Advantages of Company Formation in Dubai
- Absence of currency control
In the UAE, there is no currency regulation and an absence of currency control. This makes company formation in Dubai an attractive option for businesses.
- Rapidly developing economy
The UAE has strong economic indicators, allowing the country to be among the leaders in average annual income per capita among the states of the Arabian Peninsula. This rapidly developing economy enables this small country to maintain a high level of income for many years, further enhancing the appeal of company formation in Dubai.
- Advantageous geographical location
The UAE is a federal state located on the coast of the Persian Gulf, providing access to major markets in Southeast Asia, Africa, and Europe. This advantageous geographical location further contributes to the attractiveness of registering a company in Dubai..
- Stable socio-political environment
The UAE has positive indicators in both the political and social spheres, contributing to a stable socio-political environment.
In the 1950s, the UAE had a population of just 86,000 people, but now it has almost 10 million, with the population growing at a high rate.
- Availability of beneficial programs for supporting small and medium-sized businesses
The state actively supports and encourages the development of entrepreneurship in the Emirates. In addition, the UAE regularly publishes useful information for both residents and businessmen on a special Government portal.
- Opportunity to register a company with 100% foreign ownership
In the UAE, it is possible to open a business without involving a local agent or partner. The ownership of such a company can be distributed entirely among foreign citizens. Registering a company in Dubai in this way is beneficially different from some other countries, making it an appealing option for foreign entrepreneurs.
- Presence of free zones with favorable conditions for business
One of the most attractive features for businesses in the UAE is the presence of free zones. These zones offer advantageous tax conditions and a favorable environment for conducting entrepreneurial activities. Registering a company in Dubai within one of these free zones allows for the easiest process of doing business in the country.
Free zones in the UAE
A free zone or Special Economic Zone (SEZ) is an ideal place for setting up a business, and there are many of them in the UAE. SEZs allow for registering a company with 100% foreign ownership, meaning there are no requirements regarding the residency of directors and shareholders. Registering a company in Dubai within an SEZ allows for conducting entrepreneurial activities either within the SEZ itself or outside the UAE, making it a flexible and attractive option for business owners.
List of the most popular SEZs in the UAE
Types of Companies in the UAE
In the UAE, companies that can be registered are divided into local or mainland (can operate within the Emirates), Free Zone (can operate within the Emirate with some restrictions) and offshore (cannot operate within the Emirates).
The most popular types companies in the UAE are as follows:
- Limited Liability Company (LLC);
- Free Zone Company (FZC).
It is possible to register a company in Dubai with 100% foreign ownership.
As for offshore companies, they must operate outside the UAE and are most often holding companies.
In fact, most clients typicelly choose to form a company in a Free Zone, which, depending on the chosen Free Zone, can offer favorable tax conditions, the possibility to conduct business within the UAE, and opening an account with a local bank.
Company Formation Procedure in Dubai
The company registration procedure in the UAE starts with the preparation of the necessary identification documents for all participants in the company, as well as providing the following information:
- 2-3 names for the future company in order of priority;
- Structure of the future company (who is the director, shareholder, beneficiary);
- Type of activity of the future company.
There are many different Free Zones in the UAE, so it is very important to choose the right one. This is because, for example, a Free Zone company can usually have its office inside the specific free zone it is registered in.
After receiving all the necessary documents and information, the company registration in Dubai will be promptly initiated. The entire process includes the following stages:
- Verification of company names and selection of an acceptable one.
Name verification takes no more than 1 day.
- Preparation of forms and documents for submission to the registering authority, which can be different depending on a type of company being formed.
This stage involves the main interaction with the registering authority.
- Company registration procedure.
The timeframe for company registration in the UAE depends on the chosen emirate and varies from 1 day to 3 weeks from the submission of all necessary forms and documents to the registering authority.
- Preparation of the corporate documents for the registered company.
At this stage, a set of company documents required is prepared.
After registering a company, in most cases, a license is required for legal operation. The type of license also depends on the chosen place of registration.
- Issuing of Establishment Card.
This is a special immigration card for the company. More on this in the next section of the article.
- Attestation of documents (if necessary).
The document attestation process in the UAE takes about 4-6 days.
Since the UAE is not part of the Hague Convention
list of participating countries on the Apostille, the Apostille is not recognized in the UAE.
Notable Features of the UAE
- The popularity of free zones for company formation in the Emirates has been growing steadily year by year, and for good reason. UAE legislation imposes restrictions on foreign ownership of certain companies within the country’s territory. As a general rule, foreign investors can own no more than 49% of shares in a company registered in the UAE that carries out certain types of businesses. This creates additional complexities when organizing and conducting business. In contrast, the UAE’s free zones, of which there are over one hundred, allow for the establishment of companies with 100% foreign ownership. And that’s not their only advantage. Besides the ability to create a company in the UAE without the participation of a local agent or partner, free zones offer various tax and customs benefits. Each free zone is selected based on the needs and objectives of the business owner. More information about free zones can be found on the official UAE Government website.
- Another notable feature is the requirement to obtain a Company Establishment Card after receiving a license as part of the company registration process in the UAE. A Company Establishment Card is a so-called immigration card for the company, which is a plastic card containing all the basic information about the registered company. The Establishment Card is obtained from the immigration authority of the emirate in which the company is registered. Without an immigration card, it is not possible to obtain a resident visa for the owner or employees of the company.
The issuance of an immigration card takes from a few days to 2 weeks, depending on the emirate. It is necessary to regularly and promptly renew the immigration card, otherwise fines may be imposed.
Taxation in UAE
In 2023, the UAE continues to be an attractive destination for business owners and investors due to its favorable tax environment. The country offers several benefits, including one of the lowest corporate income tax for most companies, no personal income tax, and no withholding tax on dividends, interest, or royalties. Additionally, there are numerous free zones with various tax and customs incentives.
Here are some key aspects of the UAE taxation system in 2023:
- Corporate Income Tax: Generally, the standard tax rate is 9%, however it is being applied to profit of excess of AED 375,000. Companies from Free Zones have to pay the corporate income tax only on qualifying income, often the effective tax rate for these entities is 0%. Also, it is worth mentioning that some exceptions apply, such as foreign banks and oil and gas companies, which are subject to corporate income tax at varying rates.
- Value Added Tax (VAT): A 5% VAT was introduced in the UAE on January 1, 2018. The tax applies to most goods and services, with some exemptions and zero-rated items.
- Personal Income Tax: There is no personal income tax in the UAE, making it an attractive destination for both employees and business owners.
- Withholding Tax: The UAE does not impose withholding tax on payments made to non-residents for dividends, interest, or royalties.
- Free Zones: Companies registered in one of the UAE’s many free zones can benefit from various tax incentives, such as exemptions from corporate income tax and customs duties.
- 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.
On the UAE Federal Tax Authority‘s website, you can find a range of legal and regulatory documents related to taxation in the Emirates.
Filing and preparing financial statements in the UAE, audit in the UAE
The requirements for preparing and submitting financial statements and audits in the UAE are much simpler than in many countries, as all bureaucratic complexities are minimized.
However, filing and preparing financial statements in the UAE, as well as auditing, are crucial aspects of running a business in the country. Companies are required to maintain accurate financial records and submit periodic reports to the relevant authorities, depending on the specific regulations of their jurisdiction or Free Zone.
Auditing in the UAE is an essential process that involves an independent examination of a company’s financial statements to ensure their accuracy and compliance with applicable laws and regulations. Many businesses in the UAE are subject to mandatory audits, particularly those operating within Free Zones or those with specific business activities that require additional regulatory oversight.
If the company was registered in a Free Zone, the reports are submitted to the administration of that Free Zone.
In addition, companies that are registered for VAT are required to submit VAT tax declarations, also known as special VAT reports.
The United Arab Emirates has long attracted businessmen with excellent conditions for establishing and running a business. The opportunity to register a company in the UAE with 100% foreign ownership in free economic zones, the absence of currency control, not to mention absence of many tax obligations make the process of creating and operating a company in the UAE as simple and convenient as possible.
GFLO Consultancy offers a full range of corporate services for businesses, including matters related to the establishment and administration of companies in the UAE. If you are considering the possibility of registering a company in the Emirates, we are ready to provide one of the best offers on the market; just contact us in any way convenient for you. The first consultation with a specialist is free!