Feasibility Studies by Shokr Auditing Building Profitable and Compliant Business Ventures in the UAE

Feasibility Studies by Shokr Auditing: Building Profitable and Compliant Business Ventures in the UAE

Prepared by: Mohamed Shokr for Auditing and Accounting – Senior UAE Auditors, Tax Advisors, and Compliance Consultants

Introduction: The Strategic Importance of Feasibility Studies in the UAE’s Regulatory Environment

Launching a new business venture in the United Arab Emirates (UAE) has always demanded careful financial planning, rigorous compliance, and precise market insight. Recent regulatory developments, including the implementation of Federal Decree–Law No. 47 of 2022 on Corporate Tax and evolving guidelines from the Federal Tax Authority (FTA), have made feasibility studies not just best practice, but a necessity.

As the UAE cements its status as a global trade and financial centre, feasibility assessment is no longer limited to profitability analyses. Now, every new business idea must withstand the scrutiny of modern tax compliance, International Financial Reporting Standards (IFRS), risk controls, and ongoing FTA audits.

This expert advisory briefing, crafted by Shokr Auditing’s senior auditors and compliance consultants, outlines how structured feasibility studies can transform business concepts into profitable, tax-compliant, and legally robust ventures. Throughout, we reference the latest UAE legal requirements, highlight key risks, and provide actionable steps for executives, CFOs, and compliance officers dedicated to sustainable growth and regulatory alignment.

Table of Contents

• Feasibility Studies: The UAE Business and Regulatory Context
• Key UAE Regulatory Frameworks Governing Feasibility and Compliance
• Structuring a Feasibility Study: Shokr Auditing’s Advisory Methodology
• Integrating Corporate Tax, VAT, and FTA Compliance into Feasibility Analysis
• Risk Analysis: Implications of Non-Compliance and Mitigation Strategies
• Practical Case Studies: Shokr’s Customised Approach in Action
• Step-by-Step Compliance Roadmap for UAE Businesses
• Conclusion: Key Takeaways & Strategic Recommendations

Feasibility Studies: The UAE Business and Regulatory Context

The UAE’s rapid economic transformation has prompted an equally dynamic regulatory environment. Modern feasibility studies are expected to address not just market research or financial projections, but comprehensive compliance with an expanding web of federal laws affecting corporate tax, anti-money laundering, VAT, and overall business transparency.

With Federal Decree–Law No. 47 of 2022 (Corporate Tax Law) entering into effect, and ongoing FTA guidance revisions, investors and entrepreneurs must demonstrate proactive due diligence from the ideation phase onward. The Ministry of Economy’s emphasis on robust business governance and FTA guidance on registration, tax calculation, and IFRS-based reporting further reinforce the necessity of structured feasibility analysis.

A professionally developed feasibility study is thus the bedrock upon which a business’s legal, financial, and operational structures are built—equipping founders, CFOs, and Boards of Directors with clear visibility and control from day one.

Key UAE Regulatory Frameworks Governing Feasibility and Compliance

1. Federal Decree–Law No. 47 of 2022 on Corporate Tax

Overview: First introduced in June 2023, the UAE’s corporate tax law now mandates a 9% corporate tax on taxable income exceeding AED 375,000. This paradigm shift impacts business planning, entity selection, tax group structuring, and multinational operations.

Consultancy Insight: All business models must be stress-tested for tax exposure, eligibility for exemptions, and the potential impact on post-tax returns—especially for startups, group structures, or businesses with cross-border operations.

2. Federal Decree–Law No. 8 of 2017 on Value Added Tax (VAT)

The 5% VAT regime affects business cost structures, working capital, and cash flow planning. The FTA’s regular updates on VAT registration thresholds, compliance controls, and documentation requirements mean every feasibility study must address VAT readiness from inception.

3. Cabinet Decision No. 97 of 2023: Corporate Tax Executive Regulations

This Cabinet Decision sets out practical compliance obligations on tax registration, deductible expenses, tax grouping, and foreign tax relief. It requires technical financial planning to ensure projected profitability, compliance with deductions, and precise entity registration.

4. IFRS Implementation and Financial Reporting

As part of global best practice and local regulatory requirements, all feasibility projections must be built on IFRS-compliant assumptions, ensuring investor and regulator confidence.

Previous vs. Updated FTA Regulations: Key Comparisons

Structuring a Feasibility Study: Shokr Auditing’s Advisory Methodology

Holistic Approach: Beyond Financial Projections

A Shokr Auditing feasibility study systematically integrates regulatory, financial, market, and operational perspectives. Our staged methodology includes:

• Regulatory Screening: Early stage assessment of applicable federal and emirate-level laws (Corporate Tax, VAT, ESR, AML/CFT, ownership controls).
• Financial Viability Analysis: IFRS-based revenue modeling, cost structuring, net profit estimation, and post-tax earnings sensitivity analysis.
• Compliance Process Mapping: Outlining mandatory registration steps (FTA, Ministry of Economy), tax grouping eligibility, record-keeping formats, and periodic audit touchpoints.
• Risk & Scenario Analysis: Quantifying impact of regulatory changes, penalty risks, and market volatility, with robust mitigation plans.
• Actionable Roadmap: Delivering step-by-step actions for licensing, registrations, ongoing compliance, and monitoring.

Technical Example – Structuring for Tax Efficiency

Scenario: A client plans to launch a technology services company in Dubai.
Shokr Auditing’s study evaluates whether forming a free zone LLC or onshore LLC results in lower tax exposure—factoring in free zone tax incentives under F.D. Law 47/2022 and obligations to maintain real substance. Tax group options are mapped, with compliance impacts on VAT registration and FTA reporting cycles. The model is underpinned by projected IFRS financials, sensitivity analysis on currency and input costs, and risk factors relating to regulatory change.

Integrating Corporate Tax, VAT, and FTA Compliance into Feasibility Analysis

Relevant UAE Requirements

• All new businesses must register with the FTA (per FTA Circular 1 of 2023) and update tax records annually.
• Corporate income above AED 375,000 is taxable at 9% (Federal Decree–Law No. 47 of 2022).
• VAT applies if turnover exceeds AED 375,000 in any 12-month period (Decree–Law No. 8 of 2017).
• Economic Substance and IFRS compliance are now standard regulator expectations.

Step-by-Step Integration Process

1. Assess Taxable Activities: Map each business activity to relevant tax treatment and FTA registration obligations.
2. Quantify Tax Liabilities: Estimate and model corporate tax and VAT impact on all scenarios and sensitivity cases.
3. Document Control Framework: Set up IFRS-compliant chart of accounts, VAT documentation, tax record retention (minimum 5 years as per Cabinet Decision No. 36 of 2017).
4. Plan for FTA Audits: Systematise financial and tax processes to withstand scrutiny, including digital/real-time reporting if applicable.

FTA Compliance: Past Versus Current Requirements

Risk Analysis: Implications of Non-Compliance and Mitigation Strategies

Non-Compliance Risks in the UAE Regulatory Regime

• Tax Penalties: FTA penalty for late or incorrect returns can reach up to AED 50,000 per violation, plus criminal liability for deliberate evasion (FTA Administrative Penalties Guide 2023).
• License Suspension: Ministry of Economy may suspend trade licenses for persistent tax, ESR, or AML infractions.
• Reputational Damage: Public listing of companies with major compliance failures.
• Operational Disruption: Account freezing or director disqualification.

Mitigation via Shokr Auditing’s Governance Controls

1. Embed FTA-mandated compliance checkpoints from feasibility stage onwards.
2. Deploy periodic internal tax and audit reviews to bridge gaps before FTA audit cycles.
3. Leverage digital financial solutions for real-time compliance dashboards and document retention.
4. Engage in ongoing staff training under Ministry of Economy and FTA certified programs.

Practical Case Studies: Shokr’s Customised Approach in Action

Case Study 1: Manufacturing Setup in Abu Dhabi Industrial Zone

Problem: A group company considering entry into the industrial space needed to ensure post-tax returns justified capital investment, and that multi-entity group VAT and Corporate Tax registrations were compliant.
Shokr Approach: Our feasibility study modelled pre-and post-tax cash flows under FTA regulations, established optimal entity structuring to maximize available tax reliefs, and set up compliance calendars for all group companies per Cabinet Decision No. 97 of 2023. Result: Optimised tax grouping, full FTA registration, and streamlined periodic submissions, reducing compliance costs by 18% in year one.

Case Study 2: Startup Entry – Dubai Technology Free Zone

Problem: A tech entrepreneur wanted to know whether free zone registration delivers net profit advantage compared to onshore setup, and how to manage future expansions for corporate tax.

Shokr Approach: By integrating free zone regime tax incentives (under Law 47/2022) with projected group activity, the study highlighted the benefit for the current scope, but mapped out triggers for losing free zone preference if mainland sales expanded. The client received a tailored roadmap for phased expansion and maintained 100% compliance through our monitoring.

Step-by-Step Compliance Roadmap for UAE Businesses

For Owners, CFOs, and Auditors

1. Begin every new venture with a full feasibility study integrating financial projections, regulatory mapping, and FTA/VAT planning per UAE regulations.
2. Register entities and all business activities with FTA and relevant regulatory authorities on time; track changing deadlines (FTA, MOE portals).
3. Maintain financial records (minimum 5 years), IFRS-based accounts, and VAT/corporate tax evidence files for audit readiness.
4. Regularly assess and update compliance controls to align with new Cabinet Decisions and Ministry of Finance circulars.
5. Engage with licensed advisors such as Shokr Auditing for continuous compliance review, risk assessment, and audit-preparedness training.

Conclusion: Key Takeaways & Strategic Recommendations

With corporate tax implementation, heightened VAT regulation, and ever-tighter FTA oversight, feasibility studies have become the pivotal step for sustainable, compliant business establishment and growth in the UAE. Recent laws—including Federal Decree–Law No. 47 of 2022 and Cabinet Decision No. 97 of 2023—demand rigorous tax planning, IFRS accounting, and ongoing compliance oversight from the conception of every new business idea.

Shokr Auditing’s end-to-end feasibility study process offers more than just financial models: we deliver regulatory foresight, practical risk mitigation, and actionable roadmaps tailored to each business’s context. For CFOs, business owners, and compliance leaders determined to thrive under the UAE’s modern regulatory landscape, aligning feasibility, financial strategy, and compliance is no longer optional—it is a business imperative.

By partnering with Shokr Auditing, you ensure every venture is built on a foundation of legal clarity, financial transparency, and unwavering confidence—ready for profitable growth and lasting success within the evolving UAE framework.

References:

• UAE Federal Decree–Law No. 47 of 2022 on Taxation of Corporations and Businesses
• Federal Decree–Law No. 8 of 2017 on Value Added Tax (VAT) and FTA Executive Regulations
• Cabinet Decision No. 97 of 2023 (Corporate Tax)
• UAE Federal Tax Authority (FTA) official guidelines and penalty schedules (2023–2025)
• UAE Ministry of Economy and Ministry of Finance regulatory circulars
• UAE Government Portal: Business, Taxation, and Audit Regulatory Updates
• IFRS standards as adopted by the UAE