Overview of Doing Business in UAE
1 Business can be done in UAE under the following options
(a) in non-Free Zone areas,
(b) within the various Free Zones in UAE, and
(c) through an offshore company in UAE.
Within Free Zones, 100% foreign ownership is possible whereas in non-Free Zone areas, 51% local ownership is mandatory.
Any movement of goods from the Free Zone into non-Free Zone area is deemed to be imports into UAE and subject to customs duty. Imports into Free Zone are not subject to customs duty. Apart from this there are user based service fees or indirect charges such as government fees for various services of departments, visa, licence, salik, etc.
Presently, excepting foreign bank branches and oil companies, there is no corporate income tax in UAE. Further, there is no personal income tax in UAE.
Since UAE has double tax avoidance tax treaties with many countries, it is possible to obtain Tax Residency Certificate (TRC) for individuals/operating companies addressed to a Treaty country (offshore companies cannot obtain TRC).
2 In non-Free Zone area, a limited liability company (LLC) can be established with 51% local ownership and 49% foreign ownership. In Dubai, a minimum paid up capital of AED 300,000 (One US$=AED 3.67) is usually stipulated though in practice there is no requirement to show proof of capital at the time of set up. For obtaining trade licence physical office is a must. Some activities e.g. real estate brokers, real estate dealings in non-designated areas require 100% local.
Instead of 51% UAE National, an entity can be 100% owned by other GCC nationals (i.e. nationals of Oman, Saudi Arabia, Qatar, Bahrain and Kuwait) subject to approval of the authority.
3 Within the various Free Zones, business can be established with 100% foreign ownership. Physical presence is a must though some of the free zones provide virtual office/flexi desk office. Following options are possible
First option is to set up a branch of an existing overseas foreign Company (this will be extension of the parent company)
Second option is to set up a Free Zone Establishment (“FZE”) in which the sole shareholder is an individual or corporate.
Third option is to set up a Free Zone Company (“FZC”) in which there are two or more shareholders who could be individuals or corporate.
Suffix FZE/FZC/DMCC/FZ-LLC etc. will differ depending on the free zone selected. Visas can be issued for such companies. Most of the Free Zone authorizes will need audited financial statements to be submitted as part of the renewal of licence every year
You may like to visit the websites of some of the Free Zones as under:
-Jebel Ali Free Zone (www.jafza.co.ae)
-Dubai World Central (www.dubaisouth.ae)
-Dubai Multicommodity Centre (www.dmcc.ae)
-Sharjah Airport International Free Zone (www.saif-zone.com)
-Hamriyah Free Zone (www.hamriyahfz.com)
-Ajman Free Zone (www.ajmanfreezone.gov.ae)
-Ras Al Khaimah Free Zone (www.rakftz.com)
-Umm AL Quwain Free Zone (www.uaqftz.com)
-Fujairah Free Zone (www.fujairahfreezone.com)
4 Business can be carried out through an offshore company formed within JAFZA/RAKFTZ/Ajman. This can be 100% foreign owned, does not require physical presence and no visa is issued. Our office acts as a registered agent for such offshore company. Such offshore company can have a non-checking bank account subject to KYC of the bank. AN offshore company cannot do business either in UAE or with residents in UAE. JAFZA Offshore company can own properties in Dubai in designated areas where foreign ownership of property is permitted.
If one is looking for actual trading with visa and 100% foreign ownership, it is best to set up an entity in one of the free zones which allows 100% foreign ownership.
If one is interested in setting up a holding company, then Offshore company can be set up. Offshore company can then be a shareholder of other entities subject to regulations permitting such ownership in those jurisdictions where you intend to invest. Offshore company can also be a 100% shareholder of a free zone company or 49% shareholder of LLC depending upon where you intend to carry out actual operations in Dubai.
Although there is no tax in UAE for trading and investment operations, tax implications of the investor in his home jurisdiction needs to be examined in planning investment in UAE.