The United Arab Emirates (UAE) is one of the most prosperous countries in the world. It is known for its loyalty to foreign investors and an open policy of conducting international business.
The UAE consists of seven emirates – Abu Dhabi, Dubai, Sharjah, Ajman, Umm al-Qaywayn, Fujairah, and Ras al-Khaimah. Each of them has its procedures for starting a company. Although there are general federal laws in the country, each emirate has different additional rules and regulations for starting a business.
In each emirate, there are various options for forming a company – it can be a local (resident, offshore) or international offshore company on the territory of a free economic zone (FEZ), as well as a business outside the FEZ with the participation of a local sponsor or agent.
The choice of a free trade zone and the choice of the Emirates may depend on several factors, among them:
- The legal form of the registered company;
- The focus and scale of your business;
- Requirements for location and infrastructure in place;
- Your potential business partners.
For the correct choice, you must have an assured knowledge of local legislation and business practices. Assessing existing opportunities and choosing strategic goals for your business will provide a solid foundation for building a successful business and protecting your business and material interests.
Advantages of doing business in the UAE:
Doing business in the free zones of the UAE has a lot of advantages:
- 100% ownership of shares by expatriates without the involvement of local agents;
- No currency restrictions;
- Capital and profit can be repatriated;
- Exemption from corporate, personal, or capital gains taxes;
- Duty-free import of goods, in case the goods are not supplied to the local market;
- Excellent infrastructure and communications;
- A wide range of activities;
- Simplified procedures for starting a business: all formalities are usually resolved by the FEZ authorities, eliminating the need to apply to various government departments on their own;
- There are no restrictions on the hiring of foreigners;
Resident visas are available.
It is also worth noting that companies in the UAE and free zones can obtain a certificate of tax resident status from the UAE Ministry of Finance. Such a certificate is usually requested when there are double taxation treaties between your country and the UAE. This certificate simplifies the tax filing procedure in your country. You should consult with a tax attorney before applying for this certificate.
Licensing of companies in the Emirates
The license is the first legal document based on which the company operates. A license of a registered company is issued by the administration of the economic zone or the municipal authorities of the Emirates. By the types of activities carried out, licenses can be of the following types:
- Production license;
- Trade license;
- Commercial license;
- Professional license.
Establishing a local company in the UAE
If the company is focused to participate in government tenders and conclude contracts with local companies in the UAE, it is most beneficial to create a resident (local, offshore) company. There are three main types of offshore companies in the UAE outside the free trade zones for legal entities: limited liability company, branch/representative office, and professional company.
A limited liability company is the most common organizational and legal form of a company outside free zones among non-residents of the UAE. This is the only option that assumes the maximum ownership of the company for expatriates in the UAE – 49% of the shares. The expatriate can act as the head of the enterprise and conduct the business of the company.
Formation of a company takes approximately 1-2 weeks after submission of all necessary documents. The staff can consist of a minimum of two and a maximum of 50 people. The start-up capital required to open a limited liability company is AED 300,000 (about USD 82,000), which must be deposited in cash. While the share of foreign capital in the company should not exceed 49%, the distribution of profits and losses can be agreed upon by the partners on a contractual basis – a foreign investor can have 80% of the income, while a local sponsor can only have 20%.
The memorandum of association must contain the following information:
- The trade name of the company;
- Its objectives;
- Details of the head office;
- The duration of the agreement;
- The names of the shareholders;
- Their nationality, address, residence, the amount of capital;
- The shares of all shareholders;
- The citizenship of the managers of the company;
- The distribution of profits and losses.
In this form of doing business, the issuance of share certificates is prohibited by law.
Documents required to obtain initial approval from the Ministry of Economy to open an LLC:
- Application for registration and licensing, as well as documents confirming the ownership of the trademark;
- Copy of the applicant’s passport (together with a residence permit/visa for citizens of countries outside the Gulf Cooperation Council (GCC): Bahrain, Kuwait, Oman, Saudi Arabia);
- A photocopy of the applicant’s naturalization identification (for UAE citizens only);
- A letter of no objection from the applicant’s current sponsor for non-GCC citizens (in the UAE, in the event of dismissal, the non-resident must obtain a Certificate of No Objection from the previous employer (guarantor); this means that the previous employer has no objection to the dismissal of the employee);
- A copy of the director’s passport and a letter of no objection from the current sponsor/director;
- Court permission to do business (for applicants under the age of 21);
- Permits from other government agencies, depending on the type of activity of the company;
- Permission of the Board of Directors of the company to open a new company.
