their mainland business in UAE jurisdiction Dubai, Abu Dhabi, Sharjah, Ajman & RAK
Business Setup in United Arab Emirates (UAE)
United Arab Emirates (UAE) established on 2nd December 1971 had 6 emirates at the time, namely Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al Quwain & Fujairah. On 10th Feb 1972, Ras Al Khaimah also joined the UAE, thus making the famous 7 emirates of UAE. Each emirate has a separate ruler and together they jointly form the Federal Supreme Council.
UAE, located in western Asia on Persian Gulf and having Saudi Arabia, Iran, Qatar and Oman as its neighbors, is centrally located between Asia, Europe and Africa , making it extremely sought-after trading hub internationally.
Arabic is the official language and Islam is the official religion of UAE. UAE is considered to be 7th largest oil rich country globally and Late His Highness Sheikh Zayed, the first President of UAE, along with members of Supreme Council has turned the oil economy in to a diverse trading, business, real estate and tourism driven economy, thus reducing the reliance on oil income.
There is zero income tax in UAE, one of the prime reasons for international investors flying to the nation. However, 5% VAT (Value added tax) has been implemented from January 2018.
UAE’s wealthy international profile has made it a regional power center and attraction for worldwide entrepreneurs to establish businesses in UAE.
The World Bank has ranked UAE at the 26th position based on its economy and regulatory system in its “ Doing Business 2017 Report”. UAE is the second largest economy in the GCC region.
Currently UAE enjoys high volume of tourists from all over the world and the number is expected to go up significantly due to upcoming Expo 2020.
UAE primarily allows business entities to be registered either as a mainland company, a free zone company or an offshore company. All seven emirates have separate departments of economic development, several other Government departments and federal authorities. UAE also has several free zones across all seven emirates having their own controlling single window administrative Government authority
UAE Mainland Business Setup
It is necessary to understand what it means by the term Mainland Company in order for an entrepreneur to take a decision to register a Mainland Company in UAE.
Following are the facts about Mainland Companies in UAE.
- These companies are regulated under Federal Law No. 2 of 2015 which came in to effect on 1 July 2015
- No expatriate can own more than 49% in any commercial limited liability company
- GCC national can own 100% shares in any company
- GCC companies or individual GCC national can make partnership with UAE national
- For certain business activities, by law only UAE national can own 100% shares
- Business activities covered under professional category can be 100% owned by foreigners but it is mandatory have UAE national as a service agent.
- It is considered as on shore business entity
UAE Free Zone Business Setup
Again, it is necessary to understand what it means by setting up company in free zone and under which circumstances, the businessman has to take decision to register company in free zone.
- There are several free zones across UAE and each one is controlled by dedicated Government authority providing single window administration
- Free zone companies are not allowed to conduct business on mainland directly. However they can do so by appointing a distributor or an agent on the mainland.
- 0% income tax on any business carried out.
- Well developed infrastructure available within most free zones offering offices, land and ware houses.
- Some free zones provide low cost packages with flexi desk options
- Many free zones are located right on ports or airports making it easier for logistics and documentation
- It is considered as on shore business entity
UAE Offshore Business Setup
Three of UAE free zones allow setup offshore companies. The main benefits and restrictions of an offshore companies in UAE are as follows
- It can own assets like real estate and shares in UAE or in any other country globally
- It can open a bank account subject to bank compliance approval
- International trading or services business outside UAE can be done under this type of company
- Due to closed registry, the share holders names are not available in public domain
- UAE offers an offshore company registration through JAFZA (Jebel Ali offshore), RAKEZ ( Ras Al Khaimah offshore) and Ajman offshore authorities.
- No need to rent an office
- Residence visa is not allowed under this company
Permissible Legal Structures Available To Conduct Business On Mainland UAE
Businesses can function their operations under different legal structures available according to their business plan and activities. Mainly those are as following. All these licenses are primarily issued by Department of economic Development in each emirate of UAE along with different departments/ ministries depending on various special approvals.
- Limited Liability Company popularly known as LLC. This structure is applicable for commercial activities and in general to any trading activity. It is must for a UAE National to own 51% of shares. Maximum 50 share holders are allowed in this type of legal structure. Company’s financial liability is limited to company share capital and assets only. Company’s day to day management is handled by manager/managers appointed under notarized MOA. Share holder must to be physically present once in order to establish this type of company.
- Professional sole establishment or professional civil company. This structure is applicable to companies offering professional services. It is must to appoint UAE national as a share holder.
- Branch of a foreign company. These licenses are only issued after an approval from ministry of economy. The proposed activity of the branch company should be in the same domain of the parent company.
- Representative office of a foreign company. These companies are not allowed to practice any business activity or issue any invoices.
- Public share holding companies
Documents Required For Mainland Company Formation in UAE:
Following are in general documents required to be submitted.
- Passport copies of share holders
- Attested degree certificate if required
- CV if required
- Attested parent company documents if it is a branch or representative company
- AUD ( American university ) exam certificate if it a consultancy firm on dubai mainland
- NOC if share holder is on residence visa
- Ejari as a proof of rented office premises
Attestation has to be done by foreign affairs ministry of home country and UAE embassy in Home country and MOFA in UAE.
Why Businessmen Should Choose UAE As A Business Destination
- Stable political environment
- Well developed infrastructure like roads, bridges, metro etc
- World class sophisticated logistic facilities like airports and ports
- Strong law and order situation where by people feel safe to stay, alone or along with family.
- Almost all premier educational institutions have their facilities in UAE, bringing world class educational schools, nurseries and colleges to UAE
- State-of-the-art healthcare facilities coupled with mandatory health insurance for all residents in UAE. No one can suffer without medical assistance 24 hours and 365 days.
- All means of hospitality and entertainment as all world famous hotel brands, restaurants, night clubs and cinemas available to unwind after day long work or refreshing weekend time.
- Prestigious shopping malls and high street shops offering wide range and variety of products for all worldwide brands. After all, shopping is a great stress reliever!
- Local banks, international banks, investment banks and globally recognized financial institutions make it easier for businesses to function smoothly with banking transactions and loan arrangements.
- Well developed stock market and real estate / bullion industry making it easier for investors to have many options to invest and earn appreciation or regular income of dividends and rent.
- Due to a strategic geographical location on world map, UAE enjoys status of an international trading hub, serving as a middle station among Asia, Europe and Africa. UAE also has super busy gold souk, textile market, food market, and electronic market, perfume market & scrap yards.
- Government has designated many areas on Mainland and in free zones for industrial and manufacturing units making it easier to obtain required approvals and having supporting infrastructure and ancillaries around the specific location.
- Government is constantly investing heavily on technology to upgrade procedural work in departments and ministries along with trainings and upgradation in human assets within Government systems to provide seamless world class experience to businessmen from around the world conducting operations in UAE. Many of the processes are taking place online without person to visit physically thus creating secured and legitimate transactions and processes without human interference.
- International business transactions feel safer as UAE Dirham; a local currency is pegged against USD making it stable against USD. This hedging makes all international trading houses, foreign currency traders and commodity traders to work in UAE as a safe financial haven.
- 0% income tax is another prime factor attracting huge international interest. Government has entered into double tax avoidance agreement with several countries in order for an individual or corporate not to pay tax in home country if he or she is permanent resident in UAE.
- Government policies open to receive people from all over the world regardless of religion, education, skin or colour making it a respectable place to stay and do business.
- Undisrupted supply of water, electricity and telecommunication services across all parts of UAE.