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The Ultimate Guide to Company Formation in Dubai: Benefits, Process, and Key Considerations

Company formation in Dubai is becoming increasingly popular among entrepreneurs and businessmen around the globe. The United Arab Emirates (UAE) has generally been a popular destination for entrepreneurs, and we’re continuing to see a huge uptick in founders registering their businesses in Dubai. Between January and September 2023, the Dubai Chamber of Commerce attracted over 48,000 new member companies, representing a 42.9% year-over-year increase.

While Dubai’s architectural wonders, like the Burj Khalifa and the Palm Jumeirah, are undeniably attractive, the appeal of the city as a highly sought-after business destination lies in a set of conditions that make it extremely favorable for company formation.

These advantages for business growth and success, which we’ll elaborate on in the next section, should pique the interest of any entrepreneur. For starters, the country has over 45 free zones, which allow for an easy and quick setup and commencement of business operations worldwide, and more than half of those are situated in Dubai. As you’ll learn through this in-depth article, forming a company in the UAE is a promising avenue for any entrepreneurs seeking a profitable investment opportunity, and we’ll expand on why that’s the case.

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The Ultimate Guide to Company Formation in Dubai

Posted 9 April 2023

Summary

From 1 day to 3 weeks depending on the emirate and free zone

Free-zone or Free Economic Zone (FEZ) in the UAE is a special zone that allows 100% foreign ownership. A company in a FEZ has its own advantages and limitations compared to a local company outside the FEZ

Generally, the standard amount for authorized capital is set at 50,000 dirhams. The necessity for physically depositing funds varies depending on the chosen Free Economic Zone. Some zones enforce this requirement, while others do not

Local office requirements apply when registering a local (mainland) company

Annual report must be filed 9 months after financial year end

 

 

 

 

 

 

Relative to other countries

Ranges from low to high
Ranges from short to long

Please note that registering a company in Dubai is generally considered to be relatively simple, but there are many subtleties and pitfalls involved that could make the process needlessly overwhelming and time-consuming.

At GFLO Consultancy, our expertise and knowledge can help you navigate the entire process smoothly and avoid potential pitfalls. In the long run, professional help will save you time, money, and needless effort while granting you a streamlined, worry-free process.

Thinking about business in this country?

Schedule your free consultation with our expert!

Diane

Diane, partner of GFLO Consultancy

The Advantages of Company Formation in Dubai

For entrepreneurs considering forming a company in the UAE, Dubai presents an attractive case through a host of advantages, ranging from financial incentives to strategic geographical positioning, all underscored by its world-class business infrastructure.

  • Absence of Currency Control.

While some nations impose strict regulations on moving currency across borders, the UAE is notable for its lack of foreign exchange control. In other words, there are no restrictions on the movements of currency in or out of the country.

This applies to residents and non-residents who hold fully convertible offshore or onshore bank accounts without restriction.

The UAE’s absence of currency control can facilitate smooth, unrestricted international transactions, which, when paired with the fixed exchange rate regime, enhances business continuity and reduces currency risk for entrepreneurs looking to register a company in Dubai.

  • Rapidly Developing Economy.

The UAE‘s GDP grew by 7.9% in 2022, driven by a boost in tourism and trade post-COVID-19, and a further 3.7% in the first half of 2023, driven by growing expansions outside of the oil sector.

This rapidly developing economy has positioned the UAE as one of the world’s leaders in terms of average annual income per capita, and it positively impacts businesses operating in Dubai through an increase in consumer spending and investment opportunities.

  • Global Connectivity

The UAE is strategically located at the crossroads of Europe, Asia, and Africa, making it an ideal hub for international business. This central position allows companies to easily access markets, including:

  1. The Middle East and North Africa (MENA), with a population of over 400 million and a combined GDP of over $3 trillion.
  2. The Indian subcontinent, which is home to over 1.8 billion people and its rapidly growing economies like India, Pakistan, and Bangladesh.
  3. East Africa, which shows immense potential and increasing trade ties with the UAE.

Dubai’s location enables businesses to serve as a bridge between the East and West, facilitating trade, investment, and partnership across continents.

  • State Support

The UAE government provides extensive support to small and medium enterprises (SMEs) through various initiatives, programs, and policies aimed at fostering growth, innovation, and sustainability, which encourage entrepreneurship in the Emirates.

The UAE government’s comprehensive support for SMEs includes:

  1. Government policies and initiatives like the UAE’s SME Law,
  2. Financial assistance programs like the Khalifa Fund for Enterprise
  3. Training & Development programs from organizations like Dubai SME
  4. Favorable regulatory environments like those provided by the Free Zones.

These support measures directly benefit entrepreneurs and businesses registered in Dubai, as they assist in ways such as reducing costs, workforce upskilling, resource provision, and general simplification of business processes.

  • Opportunity to register a company with 100% foreign ownership.

In the UAE, it’s possible to open a business without the involvement of a local agent or partner. As such, foreign investors can establish Limited Liability Companies (LLCs) in the UAE with 100% ownership. The UAE is one of a very select few countries in the Middle East that allow this, making it an attractive destination for entrepreneurs.

  • World-Class Shipping & Transport Infrastructure

Airports: The UAE is home to some of the world’s busiest and most advanced airports. These airports handle millions of passengers and cargo annually, facilitating smooth international travel and trade.

Seaports: The UAE boasts several major seaports, including Jebel Ali Port in Dubai, which is one of the world’s largest and busiest ports. These ports are equipped with top-class facilities, making them crucial nodes for global maritime trade.

For business owners, this infrastructure can offer direct benefits such as a reduction of logistics costs and enabling faster delivery times, making company registration in Dubai a very attractive option.

  • Free Zones

The UAE has over 45 free zones, many of which are strategically located near shipping and travel facilities like ports and airports.

The UAE’s free zones offer many of the benefits associated with registering a company in Dubai and the UAE – such as the possibility of 100% ownership, favorable tax conditions, and simplified regulations.

Free Zones

A free zone (FZ), also known as a Special Economic Zone (SEZ) is an ideal location for setting up a business in the UAE.

The popularity of free zones for company formation in the Emirates has been growing steadily year by year, and for good reason.

FZs confer unique tax incentives and advantages to companies registered in Dubai, for instance, and they allow entrepreneurs to register companies in Dubai and the UAE with 100% foreign ownership, meaning there are no residency requirements for directors and shareholders.

Registering a company in Dubai within an FZ allows businesses to operate within the respective free zone itself, as well as outside the UAE, making it a flexible and attractive option for business owners. Businesses registered within an FZ can also operate within the UAE mainland, however, there are certain limitations to this.

Note:
Some of Dubai’s Free Zones are tailored to a specific set of industries. For instance:

Some other Free Zones in Dubai include:

To learn more, check out our dedicated articles about Dubai’s free zones, or get in touch with one of our consultants.

Types of companies in the UAE

Companies in the UAE are usually categorized as one of three options:

Mainland Companies: Onshore entities licensed by the Economic Development (DED) of the respective emirate. Mainland companies can operate within the UAE and internationally. They are broken down as follows:

  • Limited Liability Company (LLC): the most common type of mainland company. It requires a minimum of one shareholder and can have a maximum of 50 shareholders. Shareholder liability is limited only to their shares in the company. LLCs can engage in various activities except for banking, insurance, and financial services.
  • Civil Company: A company limited to professional activities. This is a suitable option for professionals such as doctors, lawyers, engineers, and accountants. Partners can own 100% of the company. However, this type of company usually requires a local sponsor.
  • Sole Establishment: A company owned and operated by a single individual who is personally liable for the business’s debts. This requires a trade license issued in the owner’s name.
  • Branch Office: A branch of a foreign company that can operate within the UAE. Branch Offices do not have a separate legal identity from their parent company.
  • Public Joint Stock Company (PJSC): Suitable for large businesses planning to list on the stock exchange. This business requires a minimum capital of AED 10 million, and at least 10 founders, and needs to pass a rigorous stock-exchange onboarding and due diligence process.
  • Private Joint Stock Company: Similar to a PJSC, but with fewer shareholders and a lower capital requirement – these companies are not listed on the stock exchange, yet still require a rigorous due diligence process.

Free Zone Companies: These are companies that can operate outside and within the Emirates but with some restrictions. These companies offer special incentives and benefits to businesses, such as 100% foreign ownership, tax exemption, and simplified import/export procedures. Each Free Zone is governed by its own respective authority.

  • Free Zone Company (FZC): Can be established with one or more shareholders. This company is limited to operating within the free zone and can engage in the activities specified by its respective free zone authority.
  • Free Zone Establishment (FZE): Similar to an FZC, but with a single shareholder.

Offshore Companies: Companies that are designed for businesses intending to operate outside the UAE. Offshore companies are not considered tax residents and are primarily used for asset protection, international trade, or to act as holding companies.

  • Offshore Company: Can be established in jurisdictions like Jebel Ali (Dubai), Ras al Khaimah (RAK) and Ajman. These companies can benefit from 100% foreign ownership, no corporate tax, and a confidentiality of ownership details.

The options available for businessmen looking to register a company in Dubai are wide and varied, and the best option would ultimately depend on your objectives and the nature of your business.

Important:

There are many different free zones in the UAE that are all geared to different activities, so it’s crucial to choose the right one for you.

Want to get further insights?

Schedule your free consultation with our expert!

Diane

Diane, partner of GFLO Consultancy

How do I register a company in Dubai in 2024?

The company registration process in Dubai and the UAE is relatively straightforward. The process begins with the preparation of necessary identification documents for all of the company’s participants. Additionally, the following information must be provided:

  • 2-3 desired names for the company being set up, in order of priority;
  • The structure of the company being set up. Who are the directors, shareholders, beneficiaries, etc.
  • The type of activity which the company wants to conduct.

When all necessary documentation has been provided, the process for registering a company in Dubai begins.

These are the stages involved in the registration process:

  1. Verification of provided company names and the selection of an appropriate name.
    This takes no more than one day.

  2. Preparation of forms and documents for submission to the registering authority
    This might differ depending on the type of company being formed. This stage involves the main interaction with the registering authority.

  3. Company registration process.
    The timeframe for this stage depends the emirate in which you choose to register your company – and it can range from one day to three weeks from the point where all necessary documentation is submitted to the registering authority.

  4. Preparation of the corporate documents for the registered company.
    Here, the required company documents are prepared.

  5. License.
    Certain business activities in the UAE require additional approvals from specific authorities. These approvals ensure compliance with industry-specific regulations and standards.
    The type of license required will depend on the nature of your business activities, as well as your chosen area of registration. For some business activities, the license is only required after the registration process – however, some activities will require prior approval from a relevant authority before or after the license is issued. This process is referred to as a ‘3rd Party Approval Process’ – and refers to the authority that oversees a specific sector.
    If you want to learn more about a specific business activity, book a free consultation today.

  6. Issuance of Company Establishment Card (EC).
    Also known as a Company Immigration Card, it is a necessary document for businesses operating in the UAE. This card serves as a corporate identity card and is essential for several business operations such as visa applications and accessing government services.

  7. Document Attestation (if required). The process for attesting documents in the UAE involves several steps and can vary in duration depending on the country from which the documents are being attested. Note: The Apostille is not recognized in the UAE as the UAE isn’t a member of the Hague Convention list of participating countries on the Apostille.

Company Establishment Cards

In the UAE, an Establishment Card (EC) is a requirement for businesses that must be obtained after the company receives a business license (as outlined above in the company registration process).

The Company Establishment Card is a crucial document whose issuance ranges from a few days to two weeks, depending on the emirate. It is an absolute necessity to renew this card regularly and promptly to ensure that fines are not imposed on the business.

  • Corporate Identity

The EC contains basic yet vital information about the company, such as the company name, establishment card number, and expiration date. In essence, the EC acts as a corporate identity card, enabling businesses to engage in various transactions and services.

  • Visa Applications

The card is mandatory for applying for resident visas for the company’s employees and partners. Without the EC, companies cannot sponsor visas.

  • Government Services

The EC is a requirement for interacting with various government departments, including the necessities such as setting up utilities (e.g., Internet, water, electricity)

  • Issuance Process
  1. Submission: The process begins by submitting an application to the relevant free zone authority (or the immigration department within the respective emirate where the business is registered.) This can often be done online through the authority’s portal or at a customer service center.
  2. Documentation: Submitting required documents, including:
  • Trade license copy
  • Partners list (if applicable)
  • Passport copies of authorized signatories
  • Memorandum of Association (MOA) for LLCs
  • Tenancy contract
  • Location map in Arabic
  • E-signature card copy of the sponsor and authorized signatories
  1. Approval and Issuance: After submitting the application and required documents, the approval process can take between 8 to 14 days. Once approved, the establishment card is issued, either as a physical card or as a digital copy.

Taxation in UAE

As of 2024, the UAE continues to be an attractive destination for business owners and investors alike, and that’s largely due to its favorable tax environment.

The UAE imposes one of the lowest corporate income taxes worldwide, in addition to having no personal income tax, nor a withholding tax on dividends, interest, or royalties. Pairing this with the tax benefits conferred by the UAE’s free zones makes Dubai an extremely attractive option for entrepreneurs looking to register a company.

Here are some highlights of the UAE taxation system as of 2024:

  • Corporate Income Tax: Generally, the UAE’s standard corporate income tax rate is 9%, which is one of the lowest tax rates globally. Note that this rate only applies to taxable profits exceeding AED 375,000 and is zero-rated for anything below this threshold.
  • Value Added Tax (VAT): A 5% VAT was introduced in 2018. The tax applies to most goods and services, with some exemptions and zero-rated items.
  • Import & Export Taxes: Import tax is generally 5% of the cost, freight, and insurance value of imports (CIF). Exemptions: Goods imported into Free Zones are exempt from import tax until they are transferred to the local market.
  • Personal Income Tax: The UAE is one of a select few countries that imposes no personal income tax, making it an attractive destination for skilled employees and business owners alike.
  • Withholding Tax: The UAE does not impose withholding tax on dividends, interest, or royalties paid to non-residents.
  • Free Zones: Companies registered in one of the UAE’s free zones can benefit from various incentives, such as being exempt from corporate income tax and customs duties if they meet specific conditions to qualify as a Qualifying Free Zone Person (QFZP).
  • Double Taxation Agreements: The UAE has signed numerous double taxation agreements with other countries to prevent double taxation of income and promote economic cooperation.
  • Economic Substance Regulations: The UAE has implemented economic substance regulations to align with international standards and prevent tax evasion. Companies conducting specific activities, such as banking, insurance, and shipping, must demonstrate economic substance within the UAE.

More information can be found on the UAE’s Tax Authority websites.

Filling and preparing financial statements in the UAE, audit in the UAE

In the UAE, preparing and filing financial statements is a process governed by strict regulations, as the country aims to ensure transparency, accuracy, and compliance with international standards.

The primary framework used is the International Financial Reporting Standards (IFRS)

Companies must maintain accurate financial records and should ensure timely submission of periodic reports to the relevant authorities. These requirements differ depending on the respective regulations of their jurisdiction or Free Zone.

Financial audits add credibility to a company’s financial statements, ensuring accuracy and serving to instill confidence in investors and stakeholders. Audits are mandatory for certain types of companies operating under specific conditions, particularly those operating within Free Zones.

If the company was registered in a Free Zone, the reports are submitted to the respective administration of that Free Zone.

In addition, VAT-registered companies (Earning over AED 375,000) are required to submit VAT tax declarations.

Conclusion

To sum up, the UAE has long been an attractive destination for entrepreneurs from all over the world, and it has very favourable conditions for both, the establishment of a business, as well as commencing operations there.

The advantages provided by the UAE (such as the opportunity to register a company with 100% foreign ownership and the absence of currency control), paired with the attractive features of the UAE (such as it’s strategic geographic positioning and its strong economic outlook) make it even more attractive.

In Dubai and the United Arab Emirates, the entire process of creating (and operating) a company becomes very simple and convenient, and GFLO Consultancy is well-informed and experienced in the process of registering a company in Dubai to ensure efficiency and success.

GFLO Consultancy experts are pleased to assist and help you with any inquiries, just get in touch or leave a request through the form right below.

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