Dubai: A Place to do Business
In less than 40 years, Dubai has transformed itself from a local trading community into one of the most inspirational, exciting and successful cities in the world. With a diverse, multicultural population, Dubai offers its residents and businesses a unique environment, a bustling metropolis with the cultures of more than 190 nationalities and a quality of life and work unrivalled in the Middle East.
With an indigenous population of just 170,000, the number of Dubai expatriate residents now stands at more than two million, thanks to its lifestyle appeal and investment incentives. The tax-free policies and penalty-free repatriation of earnings have enormous benefits on both a personal and business level, with outstanding opportunities for private savings and professional profits. As thousands of new businesses are discovering each year, Dubai is the perfect gateway between East and West and the lynchpin for the region's imports and exports market – one of the most lucrative in the world.
Competitive advantage: regional headquarters
Dubai is well established as the Middle East's prime destination for the regional headquarters of multinational corporations. Its global reputation as a wealth generator and investment stronghold continues to drive the city's growth. Dubai’s economy is now dominated by knowledge and services based sectors.
The inspirational and innovative businesses which establish themselves in Dubai are supported by the Emirate's overwhelming ambition to drive technology, pioneer new innovation and foster thought leadership. World class leaders in trade, logistics, financial services, hospitality and tourism, real estate, construction and manufacturing now make up over 90% of business activity in the Emirate.
This diversification, along with its strategic location, world class infrastructure and ease of business philosophy make it the natural choice for local and international organizations to either begin operations or expand into the Middle East.
Although its meteoric rise may have been swift, Dubai is well established as the Middle East's prime destination for the regional headquarters of multinational corporations. Its global reputation as a wealth generator and investment stronghold continues to drive the city's growth and attract both worldwide corporations and international SMEs.
The city's business infrastructure is second to none, with state-of-the-art telecommunications and unparalleled connectivity, all servicing a range of clients from the most established multinational corporations to start-up SMEs.
Dubai's travel and transport network and location as a link between Europe and Asia makes face-to-face meetings simple.
Dubai is the third largest re-export hub in the world and home to Jebel Ali port, one of the top ten busiest worldwide. Dubai World Central Airport will be the world's largest and during 2011, its first full year of operation, carried 90,000 tons of air freight.
Events and exhibitions
Dubai hosts leading industry events and exhibitions to millions of trade visitors looking to source local goods and services each year. In its own right, the Meetings, Incentives, Conventions and Exhibitions (MICE) industry generates millions of dollars of revenue for service providers, hotel owners and retailers among many others.
Taxation in the UAE
There are no Taxes levied by the Federal Government on income or wealth of companies and individuals. Further, there are no withholding taxes on outward remittance, whether of dividends, interest, royalties or fees for technical services, etc., from the other businesses operating in the UAE.
However under the Emirates based tax decrees, corporate income tax may be imposed on all companies (including branches and permanent establishment) at a rate of 55%, but in practice the corporate income tax is currently imposed only on oil and gas companies. Municipal taxes are charged in some of the Emirates, customs (import) duties are levied generally at a rate of 5% but there are many items which are duty exempt, such as medicines, most food products, capital goods and raw material for industries etc.
UAE offers 3 types of Legal Entities
- Mainland UAE licensed entities
- Free Zone Companies/Establishments (FZC/FZE)
- Offshore Companies
Mainland UAE License entities
Mainland License entities are permitted to conduct business within the mainland as sole Proprietorship, Partnership and Limited Liability Company (LLC). It is mandatory to have a local sponsor to conduct business activities. An LLC can be formed with a minimum of two and a maximum of fifty persons and the minimum capital required varied by Emirate (For instance Dubai requires AED 300,000 whereas Abu Dhabi requires AED 150,000).
The UAE commercial Company Law prescribes that the foreign ownership of an LLC may not exceed 49% with the remaining balance of 51% to be held by a UAE national. However, the foreign investor may include the following clauses for protection in the constitutional documents:
- Right to appoint all of the directors
- Right to veto major decisions
- Right to assets of the company on winding up
- Right to more than 49% of the profits
Free Zone Companies/Establishments (FZC/FZE)
UAE’s Free Trade Zones has proved to be attractive for foreign investors, as it permits 100% foreign ownership. There are approximately 36 different Free zones in UAE. Each Free Zone in the United Arab Emirates is designed around one or more business industry categories and only offers licenses to companies within those categories. An independent Free Zone Authority (FZA) in UAE governs each free zone, and is the agency responsible for issuing FTZ operating licenses and assisting companies with establishing their business in the FTZ. Investors in the United Arab Emirates can either register a new company in the form of a Free Zone Establishment (FZE) or simply establish a branch or representative office of their existing or parent company based within the UAE or abroad. Free Trade Zone entities, which are treated differently from ‘Onshore’ entities have their own rules and regulations. These entities are offered guaranteed tax holidays for a period of between 15-20 years, which is renewable.
Advantages & Features
The Free Zone Companies offers UAE Residency option.
- Free Zone Companies are entitled to apply for Tax Residency Certificates thereby enabling clients to take advantage of the double taxation treaty benefits
- The minimum number of shareholders and directors is one.
- All shares must be fully paid when allocated and no bearer shares or differential classes of shares are allowed. Some of the Free Zone authorities do not require the company to deposit the capital in bank.
- 100% foreign ownership permitted and Free Zone authorities do not impose direct taxation or VAT.
- Opening a corporate bank account in a bank in Dubai, UAE is permitted.
- One stop shop for dealing with Government formalities, which make it smooth and easy to become established.
Offshore Companies can be registered through the licensed registered agents approved by the respective free zone authority. The Offshore companies in the UAE are offered by the following jurisdictions:
- Jebel Ali Free Zone Offshore Companies (JAFZA Offshore)
- Ras Al Khaimah Free Zone International Companies (RAKIC)
- Ras Al Khaimah Investment Authority Offshore Companies (RAKIA Offshore)
- Provides commercial confidentiality over financial affairs and allows wealth growth without intrusion.
- Asset Protection.
- Limited liability.
- Eliminate or minimization of capital gains.
- Accounting or auditing not mandatory.
These offshore companies are allowed to carry on trading activities, act as a holding company and offer investment and consultancy services overseas. The JAFZA offshore is the only offshore entity allowed to own free hold properties in designated areas in UAE. The offshore companies are not permitted to carry on business with persons/companies resident in UAE nor carry on banking, financial or insurance business. The offshore companies can have a bank account in the UAE.
Double taxation treaties
The UAE has signed advantageous double tax treaties with close to 100 countries, making it one of the most efficient jurisdictions to establish holding structures. The UAE has not implemented rules on controlled foreign companies, thin capitalization or transfer pricing.
Common reporting standard and automatic exchange of information
The UAE is a signatory of the Common Reporting Standard and has started collecting the relevant information through the financial institutions. The UAE will start the automatic exchange of information in 2018. Many clients of Amicorp elect to set up their UAE residency in order to be in an advantageous position when it comes to the AEOI. It is a relatively easy and cost effective process. For individuals seeking UAE residency, they can obtain it by incorporating a simple free zone entity, maintain a domicile address, utility bill and traveling to the UAE at least once every 6 months. They can then open the local bank account and use their UAE residency to be classified as a UAE tax resident in the financial institution systems.