There are three main types of companies/businesses thar can be set in the UAE: Free Zone companies; companies in the mainland and offshore companies.
Main benefits of running a business in the UAE:
- prestigious jurisdiction;
- exemption from corporation tax;
- no residency requirements for directors;
- possibility of obtaining resident visas;
- no financial reporting requirements in most Free Zone;
- privacy (information on beneficial owners of the company is confidential source);
- ability to set up a legal entity in the country of incorporation.
UAE Free Zone Companies
The characteristics of free zones are the existence of their own regulation, the possibility of 100% company ownership for all kinds of activities, the companies’ release from income tax and dividend tax, the possibility to do business within the free zone, between different free zones or beyond the UAE.
Benefits of UAE Free Zones
There are in approximately 50 such zones in the UAE.
The client is allowed to:
- run business as in the free zone as beyond the UAE;
- work with organizations from other free zones and with local businesses if they provide services in their office;
- recruit employees and obtain resident visas for them and rent an office;
- receive a certificate of tax residency.
There are no restrictions on company ownership by foreign nationals, 100% ownership is possible.
Free Zone is an intermediary between your company and the public authorities (GDFRA, Ministry of Human Resources, Municipality, etc.), greatly facilitating communication and acting as a one-stop centre.
The client is not allowed in the zone to:
- rent an office outside the free zone where the company is located;
- work beyond the free zone if the services are provided on the client’s premises outside the free zone (for example, repair of premises (as one would have to leave the free zone), installation of equipment);
- sell and distribute products out of the free zone where the company is registered (a company may only trade in the free zone or in the entire emirate, but through a local distributor);
- take part in government tenders;
- conduct business with companies located outside the free zone through registered dealers.
When selecting a free zone, the following criteria should be considered in the first instance:
- the specialization of the free zone;
- requirements for corporate structure;
- residency requirements for employees;
- infrastructure offered by the free zone;
- budget for setting up a company;
- audited reporting requirements to state authorities.
How to start a company in the UAE Free Economic Zone?
- obtain a business license;
- the business license operates for 1 year and is is renewable at regular intervals;
- obtain a UAE resident visa;
- create a corporate bank account.
UAE Mainland Companies
It is a DED-licensed onshore business entity that is allowed to conduct business in the local market as well as outside the UAE without any restrictions. When it comes to registering a legal entity, the mainland is a practical choice, but there are certain rules to be followed in the registration process.
The main law that provides for the registration of onshore companies is the Companies Act. It sets out all the rules that need to be followed before and after incorporation.
In general terms, doing business on the mainland is characterised by the following:
- flexibility to do business in any part of the UAE;
- no restrictions on the number of visas;
- additional activities available for licensing.
The most commonly used forms of incorporation are as follows:
- Sole entrepreneur.
- Limited Liability Company (LLC) – This structure is one of the most popular with non-residents on the mainland. Investors can incorporate an LLC in Dubai or any other Emirate usually with a minimum of 2 shareholders (up to a maximum of 50). Liability in an LLC extends only to the shareholding owned by the investor.
- Professional Mainland Company – The owners maintain 100% of the shares in the company. This, however, does not mean that the local sponsor requirement is waived. The requirement remains, but the local sponsor does not take part in the management of the firm. This type of business requires a professional licence to operate in certain sectors, such as business consultants, accounting and auditing firms, etc.
- Public or private limited company.
- Foreign subsidiary (the parent company may be located in the UAE or abroad) – Foreign organizations can also open a subsidiary or branch office. Registering a branch in the UAE is quite a profitable business investment for foreign companies looking to actively enter the local markets of the Emirates. A representative office allows large organizations to optimize their business operations in new markets.
- Branch of a company incorporated in a free zone.
- Joint venture.
Types of licenses:
Forms of mainland companies registration:
- Society limited liability company.
Procedure of registration of a mainland company:
- determining the line of business;
- choosing the form of incorporation;
- company name;
- preliminary approval of the Department of Economic Development;
- Memorandum and By-Laws;
- office rental;
- obtaining additional permits (if necessary);
- obtaining license.
UAE Offshore Companies
An offshore is an organization registered in an offshore territory. What is the purpose of offshore?
First of all, it is beneficial for those who want to save their capital from political instability of the country where it is located and to be able to freely dispose of it by moving it around the world.
Secondly, if the company is engaged in foreign trade activities: offshore will allow to simplify the paperwork, speed up financial flows and optimize taxes. These are just a few examples; in fact, there are many more.
Benefits of UAE Offshore Companies:
- The right to own property in the UAE;
- global visibility;
- ability to open an account in domestic banks;
- exemption from taxes;
- 100% foreign property;
- no limitations on the shareholder’s number;
- no minimum equity capital requirements;
- no restrictions on repatriation of capital;
- no need to file financial statements with the local tax authorities – however, since 2018 companies have to file quarterly VAT returns (5% rate), which, however, will be zero if there is no activity in the UAE;
- low cost of registration and service;
- exemption from the need to rent an office;
- easy share transfer procedure
UAE Offshore Companies Disadvantages:
- All commercial operations are prohibited in the UAE.
- Companies are not required to provide visas or recruit employees.
- Restrictions on banks, insurance companies and financial institutions.
- Problems with opening a bank account.
An offshore company does not obtain a license, it gets a certificate of incorporation. A business license can only be issued for mainland and free zone companies. The authorised activities of an offshore company are specified in the Memorandum and Articles of association.
Types of UAE offshore companies:
- Company limited by shares (CLS).
- Company Limited By Guarantee (Clg).
- Unlimited Company (Uc).
The stages in offshore company registration in the UAE:
- Choosing an agent to register an offshore business – Under local company law, all offshore companies in the UAE must nominate an authorised registered agent to carry out the entire registration process and provide an office address. This is essential for comprehension of international law and the company formation procedure.
- Selecting an offshore jurisdiction.
- Selecting a name and the kind of business (According to the rules, the company name should end with “Limited”).
- Drafting and signing of documents – docs will depend on the jurisdiction the client selects, but the basic types of documents are:
– the articles of association;
– a document appointing an agent;
– a certified passport copy;
– confirmation of the shareholder’s address.
- Applying for and obtaining a company registration certificate.
The stated period of incorporation of an offshore company varies from 3 to 20 business days depending on the jurisdiction. After this the client will be provided with a certificate of incorporation of the offshore company.