Many German entrepreneurs assume that an inactive company in the United Arab Emirates (UAE) will “take care of itself”.
This is legally incorrect – and often costly in practice.
As long as a UAE company is not formally liquidated and deregistered, it continues to exist – with all legal and financial consequences.
I. Risks under UAE Law
Even with factual inactivity, statutory obligations continue to apply, particularly under the Corporate Tax Law (Federal Decree-Law No. 47 of 2022) and the recently tightened deregistration regulations (including Federal Decree-Laws No. 16 and 17 of 2025).
The typical consequences:
- Ongoing License Fees (Trade License Renewal Obligations)
- Violations of Corporate Tax Filing & Registration – even with zero turnover (fines from the Federal Tax Authority)
- Violations of Deregistration Obligations (deadlines, notifications, sanctions)
- Visa Risks: Overstay fines, entry bans for improperly cancelled Residence Permits
- Bank-side Measures: Account freezes, KYC escalations
- Blacklisting by Authorities / Free Zones: No new licenses or visas until full clearance
Conclusion UAE: The company does not “lie dormant” – it continuously generates compliance risks.
II. Tax Risks in Germany
The situation becomes particularly critical from a German perspective.
A UAE company does not disappear from German tax law simply because it is no longer factually used abroad.
As long as no formal liquidation is proven, it will continue to be considered for tax purposes.
Key Problem Areas:
- Increased duty to cooperate according to § 90 para. 2 AO
- The tax office demands detailed proof of status, activity, and termination
- Burden of proof lies entirely with the taxpayer
- Risk of shifting management to Germany (§ 10 AO)
- especially in the absence of substance abroad
- Consequence: unlimited corporate income tax liability in Germany
- Resulting from this:
- Corporate income tax + possibly trade tax
- Retroactive taxation for several years
- Interest burden (§ 233a AO)
- Criminal tax risks (§ 370 AO) for omitted declarations
- significant consulting and procedural costs
Conclusion Germany: A “forgotten” UAE company can quickly become a tax problem.
III. Clean Solution: Orderly Liquidation
The only legally secure approach is the formal winding-up and deregistration of the company.
The process regularly includes:
- Shareholder resolution for liquidation
- Appointment of a liquidator
- Cancellation / revocation of all visas
- Deregistration with the Federal Tax Authority (FTA)
- Publication and creditor period (usually 45 days)
- Audit / Clearance
- Issuance of the Certificate of Deregistration
Duration:
For simple structures, typically 2–3 months.
It can also be carried out from abroad by power of attorney.
IV. Conclusion
An inactive UAE company is not a “dead vehicle”, but an ongoing legal risk – both under UAE law and German tax law.
Those who do not act proactively risk unnecessary costs, tax burdens, and in extreme cases, criminal consequences.
