Why incorporate a legal entity in Dubai and the UAE
The UAE is a white listed onshore jurisdiction that offers business opportunities that exist only in mature industrial and financial hubs at a zero tax rate.
Furthermore, there are no restrictions or tax on current and capital account transactions. This helps to implement these objectives as does the fact that foreign entities repatriate dividends, profits, interest or royalties without restrictions.
A pro-business government encouraging foreign investment has also developed the country into a cosmopolitan centre welcoming a diverse specialist and competitive workforce. Further, Dubai has emerged as a popular jurisdiction for the relocation of high net worth individuals and a strong alternative to Hong Kong, Switzerland, Monaco, Singapore and such countries.
Economy of the UAE since the 1980’s
The UAE has a vibrant free economy with a significant proportion of revenues arising from exports of oil and gas. Successful efforts have been made to diversify away from dependence on hydrocarbons and a solid industrial platform has been created together with a strong services sector. The establishment of free zones has been an important feature of this diversification policy and the reform of property laws gave a major boost to the real estate and tourism sectors.
Since the early 1980s, the two main economic objectives set by the UAE government have been to reduce reliance on hydrocarbons and boost private sector investment. This strategy is being followed diligently in an effort to offset the country’s vulnerability to fluctuations in oil prices and to propagate economic growth and stability. The UAE aims to promote free trade with minimum restrictions on foreign trade and investment. The policy of the UAE government to encourage foreign investment is evidenced with new and impressive industrial and commercial developments frequently announced.
Oneworld MidEast Ltd (OME) operates in Dubai since 2013 and we are located in our own offices in Business Bay, a prime business location in Dubai. We are a boutique firm providing niche services to clients which include corporate and trust, global compliance, tax and legal, business advisory, financial advisory and family offices.
Our staff consist of knowledgeable and well educated staff that can give you hands-on advice on your business and strategic decisions.
Description of Legal Entities for foreign and domestic investors
Under the UAE Federal Law, foreign businesses have three main entities to choose from in order to conduct business in the UAE: a local limited liability company (“LLC”), a free zone (“FZ”) entity, and an international business company (“IBC”).
Companies can also operate by setting up a branch of a foreign company and a representative office of a foreign company.
Short description of Legal Entities
International Business Companies (IBC)
International Business Companies are ideal for any type of business that does not require a local office. This includes any passive investment activity e.g. holding shares in local or free zone companies, holding UAE real estate, or trading activities outside the UAE. IBCs cannot rent office space nor can they apply for staff visas and they are not allowed to trade with parties inside the UAE. IBCs have the attractive features such as no requirement to deposit capital in a bank account or to submit financial statements.
Free Zone (FZ)
Setting up in a free zone (FZ) is often very attractive. If there is no need to sell goods directly to the local market, but office space and local staff are required, then setting up in a free zone is often more attractive than using a local company. Free zone companies also meet the growing necessity in international tax planning of having necessary substance. This is often impossible to deliver from the traditional offshore jurisdictions since they typically only offer an IBC regime. Numerous advantages of setting up in one of the free zones in the UAE include:
• 100 percent foreign ownership is allowed guarantee for 15-50 years against the future imposition of corporation tax
• import of goods duty free provided the goods are not supplied to the local market
• all formalities are typically dealt with through the free zone authorities instead of the various government departments
• no restrictions on hiring expatriates
• access to 80 double tax treaties
Branch office of a foreign company
Foreign Companies can establish a branch office in the UAE. A branch office may not carry out any commercial activity in its own name, it may only negotiate and enter into contracts on behalf of the parent company, and if goods are required to fulfil the contract, they have to come directly from the parent. Support activities by the branch are allowed. Such an entity will enable the company to set up offices in mainland Dubai outside Free Zone jurisdiction which restricts the company’s presence to one Free zone. Furthermore, office premises are required, however 100% foreign ownership is guaranteed.
A foreign company may also establish a representative office in the UAE. Such representative offices may undertake marketing and promotional activities on behalf of their parent company, but are not permitted to trade.