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Set up a business in the UAE

The United Arab Emirates offers unlimited opportunities for the business; the local infrastructure meets the highest international standards, which contributes to the efficiency and quality of service. Businesses in Dubai do not pay direct taxes on corporate profits or personal income; customs duties are low at 4% with many exemptions, businesses can avail of 100% repatriation of capital and profits. There are no foreign exchange controls, trade quotas or barriers. A stable exchange rate exists between the US Dollar and the UAE Dirham (US$1.00=AED 3.678). Liberal visa policies permit easy import of expatriate labour of various skill levels from almost anywhere in the world.

In order to set up a business in the UAE the following options can be used:

  1. Incorporation of a Free Zone Company: allows 100% foreign company ownership; 100% repatriation of capital and profits; 100% corporate, personal income tax exemptions; exemption from all import and export duties; inexpensive workforce and easy recruitment procedures: office + residency visas; however it is restricted to trade directly with UAE market.
  2. Incorporation of an offshore company: 100% tax exemption; 100% foreign ownership; protection against lawsuit judgments; Extreme discretion and confidentiality of the International Company Registry; ability to maintain corporate bank accounts (multiple current accounts) in the UAE; Ability to own e.g. real estate property in the UAE, patents, trademarks; ability to tailor the company; no annual audit report needs to be submitted to the authorities; no tax haven stigma as the UAE is on the white list of OECD; however neither office nor resident visas will be available. Mainly used to restructure a business, to protect assets or simply develop an international presence for a business.
  3. Incorporation of a mainland company

    3.1.The Federal Company Law prescribes a total local equity of not less than 51% in any commercial company and defines seven categories of business organization, which can be established in the UAE:

    3.1.1 General Partnership - formed by two or more partners who will be jointly liable to the extent of all their assets for the company liabilities.

    3.1.2 Simple Limited Partnership - formed by one or more general partners liable for the company liabilities to the extent of all their assets, and one or more limited partners liable for the company liabilities to the extent of their respective shares in the capital only.

    3.1.3 Joint Venture - a company concluded between two or more partners to share the profits or losses of one or more commercial businesses being performed by one of the partners in his own name. Local equity participation must be at least 51%.

    3.1.4 Public Joint Stock - any company whose capital is divided into equal value negotiable shares shall be considered a public join stock company and a partner therein shall only be liable to the extent of his share in the capital.

    3.1.5 Private Joint Stock - a number of not less than three founder members may incorporate amongst them a private joint stock company whose shares are not offered for public subscription.

    3.1.6 Share Partnerships - a company formed by general partners who are jointly liable to the extent of all their assets for the company liabilities and participating partners who are liable only to the extent of their shares in the capital.

    3.1.7 Limited Liability Company (LLC) can be formed by a minimum of two and a maximum of 50 persons whose liability is limited to their shares in the Company’s capital. Most Companies with expatriate partners have opted for this LLC, due to the fact that this is the only option which will give maximum legal ownership.

    In general, as we have mentioned above, all mainland companies are governed by the Federal Law No. 8 of 1984, as amended by Federal Law No. 13 of 1988 the ‘Commercial Companies Law’ and its bylaws. This law stipulates that a total equity of not less than 51% should be held by a U.A.E. national in any commercial company except in the following:

    - Where the law requires 100% local ownership
    - Businesses set up in the Free Zone
    - for the 100% ownership by GCC
    - for GCC companies in partnership with U.A.E. nationals
    - for branches or a representative office *
    - In professional companies *

    *U.A.E. national service agent is required

    Local partner is one of the core issues to start your business through the mainland company in the UAE.

    In general the local partner has no rights on the business management, turnover or profits. However, you have to pay an ongoing fee to the partner. Sometimes, an individual local partner of your company may demand a percentage of the profit in addition to the fee. Plus the signatures which you may require from the local partner, for example, to register the company’s new employees or to receive some additional permission to start business and, when such signature is missing as you cannot reach you local partner physically, can complicate your business. That is why we suggest to have a proper agreement with a local partner and to mention all the necessary authorizations in the power of attorney in order to avoid such consequences in the future.

    From the other side in terms of the corporate partnership when the local company is your partner it will be basically much easier to proceed with the formalities. The probability that the company will interfere in your business requesting the percentage of the profit instead of the stable agreed amount will be minimized. One of the most important attribute of a corporate shareholder/partner is that it has continuous life. A legal entity does not expire upon the death of its shareholders, directors or officers.

    With regards to the mentioned above, we always recommend to evaluate your preferences before you decide to sign the MOA with your local partner.

3.2.Besides commercial companies that are established for the sole purpose of making profit, the UAE Civil Transactions Law (Federal Law 5 of 1985) provides for the setting up of "Civil Companies". Such companies can be formed for any object or activity that is not considered to be "commercial" by the concerned licensing authorities. Civil companies are formed for the sole purpose of beneficial utilization and development of the personal expertise and or skills of the proprietor. Business entities most suitable for being classified and licensed as civil companies are those that are engaged in offering some kind of services. There is no restriction of 51% local equity like LLC. However, local service agent is required.

3.3.Individual Establishment also might be used as a legal form to perform a business in the UAE. It is an establishment owned by a sole proprietor to operate an economic activity (commercial, professional, industrial, agricultural or real property). An establishment’s financial liability is linked to the proprietor who shall be responsible for all its financial obligations.

  1. Branch and RO of a foreign company in the UAE.

The Commercial Companies Law covers the formation and regulation of branches and representative offices of foreign companies in the UAE and stipulates that they may be 100% foreign owned provided a local service agent is appointed.

4.1 A branch office, legally regarded as part of its parent company, is a full-fledged business, permitted to perform contracts or conduct other activities as specified in its license. A branch office may only be engaged in activities similar to those of its parent company. Each branch can have several sub-branches, with the same licensing and registration procedures followed for the branches/sub-branches.

4.2 A representative office, on the other hand, is limited to promoting its parent company’s activities, i.e. to gather information and soliciting orders and projects to be performed by the company’s head office. Representative offices are also limited in the number of employees.

Thus, to set up a company in the UAE and to relocate your existing business, properties, assets over are crucial steps toward your unlimited opportunities to increase your wealth and to enjoy the highest standards of life.