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Why UAE?

UAE is the 30th largest economy in the world and 2nd in the Middle East and North Africa. The UAE has an open economy with a high per capita income and a sizeable annual trade surplus. With Abu Dhabi and Dubai as its dual financial centres, the UAE has long commanded economic superiority in the GCC.

The United Arab Emirates - UAE is in the Middle East, bordering the Gulf of Oman and the Arabian Gulf between Oman and Saudi Arabia.

Population
population
9,205,651
Currency
population
Arab Emirate Dirham (AED)
GNI Per Capita
population
US$ 36,040
Region
population
Middle East & North Africa
Political Overview
population
Federal, Presidential & Absolute Monarchy

Fiscal Advantages

  • No exchange control
  • Personal income tax, not imposed
  • Corporate income tax, not levied
  • VAT not imposed, as of now
  • Taxation on dividends, capital gains, stamp duty and inheritance tax, not levied
  • Gratuity payment offered to foreign employees at the end of their service


Regulatory Advantages

  • UAE has liberal trade regimes in the Gulf region attracting strong capital flows from across the region
  • Enormous opportunities through economic diversification in various financial sectors
  • Strong financial sector and a stable political system
  • Tax neutral & 100% ownership in free trade zones, subject to a few limitations
  • Favourable tax environment for certain industries


Limitations

  • A foreign investor wishing to do business in UAE and not in the free zone, needs to find a UAE national partner owning 51% of the business
  • UAE does not follow English common law jurisdiction
  • Too many laws can get complex and confusing
  • Companies established in the free trade zones are strictly restricted from doing business within UAE, outside of free trade zone

Company Formation

In a non-Freezone area, various forms of businesses are:

  • Sole proprietorship
  • Commercial Agencies
  • Entities under Commercial Companies Laws (Federal Law of 8 of 1984)
    • General partnerships
    • Limited partnerships
    • Joint participation company
    • Partnership limited with shares
    • Public joint stock company
    • Private joint stock company
    • Limited liability company
    • Branch of a foreign company


A LLC is formed with a minimum of 2 to a maximum of 50 individuals. The minimum capital requirement varies with each Emirate. Partners in a LLC will have more flexibility in making decisions on factors like dissolution, dividend payments and conversions. Partners in a LLC can determine the adequate capital requirements for establishing their company, according to the amended UAE Commercial Companies Law.

An extension of a foreign parent company is a branch, which is wholly owned by its parent company and there are no requirements for UAE nationals to be equity partners. A branch can be set up in the wider Emirate with appropriate licensing from the Department of Economic Development and an approval from the Ministry of Economy.

Free trade zones – are tax neutral zones and are 100% foreign ownership. There are about 30 freezones in UAE. They have their own rules and regulations and are customised to suit the industry specifics. It provides you with the option of establishing either a company or a branch. The time consumption to establish a company in freezone is lesser comparatively. Incorporation of companies can vary between 4 to 6 weeks as per the zone.

There are 3 types of company solutions - Freezone, Onshore & Offshore in UAE.

Freezones allow 100% foreign ownership and have no taxes - usually guaranteed for 15 or 50 years. Each freezone has its own requirements and laws & regulations.

For trading in the UAE, popular freezones are:

  1. Dubai Multi Commodities Centre (DMCC)
  2. Dubai Airport Free Zone (DAFZA)
  3. Sharjah Airport International Free Zone (SAIF Zone)
  4. Hamriyah Free Zone
  5. Ras Al Khaimah Investment Authority (RAKIA)
  6. Ajman Free Zone Authority
  7. Jebel Ali Free Zone 


The Dubai Multi Commodities Centre (DMCC)

DMCC is the strategic goal of the Dubai Government in order to establish a commodity market place in Dubai. The DMCC was launched on April 24th 2002 by a decree from the Government of Dubai. The DMCC offers a unique opportunity for participants in a wide range of metals and commodities industries. It provides facilities that bring together the gold trade, the diamond trade (housing a Diamond Exchange), and trading in other selected commodities.

Forms of company in DMCC:

  • As a branch of a foreign company - no minimum capital required
  • As a Free Zone Company (DMCCO) - minimum share capital is AED 200,000


Dubai Airport Free Zone (DAFZA)

The Government of Dubai wholly owns DAFZA. It is the only airport oriented Free Zone in Dubai, and is located within the boundary of Dubai International Airport. DAFZA is an ideal location for high-tech/IT products, luxury items, jewellery, light industry and activities related to the aviation industry.

Forms of Company in DAFZA:

  • As a branch of a foreign company - no minimum capital required
  • As a branch of a UAE company - no minimum capital required
  • As a Free Zone Company (FZC) - minimum share capital is AED 500,000
  • Free Zone Establishment (FZE) - minimum share capital is AED 1,000,000


Sharjah Airport International Free Zone (SAIF Zone)

SAIF Zone is in the Emirate of Sharjah, the industrial powerhouse of UAE. It accommodates major companies from the IT Sector, consumer goods sector, media, manufacturing houses and lots more. It is the only emirate with seaports on the East & West coasts.

Forms of Company in SAIF Zone

  • As a branch of a foreign company - no minimum capital required
  • As a branch of a UAE company - no minimum capital required
  • As a Free Zone Company (FZCO) - minimum share capital is AED 150,000 or USD equivalent
  • Free Zone Establishment (FZE) - minimum share capital is AED 150,000 or USD equivalent


Hamriyah Free Zone

Hamriyah is situated in the Emirate of Sharjah. It offers an investor friendly zone with 100% ownership, exemptions from commercial taxes, repatriations of capitals and profits.

Forms of Company in Hamriyah

  • As a branch of a foreign company - no minimum capital required
  • As a branch of a UAE company - no minimum capital required
  • As a Free Zone Company (FZCO) - minimum share capital is AED 150,000
  • As a Free Zone Establishment (FZE) - minimum share capital is AED 150,000


Ras Al Khaimah Investment Authority Free Zone (RAK-IA)

RAKIA offers Business towers, commercial complexes, corporate offices, warehouses, industrial lands and labour accommodation. Approval from RAKIA for a clients project is mandatory. Appropriate licences are issued depending on the sector to which the project belongs to - Industrial, trading, general trading, commercial, consulting or services and media licence.

Entities registered under RAKIA:

  • Establishment
  • Limited Liability Company
  • Foreign or Local Branch

RAKIA promises simpler and quicker investment opportunities that enhance the business to flourish and grow accordingly. RAKIA is a facility provider and also offers advisory services on investments and equity participation on selective projects.


Ajman Free Zone

It is strategically placed catering to both eastern and western markets. It offers total exemption from import and export duties and 20 years land contract that is renewable for another 20 years guaranteeing 40 years tax and customs free operations.

Forms of Company in Ajman Free Zone

  • As a branch of a foreign / UAE company - no minimum capital required
  • As a Free Zone Company (FZCO) - minimum share capital is US$ 50,000
  • As a Free Zone Establishment (FZE) - minimum share capital is US$ 50,000


Jebel Ali Free Zone

JAFZA offers business centres, ready to use offices; warehouses, factories and infrastructure ready plots. It offers 100% foreign ownership, no corporate taxes levied for 50 years, concession on renewal. No restrictions on currency, foreign talent or employees.

Forms of Company in JAFZA

  • Free Zone Company
  • Free Zone Establishment
  • Branch of a Company


UAE Onshore (Local) Companies

The United Arab Emirates Company Law No.8 of 1984 was issued and implemented in 1993. The law states that, UAE nationals should own at least 51% of all private and public shareholding firms and limited liability firms.


UAE Offshore Companies

Offshore companies may obtain favours from a few tax treaties obtained by the UAE. RAK free trade zone and RAKIA offer an International Business Company (IBC) regime, popularly known as RAK Offshore Company. It suits perfectly for businesses that do not require a local office and a passive investment activity. 

Some of the activities of an offshore company are holding shares in global, local or freezone firms, holding intellectual property, trading activities outside UAE etc. 

The Jebel Ali Free Zone Offshore Companies Regulations 2003 is the constitutional framework that governs the incorporation and on-going governance for JAFZA companies. Regulations of JAFZA are constituted such that they provide accessibility and competence of global offshore locations coupled with supreme standards. The legal system of a free zone is altered and unique to each from that of companies operating outside the zone. With appropriate licencing, companies can do business anywhere in UAE. 

The procedures and cost for incorporating an establishment depends on the Free Zones you choose and the type of your activity. 100% ownership is offered to foreign investors in free zones which is otherwise a 49% & 51% proposition between the foreign investor and the UAE national in UAE. Offices, factories, warehouses are readily available. A JAFZA offshore company allows holding of any assets including property ownership in Dubai. 

Legislation in Dubai has been amended since 1st January 2011, with respect to the registration of real property rights by companies incorporated outside UAE (generically referred as “offshore” companies). Only companies registered as JAFZA offshore entities became eligible to register Dubai property with the Dubai Lands Department.

The most favoured form of company formation by foreign investors is either the Limited Liability Company or Branches. According to the UAE Commercial Companies Law, the ownership is divided between the foreign investor and the UAE national as 49% & 51% respectively.

If a company suffers loss that accounts for more than 50% of its share capital, then the company may either consider recapitalising or dissolving the company, as per amendments made in the UAE Commercial Companies Law. 

Incorporation process of an LLC takes about 8 to 10 weeks, due to a number of legal documentation procedures.

  • Free zone application form
  • Passport copy
  • Visa copy
  • Business Plan
  • Bank statements (supporting adequate capital)
  • No objection certificate form sponsor (for UAE residents)

Taxation, Laws & Regulations

Personal tax is not levied on individuals working in UAE. 

However, a social security regime is applicable, 17.5%, paid by the employees who are GCC nationals. The employee pays 5% and the employer pays the remainder of 12.5%. 

This regime may differ in each Emirate. No such payment is levied on expatriates. They are entitled to a gratuity payment at the end of their service. This benefit is not applicable for UAE national employees.

Free trade zones have their regulations and offer tax neutrality anywhere between 15 to 50 years for companies and their employees.

Presently, corporate tax is not imposed in UAE. Tax is levied based on the Emirate the company is established in. Corporate income tax is levied on oil & gas companies, financial sectors like foreign banks having operations in the Emirate. 

Branches of foreign banks are taxed at rates agreed with the ruler of the Emirate in which they operate, generally at a flat rate of 20%. 

Value Added Tax (VAT) is not imposed but may be implemented in the near future (2016).

Companies and branches that are located outside free trade zones need to file annual financial statements with the Ministry of Commerce. Companies established in the free zone need to file their accounts to the authorities within that zone. 

Companies and Branches need to audit accounts locally and file it with their respective Emirates or free zones during their annual licence renewal filing process. An annual fee has to be paid as per the type of company and their activities and licence. 

Currently, no foreign exchange control restrictions are applicable.

Immigration & Visa Requirements

New multiple entry visas have been introduced for students, medical tourists and business visitors. The revised visa fee structures for some are:

  • Employment Visa (public sector) – AED 200
  • Employment Visa (private sector, free zones, investors) – AED 250
  • Multiple entry work visa – AED 2,100
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