Company Formation in UAE
The United Arab Emirates (UAE) comprise seven member states: Abu Dhabi (the capital), Dubai, Sharjah, Ajman, Umm Al Qaiwain, Ras Al Khaimah and Fujairah. The total area of the country is approximately 83,600 square kilometres located on the eastern coast of the Arabian Peninsula in the south west corner of the Arabian Gulf.
Dubai is the second largest Emirate and is situated on the banks of the Dubai Creek, a natural inlet from the Gulf that divides the city into the Deira district to its north, and Bur Dubai on its south. The city ranks as the UAE’s most important port and commercial centre.
The Supreme Council of the UAE, comprising the rulers of the seven Emirates is the highest federal authority. It is responsible for general policy matters involving communications, education, defence, foreign affairs and development and for ratifying federal laws. The UAE became a member of the United Nations and the Arab league in 1971. It is a member of the International Monetary Fund, the Organization of Petroleum Exporting Countries, World Trade Organization and other international and Arab organizations.
The official language is Arabic, although English, Urdu and Hindi are widely spoken. Arabic and English are the official business languages. The non-oil sector of the economy currently contributes some 80% of the total produced domestic products of Dubai and is continuing to expand in importance. A long trading tradition has earned Dubai the reputation within the Middle East as the ‘City of Merchants’ and this remains an important consideration for foreign companies looking at opportunities in the region today.
The UAE has concluded advantageous tax treaties with China, Czech Republic, Egypt, Finland, France, Germany, India, Indonesia, Italy, Malaysia, Netherlands (air transport), Pakistan, Poland, Romania, Singapore, Sri Lanka (air transport), Switzerland (air transport), UK (transport). It should be noted that the UAE is not on the OECD, UN or EU blacklists so Companies incorporated in this jurisdiction, if carefully structured with professional advice, may be extremely useful for tax planning purposes.
There are a number of different ways of creating an establishment in Dubai, depending upon the function to be carried out. A Limited Liability Company is the most common way of registering in Dubai and is recommended where the purpose of the entity is to make sales within the region. It should be noted, however, that 100% foreign ownership of such an entity is not permitted. A professional licence will enable the provision of professional services, while a branch or representative office will be suitable where there is no requirement to actually conduct sales or manufacturing, only to provide information and negotiate sales
Helpline Group offers our clients a complete range of Offshore Company Formation Services through Company Incorporation Division all over UAE including Dubai Company Formation, Dubai Company Incorporation and Maintenance and Management Consultancy. Extensive experience of local business, good working knowledge about the rules and regulations of the UAE and a high level of personal involvement are our main strengths. We will provide our assistance in the formation of Limited Liability Company, Free Zone Enterprises, Branch of foreign companies, online company formations etc.
Company fromation in UAE
There are a number of different ways of creating an establishment in UAE, depending upon the function to be carried out. A Limited Liability Company is the most common way of registering in UAE and is recommended where the purpose of the entity is to make sales within the region. It should be noted, however, that 100% foreign ownership of such an entity is not permitted. A professional license will enable the provision of professional services, while a branch or representative office will be suitable where there is no requirement to actually conduct sales or manufacturing, only to provide information and negotiate sales.
The Federal Law stipulates a total local equity of not less than 51% in any commercial company and defines seven categories of business organisation, which can be established in the UAE. It sets out the requirements in terms of shareholders, directors, minimum capital levels and incorporation procedures. The seven categories of business organisation defined by the Law are:
- Partnership Company
- Joint Ventures
- Shareholding Companies
- Limited Liability Company (LLC)
- Free Zones
General partnership companies are limited to UAE nationals only. The Dubai government does not presently encourage the establishment of partnership-en-commendam and share partnership companies.
A joint venture is a contractual agreement between a foreign party and a local party licensed to engage in the desired activity. The local equity participation in the joint venture must be at least 51%, but the profit and loss distribution can be mutually agreed. Joint ventures are suitable for companies working together on specific projects.
Public and private shareholding companies
The Law stipulates that companies engaging in banking, insurance, or financial activities should run as public shareholding companies. Foreign banks, insurance and financial companies, however, can establish a presence in Dubai by opening a branch or representative office.
Shareholding companies are suitable primarily for large projects or operations, since the minimum capital required is Dh. 10 million (US$ 2.725 million) for a public company, and Dh. 2 million (US$ 0.545 million) for a private shareholding company. The chairman and majority of directors must be UAE nationals and there is less flexibility of profit distribution than is permissible in the case of limited liability companies.
Limited Liability Company(LLC)
This type of company allows for a joint venture between national and foreign partners. Non-national partners are permitted to hold shares not exceeding 49% of the capital, with the national partner holding the remaining 51%. The law provides that the minimum share capital required is different in the emirates of UAE. Share capital must be fully paid up and deposited with a local bank (can be transferred out once the company is registered). The shares of such companies are not open for subscription by the public. Despite the split in shareholdings, profits may be divided in other ratios agreed upon taking into consideration efforts of non national partners in management, provision of technology or expertise. The expatriate partner may undertake management of the company.
Branches and Representative offices of foriegn commercial compnaies
The Commercial Companies Law also 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 agent is appointed.
Some categories of businesses require approval from ministries also: for example, banks and financial institutions from the Central Bank of the UAE; manufacturing from the Ministry of Finance and Industry; and pharmaceutical and medical products from the Ministry of Health; branch of foreign company from the ministry of Economy and Commerce. More detailed procedures apply to businesses engaged in oil or gas production and related industries.
Free zone Registration in Dubai and other Emirates
The UAE now boasts many free zones, including Jebel Ali Free Zone (which was the first), Dubai International Airport Free Zone, Dubai Internet City, Dubai Media City, Sharjah Airport International Free Zone, Ajman Free Zone and Ras Al Khaimah Free Trade Zone. The main attraction of establishing an entity in one of the free zones is that there is no UAE national shareholding requirement.
A common procedure is to register a branch of an offshore company, but it is also possible to incorporate a Free Zone Establishment or a Free Zone Company. In all cases the following benefits apply:
Free zone incenstives
- 100% foreign ownership
- 100% repatriation of capital and profits
- 100% corporate and personal income tax exemption
- No currency Restriction
- Abundant and inexpensive energy
- Modern efficient communications
- Excellent support services from local authorities
Please note new free zones are being created and some of the existing free zones are reaching capacity. Please contact the office for free zone specific information.
There is no corporate tax or personal tax in the UAE. The only exceptions to this are oil producing companies and branches of foreign banks. Direct taxation is against the traditions of the UAE and it is highly unlikely that it will be introduced in the near future.
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