Business Set Up
Doing Business in the United Arab Emirates
Are you interested in establishing a company in the United Arab Emirates? We gladly support you in the following areas:
- Developing and revising market entry strategies
- Advising on the formation, restructuring and dissolution of companies located in the territory of the United Arab Emirates, in free zones and in offshore jurisdictions
- Drafting memoranda and articles of association, resolutions and powers of attorney
- Assisting with the preparation and holding of general assemblies
You can find an introductory overview of company formation below:
Doing Business in the United Arab Emirates
The United Arab Emirates ("UAE") provides an attractive business environment for investors. Some of the numerous incentives offered are a liberal economic policy, political stability, the exemption from personal income tax and corporate tax for most fields of business, the existence of diversified free zones and offshore jurisdictions, unrestricted repatriation of capital and profit, the tying of the UAE Dirham ("AED") to the US Dollar and the existence of treaties for the avoidance of double taxation with various countries.
Business in the UAE can successfully be done by exporting products to the UAE, by taking advantage of appointing a commercial agent or distributor or by establishing a company in one of the seven Emirates.
When considering a company set up, three areas have to be distinguished: (a) the territory of the UAE itself, (b) the free zones and (c) the offshore jurisdictions. Each location is governed by its own laws and regulations and offers various opportunities to the investor.
Establishing a Company in the Territory of the UAE
A representation can be established in each of the seven Emirates.
The most common legal form amongst foreign investors is the limited liability company. According to the Commercial Companies Law, which governs commercial legal entities established in the UAE, the majority of the shares – i.e. at least 51% – has to be held by a local citizen or a company wholly owned by Emirati nationals. This requirement was yet again confirmed by the new Commercial Companies Law (Federal Law No. 2 of 2015) which came into force in July 2015. The shareholders are generally free to determine the share capital of the company provided the amount is adequate to achieve the purpose of the company's incorporation.
On the condition that no trading activities will be conducted, another option is establishing a branch, which is a dependent subsidiary of a foreign mother company. A branch does not have to meet any capital requirements. However, a bank guarantee amounting to AED 50,000 needs to be submitted to the competent authority.
Establishing a Company in a Free Zone
Setting up a business in one of the free zones continues to be an attractive alternative to establishing a representation within the UAE.
Free zones are geographically defined areas in the territory of the UAE, wherein no customs duties accrue upon the import of goods or their re-export to other countries than the UAE. In these special economic zones, the laws of the UAE are only partially applicable.
Dubai, for example, offers a wide range of specialised free zones, which provide the investor with a tailor-made business environment. Some of the most prominent free zones are the Jebel Ali Free Zone, the Dubai Airport Freezone, the Dubai International Financial Centre, the Dubai Internet City, the Dubai Media City and the Dubai Multi Commodities Centre.
The main incentive for foreign investors is the fact that free zone regulations – in contrast to the laws prevailing outside the free zones – allow complete foreign ownership of a limited liability company. The minimum share capital varies between AED 1,000 and AED 300,000 depending on the free zone and the type of legal entity to be established.
Should goods be brought into a free zone for temporary storage or permanent use, no import duty has to be paid. Upon import into the UAE of goods stored or produced in a free zone, an import duty of generally 5% will be imposed. In such cases, the free zone company is considered a foreign entity.
Establishing an Offshore Company
The formation of an offshore company is one of the most cost-effective alternatives in the UAE because the shareholders are usually free to determine the share capital and no office rent has to be paid. However, offshore companies are generally not allowed to conduct business with contractual partners located in the UAE.
Currently, offshore centres are operated under the umbrella of the Jebel Ali Free Zone Authority, the Ajman Free Zone Authority and several authorities in the Emirate of Ras Al Khaimah.
Choosing the Right Set Up
Location and legal form of a new company are influenced by a number of factors, such as the kind of activity to be conducted, the location of important business partners and the available budget. In order to make best use of the various advantages in each of the different locations, a thorough study that takes both economic and legal implications into account should be made before deciding on one of the alternatives.