unused licenses accumulate fines over time, creating unnecessary financial burdens. Therefore, canceling a trade license in Dubai is not just an optional formality; it is mandatory.
Protect Against Penalties
If you fail to properly cancel your trade license, it can lead to heavy penalties. By formally canceling your trade license, you protect yourself from the penalties due to unpaid tax returns and fees for license renewals.
Maintain Reputation
If you neglect to cancel your trade license and clear any associated debts, your business could be blacklisted in Dubai’s governmental and legal systems. This could make it difficult for you to open a new business or access financial services in the future.
Reasons for Trade License Cancellation In Dubai:
There are various reasons for trade license cancellation for businesses in Dubai as listed below:
Business Closure:
Business closure is one of the most common reasons for trade license cancellation. When a company decides to permanently shut down its operations, it must cancel its trade license to avoid ongoing legal obligations and unnecessary costs. Entrepreneurs make this decision due to shifts in market conditions or exploring new opportunities.
Restructuring or Reorganization:
Sometimes, companies undergo restructuring or reorganization. This could involve merging with another company, changing the operational framework, or relocating to a more strategic location. In such cases, canceling the trade license is necessary to comply with the regulatory requirements.
Change Business Activity:
A company may also cancel its trade license if it changes its fundamental business activities. This could happen if the business model is no longer sustainable or if the company decides to operate in a completely different industry.
Shift Operations:
Companies that decide to move their operations to another emirate or country must cancel their trade license in Dubai. This could be due to better market opportunities, lower operational costs, or a strategic relocation that benefits the business.
Non-compliance or Legal Issues:
If a business fails to comply with local regulations or faces ongoing legal issues, it may opt to cancel its trade license. This could be due to regulatory violations, unresolved disputes, or penalties for non-compliance.
Financial Challenges:
If businesses fail to overcome the financial challenges, it may also drive a company to cancel its trade license. If a business cannot sustain the cost of renewing its license or if it is struggling with operational expenses, the owners may choose to cancel the license rather than burden themselves with more costs.
Trade License Cancellation Cost In Dubai:
When closing a company in Dubai, specific charges are involved in canceling a trade license. Businesses are required to pay these costs when planning to end their operations officially.
License Cancellation Fee
The trade license cancellation fee in UAE is AED 1,020. This fee is charged for the administrative procedures needed to cancel the trade license.
Company Dissolution Fee
The company dissolution fee in UAE is AED 2,520. This fee covers the official process of closing the company, which includes documentation, debt settlements, and completing the legal requirements.
The cancellation cost may vary if your business has any outstanding dues or fines or requires any clearance from specific authorities.
Documents Required For Trade License Cancellation in UAE
To cancel a trade license in Dubai without any delay, you need to prepare and submit the following documents to the relevant authorities:
Passport Copies: Copies of your passport and the passports of all partners.
Resolution of Shareholder: Agreement from all shareholders to cancel the trade license.
Visa Copies: Copies of the visas of all shareholders and employees involved.
Trade License Copy: A copy of the existing trade license that needs to be canceled.
Published Liquidation Notice: Newspaper copies showing the published liquidation notice with no third-party objection.
Immigration Establishment Card: The original Immigration Establishment Card issued to the company.
Company Stamp and Letterhead: The original company stamp and official letterhead for formal use.
Power of Attorney: A valid power of attorney if one is applicable to your case.
Memorandum of Association (MOA): A copy of the MOA with all changes and amendments.
Customs Clearance Certificate: A clearance letter from Customs confirming no pending obligations.
Bank No Liability Certificate: A certificate from your bank confirming the closure of the company’s account and no outstanding dues.
How To Cancel Your Trade License In Dubai – Step-by-Step Procedure:
The following is the step-by-step process to cancel a trade license in Dubai:
Step 1: Company Resolution
The first step is to prepare and approve a resolution from all the partners or shareholders confirming the decision to cancel the company. This resolution acts as proof that all parties agree to close the business. Once prepared, it needs to be notarized and included in the cancellation documents.
Step 2: Get Initial Approval
After finalizing the resolution, you need to apply for initial approval from the Department of Economic Development (DED) or Free Zone Authority. This approval allows you to officially start the cancellation process.
Step 3: Publish Liquidation Notice
Once the initial approval is received from the relevant authorities, you must publish a liquidation notice in two local newspapers, one in Arabic and one in English. This notice informs the public and potential creditors about the company’s closure. You are required to wait 45 days after publication to allow time for any objections.
Step 4: Clear Company Dues
During the 45-day waiting period, you must settle all the company’s financial obligations. This includes clearing outstanding debts, paying employee dues, closing your bank account, and obtaining a bank no-liability certificate.
Step 5: Get Clearance Certificates
In this step, you need to obtain clearance letters from all relevant authorities. Depending on your business type, these may include MOHRE, Dubai Municipality, Dubai Customs, and others. These certificates confirm there are no pending liabilities or violations against your company.
Step 6: Prepare Liquidation Report
If your company is undergoing liquidation, you must prepare a liquidation report. This report serves as an official confirmation of the company’s financial closure.
Step 7: Final Submission to DED
In this step, you gather all the required documents as listed above and submit them to the DED or Free Zone Authority for final approval. Once approved, your trade license will be officially canceled.
Step 8: Cancel Establishment Card
Following the license cancellation, you must cancel the company’s establishment card from the General Directorate of Residency and Foreigners Affairs (GDRFA). This step is necessary to complete the company’s closure for immigration records.
Step 9: Cancel All Visas
In the final step, you must cancel all visas issued under the company’s sponsorship, including employees and partners. Only after this final step will your company be considered fully and legally closed.
It would be difficult for you to complete the process while meeting all the above requirements; therefore, it is better to appoint an expert at Now Consultant to complete the trade license application process on your behalf.
Common Challenges In UAE Trade License Cancellation:
The trade license cancellation process in Dubai can pose several challenges for businesses. Some of the common challenges are given below:
Unpaid Company Debts:
One of the most common challenges is dealing with unpaid debts or financial obligations. All company dues, loans, and payments must be cleared before starting the cancellation. Any pending payments can cause delays or even legal troubles during the cancellation process.
Multiple Shareholders Involvement:
If the company has several partners or shareholders, coordinating with all of them can slow things down. Every partner must agree to cancel the license, and all documents must be signed properly. Lack of clear communication among shareholders can make the process more complicated.
Delays in Government Approvals:
You need to get clearance from different government departments, which can be time-consuming if your paperwork is incomplete. Some authorities might have extra requirements depending on your business activity.
Employee-Related Issues:
If you have employees under the company, you must cancel all their visas and settle any pending dues. Handling employee clearances, especially in companies with many workers, can be difficult and may cause delays if not managed properly.
Free Zone Regulations:
If your business is registered in a Free Zone, you may face additional steps to adhere to the Free Zone regulation compared to mainland companies. Each Free Zone has its own specific rules for trade license cancellation.
FAQs:
How Long Does It Take To Cancel a Trade license In Dubai?
The estimated time to cancel a trade license in Dubai is 40 to 60 days, depending on getting approval from the relevant authorities and preparing the required documents.
Can I Cancel a Trade License If I Have Outstanding Debts Or Liabilities?
No, you can not cancel your trade license if your business has any outstanding debts and liabilities. You need to clear all the debts and pay liabilities before starting the trade license cancellation application.
Do I Need To Cancel Visas Before Canceling The Trade License?
Yes, all visas linked to the company must be canceled with the trade license cancellation. The visa cancellation is part of trade license cancellation. The company has to approach the General Directorate of Residency and Foreigners Affairs (GDRFA) for visa cancellation.
What Happens If I Don’t Cancel My Dubai Trade License?
If you do not cancel the trade license, your business remains liable for renewal fees and compliance requirements even if it is no longer operational. The unsettled financial obligations lead to penalties, legal consequences, and restrictions on future business activities in Dubai.
Can I Reactivate a Canceled Trade License In The Future?
A canceled trade license cannot be reactivated. To restart business operations, a new trade license must be obtained by fulfilling the latest legal and regulatory requirements.
Why Should I Hire a Consultant To Cancel My Trade License?
A consultant completes the trade license cancellation process on your behalf by handling documentation, ensuring compliance, and avoiding unnecessary delays. This helps businesses close operations smoothly and prevents future legal or financial issues.
How We Can Help You?
If you want to cancel your trade license in Dubai, you have to overcome all the above challenges and meet the regulatory requirements. By hiring experts at Now Expert Tax Consultants, you can overcome these challenges and easily complete the cancellation process. We specialize in providing expert assistance throughout the trade license cancellation process, ensuring all legal requirements are met efficiently and cost-effectively.
