Setting up in the U.A.E.
For creative and forward-thinking companies, there are few places in the world better suited for setting up a business than the U.A.E. Led by the visionary U.A.E. Government; it is a country infused with an entrepreneurial spirit that offers one of the most business-friendly environments in the region and the world. Thanks to an enviable geographical location, the U.A.E. is ideally situated to facilitate business between Europe and Asia and across Africa and the Middle East. Two-thirds of the world’s population is within an eight-hour flight. The U.A.E. is on track to benefit hugely from China’s Belt and Road initiative (B.R.I.) thanks to its economic potential, infrastructure, and demographic advantage.
At A.B.N., we have the expertise to guide you through the complexities of setting up or moving your business to the U.A.E. and broader region. An overview of our services can be seen below, but if you would like to speak to one of our Client Account Managers about setting up your business, please get in touch via Phone or Reach us.
Here’s what you need to know:
Each Emirate in the United Arab Emirates (U.A.E.) has its own rules for setting up a corporate entity. It all comes down to your business objectives and shareholding structure regarding whether you set up in mainland U.A.E. or one of the many Free Zones. If you opt for a mainland U.A.E. company, the Department of Economic Development, or D.E.D. for short, will register your firm and provide you with a license. A new law, the Commercial Companies Law (CCL), aimed at modernizing the private sector, governs the establishment of commercial companies in the U.A.E. It offers more transparency than ever before.
Setting up an L.L.C.
The main hurdle for foreign investors in setting up an L.L.C. (Limited Liability Company) in the mainland U.A.E. is the foreign ownership restrictions. There is a lot of pressure for this to be relaxed to encourage more investors to the country, but for now, the CCL states that a minimum of 51% must be registered to a U.A.E. national. One safeguard is for the foreign investor and the U.A.E. national to enter into a side agreement. This contract facilitates a legally binding relationship between the parties involved to protect the foreign investor to the maximum extent possible. One of the most significant advantages of an L.L.C. in the mainland U.A.E. is that there are no territorial restrictions on business activity and no minimum capital requirement.
Dispelling the myth:
There is a misconception outside of the U.A.E. that the country is tax-free; this is not true. There is a tax regime, but it is not in effect. However, it is essential to note that there is a 5% customs duty on all imports.
Ready to Setup your Business?
One option to consider is setting up a branch of a foreign company. The advantage here is that the branch can carry out all the activities of the parent firm in mainland U.A.E. with the exception of trading.
To do this, you simply appoint a Local Service Agent (L.S.A.). The stipulation is that the L.S.A. has to be a U.A.E. national. However, the position is purely procedural, unlike the role he/she would play in an L.L.C. In this instance, the L.S.A. has no interest or right in the business whatsoever. The L.S.A. acts as the middleman between the foreign investor and the government (sorting out the paperwork, visas, etc.)
You would be expected to pay the L.S.A. an annual fee.
Free Zones provide a business-friendly environment with access to all the necessary services and amenities you would expect. Think of them as a one-stop-shop to facilitate the establishment of your entity. They are considered distinct legal jurisdictions from the U.A.E. government, operating under their own jurisdiction.
The main advantage for foreign investors is that most Free Zones offer the option for 100% foreign ownership. They also offer a guaranteed tax-free period for 50 years, and customs duties are waived if imported goods are for the use of the company. The added benefit is that there are zero restrictions on the repatriation of capital and profits! However, there are drawbacks to operating within a Free Zone.
You cannot conduct business outside of the boundaries of the Free Zone unless you appoint a mainland commercial agent. If you do this, you would have to pay duty on any imports.
Some Free Zones offer the option to set up an offshore company, but the companies can only act as a holding company – not as an operational entity.
There are several benefits to an offshore company, though, including the ability to own property (in designated areas), there are no foreign ownership limitations, and no minimum share capital requirement.
The drawback is that an offshore company cannot sponsor any employees.