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Dubai Company Formation

Dubai Forms of Offshore Operation

Companies approved for operation in Jebel Ali Free Zone are granted one of the following types of licences, renewable annually for as long as the company holds a valid lease from the Free Zone Authority:

  • A General Trading Licence allows the holder to import, distribute and store all items as per Jafza rules and regulations.
  • A Trading Licence allows the holder to import, export, distribute and store items specified on the licence.
  • An Industrial Licence allows the holder to import raw materials, carry out the manufacture of specified products and export the finished product to anycountry.
  • A Service Licence allows the holder to carry out the services specified in the licence within the Free Zone. The type of service must conform to the parent company's licence, issued by the Economic Department or Municipality of the relevant Emirate in the UAE.
  • A National Industrial Licence is designed for manufacturing companies with an ownership or shareholding of at least 51% AGCC (Arabian Gulf Co-operation Council).

A Free Zone Establishment - or FZE - is an establishment formed and registered in Jebel Ali and regulated solely by the Free Zone Authority.

Such establishments must have a capital of at least Dh 1 million and liability will be limited to the amount of paid-up capital. A FZE need only have a single shareholder and is an independent legal entity.

Any company, organisation or individual wishing to form a Free Zone Establishment must submit a completed application form to the FZE Department of the Free Zone Authority. A decision on whether permission has been granted will be given within 30 days of receipt of the application and any other information and documentation required.

If permission is granted, the Authority will record all relevant details in the FZE Register and issue a Certificate of Formation. This will specify the date of registration after which the FZE will be free to conduct any such business as is permitted in its Special Licence.

The Dubai Internet City is regulated by a law passed in 2000, and is formally known as Dubai Technology, Electronic Commerce and Media Free Zone. The privileges offered to its occupants are very similar to those applying in Jebel Ali. In line with Dubai's liberal economic policies and regulations, Dubai Internet City offers foreign companies 100% tax-free ownership, 100% repatriation of capital and profits, no currency restrictions, easy registration and licensing, stringent cyber regulations, protection of intellectual property.

The Dubai International Financial Centre (DIFC) was launched in 2003 and began operations in late 2004. lt was intended to fill a significant gap in the market for international Shariah banking, fund management and life assurance. The proposed regulatory framework was published for industry consultation in June, 2003. Philip Thorpe, chief executive of the DIFC Regulatory Authority, explained that: 'We have...made good use of our freedom to create a single, logical framework - in contrast to older-established jurisdictions, who often have to make (do) and mend within existing frameworks which may gradually become more complex and less relevant.'

In July, 2003, the UAE Federal Cabinet approved a Federal Decree allowing the DIFC a large degree of sovereignty. In addition to confirming the appointment of General Sheikh Mohammed bin Rashid Al Maktoum, UAE Defence Minister and then-Crown Prince of Dubai (now Ruler) as the President of the DIFC, the decree officially created the DIFC Financial Services Authority, the DIFC Judicial Establishments and the DIFC Registrar of Companies.

The DIFC has a separate set of laws called the Commercial Code, comprising a comprehensive set of regulations like company law, legislation on property rights, including laws on security and collateral, title to goods and securities, commercial transactions and contracts, and insolvency.

In January, 2004, the Dubai Financial Services Authority (DFSA) announced that 12 new laws relating to operations within the Dubai International Finance Centre (DIFC) were now in place. Chief executive officer of the DFSA, Philip Thorpe explained that:

"The 12 new laws have been drafted by the DFSA to world-class standards, using the best examples of legislation from around the globe. They are clear and concise, and will provide certainty as to the rights and obligations of the financial institutions and other companies who will operate in or from the DIFC."

The laws (to which the DFSA has provided access on its website) are:

Regulatory Law;
Companies Law;
Law on the Application of Civil and Commercial Laws in the DIFC;
Law Relating to the application of DIFC Laws;
Limited Liability Partnership Law;
Contract Law;
Insolvency Law;
Arbitration Law;
Data Protection Law;
Commercial Court Law;
General Partnership Law; and
Markets Law.

In June 2005, five new laws dealing with legal obligations, employment and security interests in relation to the Dubai International Financial Centre were enacted.

The new legislation comprised:

  • Employment Law No. 4 of 2005. This law provides for minimum employment practices comparable to established international standards, so as to promote fair treatment of employees and employers;
  • Law of Obligations No. 5 of 2005. This law creates a framework for claimants to seek recovery for non-contractual claims and sets out the rules as to when obligations arise and how disputes involving them are resolved;
  • Implied Terms in Contract and Unfair Terms Law No. 6 of 2005. This law provides for fairness and certainty in contracts governed by the laws of the DIFC by providing terms and conditions not normally included in contracts and assures the necessary framework for their enforcement;
  • Law of Damages and Remedies No. 7 of 2005. This law creates the structures necessary to assure the recovery of damages and other forms of relief to claimants within the DIFC; and
  • Law of Security No. 9 of 2005. This law defines various forms of security interests as collateral for repayment of debts and prescribes the process for their perfection and enforcement.
Then in November 2005, the DIFC Trust Law 2005, which provides a comprehensive framework for the creation of trusts in the DIFC, was enacted. Consisting of ten major sections, the legal framework encompassed matters such as choice of governing law, place of administration, creation, validity and modification of a DIFC trust, office of trustee, and duties and powers of trustees.

The Trust Law, DIFC Law No. 11 of 2005 followed closely the enactment in September of the Personal Property Law No. 9 of 2005, which defines the rights and obligations of parties in relation to property other than real estate (land and buildings) located in the DIFC, and the Law Relating to the Application of DIFC Laws (Amended and Restated) No. 10 of 2005.

In 2006, both the Companies Law and the Limited Partnerships Law were amended.


Dubai Tax Treatment of Offshore Operations

Amongst the incentives offered to companies operating within the Jebel Ali Free Zone, the DIC and the DIFC are:

  • Corporate Income Tax: No corporate income tax on profits. The exemption is for a period of 15 years with a guarantee of an extension for a further 15 years in the event that corporate income tax is introduced in Dubai. Currently only banks and oil companies are assessed to corporate income tax in Dubai. The key difference with companies operating in JAFZ is the guarantee of exemption in the event that corporate income tax is imposed by the Government.
  • Withholding Taxes: No withholding taxes.
  • Import Duty: Exemption from all import duties on goods imported into the free trade zones. For all other imports, duties have been largely standardised at 5%.


Dubai Taxation of Foreign Employees of Offshore Operations

No personal income tax is deducted from wages and salaries paid to employees or on other income earned. See Domestic Personal Taxes for the general principles of individual taxation (or lack of it) in Dubai, which also apply to the resident employees of offshore entities.

Dubai Exchange Controls

There are no exchange controls in Dubai


Dubai Employment & Residence

Citizens of GCC countries (Gulf Cooperation Council: Saudi Arabia, Kuwait, Bahrain, Qatar and the Sultanate of Oman) and British nationals with the right of abode in the UK do not need visas to enter the UAE. GCC nationals can stay more or less as long as they like. Britons can stay for a month and can then apply for a visa for a further two months.

The Dubai Naturalization & Residency Department (DNRD) issues different types of visas which are listed below.

1) 96 hour visa:

  • Issued upon arrival at the airport
  • Airline sponsored only
  • Applicants should have onward booking
  • Should have a minimum of 8 hour transit break

2) Visit visa:
2.1 In case of Personal sponsorship:

  • Fees: Dhs 100
  • Entry permit application form with completed typed data
  • Original Marriage certificate and copy of it, in case of wife sponsorship
  • Salary Certificate; The monthly salary should not be less than Dhs. 4000 in case of wife
  • sponsorship, and Dhs. 6000 in case of first relatives sponsorship.
  • Copy of the Sponsor passport
  • Copy of the Sponsored passport.

2.2 In case of Establishments sponsorship:

  • Fees: Dhs 100
  • Entry permit application form with completed typed data
  • Establishment card and copy thereof
  • Copy of the Sponsored passport.

2.3 Renewal:

  • Fees: Dhs 100
  • Original Entry Permit.

2.4 Extension:

  • Fees: Dhs. 500
  • Original Entry permit
  • Extension application form
  • Original sponsored passport.

3 - Transit visa

  • Fees: Dhs. 120
  • Establishment card
  • Entry Permit Application form
  • Copy of Sponsored passport.

4 - Tourist visa

  • Fees: Dhs. 100
  • Establishment card
  • Statement of tourists data

A Multiple Visit Visa can be granted after a normal visa has been issued and used, and are an option for business visitors who are frequent visitors to the UAE and who have a relationship with a reputable company in the UAE. Valid for six months from date of issue, each visit must not exceed 30 days in total. This visa costs Dh1000. The visitor must enter the UAE on a visit visa and obtain the multiple entry visa while in the country.

A Residence Visa stamped on a passport proves the legal residence of an expatriate in the country. This visa is given to workers who have obtained work permits or for relatives living with them permanently, and additional documentation is required.

In June, 2004, the Dubai government unveiled plans to enshrine in law rules governing foreign freehold ownership of property. Deputy director general of the Dubai Chamber of Commerce and Industry (DCCI), Ahmed Abdul Rahman Al Banna explained that:

"At present there is no federal law to govern foreign freehold ownership of property in Dubai," although he added that as an internim measure "major property developers have got together to offer guarantees to investors on freehold ownership, which has been endorsed by the Dubai government."

The DCCI deputy director general went on to announce that: "As part of our commitment to regulate the real estate sector, the Dubai government will issue a new property law which will address some of the key issues including legalising foreign freehold ownership of properties."

In August 2006, the Dubai International Financial Centre Authority (DIFCA) published draft legislation that will allow foreign freehold ownership of property in the DIFC.

The laws published included the DIFC Real Property Law 2006 and the Strata Title Law 2006. The Real Property Law guarantees ownership of freehold land and interest in land within the DIFC. It will allow for foreign companies and individuals to hold freehold ownership of real estate within the Dubai International Financial Centre.

The Strata Title Law establishes a system of guaranteed freehold title to units in buildings in the DIFC. It is based on the system originally developed in Australia, which is now in use in many countries around the world, including Singapore.

Consultation on the proposed laws ended in September 2006.

 

Dubai The Jebel Ali Free Zone

The Jebel Ali Free Zone (JAFZ) was established in 1985 with the specific purpose of facilitating investment. Accordingly, the procedures for setting up in the zone are relatively simple. Its legal status is quite distinct: companies operating there are treated as being "offshore", or outside the UAE for legal purposes.

The option of setting up in Jebel Ali is therefore most suitable for companies intending to use Dubai as a regional manufacturing or distribution base and where most or all of their turnover is going to be outside the UAE.

100% foreign ownership is permitted in the JAFZ. There is exemption from all import duties and 100% repatriation of capital and profits is guaranteed.

There is freedom from corporate taxation for a period of 50 years, a concession which is renewable. There is a high level of administrative support from the Free Zone Authority. In addition, there are no import or re-export duties, no personal income taxes, no currency restrictions, and no restriction on hiring foreign employees.

Companies approved for operation in Jebel Ali Free Zone are granted one of the following types of licences, renewable annually for as long as the company holds a valid lease from the Free Zone Authority:

  • A General Trading Licence allows the holder to import, distribute and store all items as per Jafza rules and regulations.
  • A Trading Licence allows the holder to import, export, distribute and store items specified on the licence.
  • An Industrial Licence allows the holder to import raw materials, carry out the manufacture of specified products and export the finished product to anycountry.
  • A Service Licence allows the holder to carry out the services specified in the licence within the Free Zone. The type of service must conform to the parent company's licence, issued by the Economic Department or Municipality of the relevant Emirate in the UAE.
  • A National Industrial Licence is designed for manufacturing companies with an ownership or shareholding of at least 51% AGCC (Arabian Gulf Co-operation Council).

Companies holding a Free Zone licence are permitted to operate in the Jebel Ali Free Zone and outside the UAE. Operation within the UAE can be undertaken either by a commercial agent, representative, distributor, or the mother company licensed by the relevant UAE authority. Any company holding a Free Zone licence can itself purchase goods or services within the UAE.

Any company wishing to set up a project in Jebel Ali Free Zone must first complete a simple questionnaire. The license application process then takes place and will include a meeting to discuss and finalise the project details. If everything is satisfactory, the Authority will issue conditional approval for the project. Thereafter, a lease agreement and, if required, a personnel secondment agreement will be prepared by the Authority for signature by the company.

At the time of signing, the applicant will be required to provide the insurance policies called for in the agreements and should pay the agreed rental and licence fee prior to collection of the licence.

If the company wishes the Free Zone Authority to sponsor employees on its behalf, applications for entry permits may be submitted once the licence has been issued. The bank guarantee called for in the personnel secondment agreement will be required at this stage together with visa charges.

If the company's project involves the erection of a structure, detailed plans must be submitted after the lease has been signed. When the plans have been agreed, a building permit will be issued.

Administrative work, such as importing equipment or engaging labour for installation of equipment, may proceed in parallel with construction work. But application for entry permits for operatives to be sponsored by the Free Zone Authority will not normally be accepted until a completion certificate for the construction has been issued.

A Free Zone Establishment - or FZE - is an establishment formed and registered in Jebel Ali and regulated solely by the Free Zone Authority.

Such establishments must have a capital of at least Dh 1 million and liability will be limited to the amount of paid-up capital. A FZE need only have a single shareholder and is an independent legal entity.

Any company, organisation or individual wishing to form a Free Zone Establishment must submit a completed application form to the FZE Department of the Free Zone Authority. A decision on whether permission has been granted will be given within 30 days of receipt of the application and any other information and documentation required.

If permission is granted, the Authority will record all relevant details in the FZE Register and issue a Certificate of Formation. This will specify the date of registration after which the FZE will be free to conduct any such business as is permitted in its Special Licence.

The free zone is the base for thousands of leading international firms, including many Fortune global companies from various sectors.

The Free Zone and Dubai Ports Authority (DPA) are inextricably linked, they are led by one chairman and share a strong, symbiotic relationship. The Free Zone is built around the DPA's Jebel Ali terminal, enabling customers to take full advantage of the port's ISO-certified container and general cargo operations. Specialized unloading facilities and purpose-built storage such as the cool and cold stores are also at the disposal of Free Zone companies. Jebel Ali terminal offers efficient cargo handling, and with rates among the lowest in the world, the prospect for exporting is good.

In February 2000 Dubai ruler Sheikh Maktoum bin Rashid al-Maktoum issued a decree setting up a free-trade zone for electronic commerce and technology, known as Dubai Internet City.

Legal and fiscal privileges in the DIC are similar to those applying in the Free Zone.

The physical location of the Internet City is on Sheikh Zayed Road, next to the American University.This area overlooks the Emirates hills golf course development. The City opened for business in late 2000; highlights include:

  • World class technical infrastructure: high bandwidth, low cost telecom infrastructure and secure, high speed support infrastructure;
  • State-of-the-art urban infrastructure: cost competitive, flexible office space and world class housing, medical and education facilities;
  • Access to talent pool: large pool of high skill, low cost knowledge workers;
    Straight-forward laws and regulations: easy and fast company registration laws, hassle-free immigration process and straight forward legal procedures;
  • Supportive environment: Government backed e-business initiatives, business incubators, venture capital funds and e-education programs;
    Gateway to markets: access to regional markets in Middle East, North Africa, Indian Subcontinent and CIS.

In line with Dubai's liberal economic policies and regulations, Dubai Internet City offers foreign companies 100% tax-free ownership, 100% repatriation of capital and profits, no currency restrictions, easy registration and licensing, stringent cyber regulations, protection of intellectual property.

Dubai Internet City

In February 2000, Dubai's then ruler Sheikh Maktoum bin Rashid al-Maktoum issued a decree setting up a free-trade zone for electronic commerce and technology.

The decree established an independent body, the free zone authority headed by Crown Prince Sheikh Mohammed bin Rashid al-Maktoum, which would operate under the Dubai government to spearhead the emirate's drive to become a regional centre for electronic commerce, technology and information.

"Among the objectives of the free zone, as outlined by the law, is to draft strategies and policies to make Dubai a centre for technology and electronic commerce,' said an announcement.

The free zone authority oversees the establishment of the necessary infrastructure at the zone, licenses companies wishing to set up shop there and leases land and property to them for up to 50 years. The authority also runs the zone, and levies fees for its services. Companies are allowed 100 per cent foreign ownership in the zone. Goods imported to the zone and products for export are exempt from custom duties and companies are exempt from taxes, including income tax.

Companies can choose to incorporate in one of three ways:
  • Branch of Foreign Company;
  • Branch of UAE-based Company (including other UAE Free Zone licensees);
  • Free Zone Limited Liability Company (FZ LLC).
Submission of the License application form can be done electronically through the Dubai Internet City site.

The physical location of the Internet City is on Sheikh Zayed Road, next to the American University. DIC highlights include:

  • World class technical infrastructure: high bandwidth, low cost telecom infrastructure and secure, high speed support infrastructure;
  • State-of-the-art urban infrastructure: cost competitive, flexible office space and world class housing, medical and education facilities;
  • Access to talent pool: large pool of high skill, low cost knowledge workers;
  • Straight-forward laws and regulations: easy and fast company registration laws, hassle-free immigration process and straight forward legal procedures;
  • Supportive environment: Government backed e-business initiatives, business incubators, venture capital funds and e-education programs;
  • Gateway to markets: access to regional markets in Middle East, North Africa, Indian Subcontinent and CIS.
In September 2000 Dubai officials announced that more than a hundred information technology companies had been granted licences to operate in the City. The companies, which included industry giants Microsoft, Oracle and Compaq, were investing $250 million in the technology, e-commerce and media free zone, DIC director-general Mohammed al-Gergawi said at a press conference. Another 350 firms were awaiting approval, he said. By mid-2004, the number of companies operating out of the DIC had risen to more than 500.

The DIC's 2005-2006 Partner Profiles 2005-2006 directory, meanwhile revealed that there were then over 700 companies, from across the ICT industry spectrum, operating out of the City.

Celebrating its fifth anniversary in 2005, the DIC authorities revealed that as part of the Internet City's 'Going Global' mission, they were in talks with authorities in India, Pakistan, Iran and Malta to set up facilities in various cities.

To complete Dubai's aim to become the super e-commerce hub in the Middle East region, Dubai's cyber laws - more formally known as the E-Commerce Facilitation Laws - were passed at the end of 2001. The Electronic Transactions and Commerce Law No.2 was additionally passed in 2002.

In June, 2004, Dubai Internet City announced the Dubai Outsource Zone (DOZ), the world’s first ’free zone’ dedicated to the outsourcing industry. The announcement was made by Dr. Omar Bin Sulaiman, CEO of Dubai Internet City at Europe’s biggest conference on outsourcing, Outsource World held in London.

Dubai Outsource Zone provides a comprehensive infrastructure and environment for outsourcing companies to set up global or regional hubs servicing the worldwide market. DOZ’s offering includes 100% exemption from taxes, arguably the world’s most reliable technology and communications infrastructure, a one-stop shop of support services and the best possible working environment.

Dubai Outsource Zone provides a base for companies wishing to provide mid- to high-end IT and business process outsourcing (BPO) services. Some of the key sectors targeted include finance, accounting, IT, payroll processing, healthcare, insurance, engineering, biotech, multimedia, R&D and design. DOZ also serves as a centre for disaster recovery facilities for call centres located offshore elsewhere in the world. The Zone offers facilities both to ‘captive’ BPO operations, ie. companies who have their own offshore BPO facilities, and to third-party BPO service providers, from Europe, the US, the Middle East, Asia and Africa.

“Having established vigorous growth in the ICT industry, we are now seeking to transfer that momentum to new high-growth sectors like Outsourcing,” said Dr. Omar Bin Sulaiman, CEO of Dubai Internet City. “We had been studying the outsourcing sector for a long time to design the perfect combination of services that will provide value to the global and regional outsourcing industry. At the heart of the Dubai Outsource Zone concept is a commitment to offer relevant facilities to global companies to enable them to create an effective globally distributed delivery model. DOZ will go a long way in strengthening Dubai’s status as a knowledge-economy hub,” he added.

“The establishment of DOZ and the expected growth of the outsourcing industry will bring in several economic benefits for the UAE and the region,” said Dr. Bin Sulaiman. In the UAE alone, apart from the infusion of talent from other countries, it will to provide a significant boost to the development of the country’s own human capital. The industry promises several opportunities for fresh graduates to gain valuable exposure in various emerging sectors of the economy through both full-time and part-time employment opportunities,” he concluded.

Introduction/summary

 Dubai/UAE has double taxation agreements = DTA with most other countries. EU freedom of establishment is not applicable. For approval of the permanent establishment according to tax laws, a commercially equipped business operation must be installed in Dubai/UAE, and active business must be transacted in UAE/Dubai.

Since only oil companies and banks are subject to taxation in the UAE/Dubai, and any other companies do not pay any taxes, this results in interesting opportunities for investment in Dubai/UAE. In order to be able to use the tax advantages, a permanent establishment according to DTA must be installed in Dubai. On the one hand, a Dubai company is no offshore company in this sense, since the UAE/Dubai also maintain double taxation agreements with many countries – including Sweden and Denmark – but on the other hand, the EU freedom of establishment is not applicable. Therefore, the following prerequisites for approval of a permanent establishment according to tax laws in Dubai must be met:

  • Place of management: A manager resident in the UAE/Dubai according to tax laws must – at least on the outside – control the company’s businesses.
  • There must be a commercially equipped business operation, i.e. at least one office and one employee.
  • It must be demonstrated that the Dubai company does actively transact business in the UAE.

Under the stated conditions, for example the Swedish could be a majority shareholder of the Dubai company, but nevertheless Dubai/UAE has the sole right of taxation, provided that the Articles of Association state that all relevant decisions are made at the shareholders’ meetings, which exclusively take place in Dubai, at which the Swedish shareholder must be present. However, the UAE company law stipulates that 51% of the company shares must be held by persons resident in Dubai. As a rule, the founder will use a “sponsor”. This requirement may be omitted in case of company formations in the free zones. In the free zones, 100 % of the shareholders may be foreigners.


Introduction

The basic requirement for all business activity in Dubai is one of the following three categories of licence:

  • Commercial licences covering all kinds of trading activity;
  • Professional licences covering professions, services, craftsmen and artisans;
  • Industrial licences for establishing industrial or manufacturing activity.

These licences are all issued by the Dubai Economic Department. However, licences for some categories of business require approval from certain ministries and other authorities: for example, banks and financial institutions from the Central Bank of the UAE; insurance companies and related agencies from the Ministry of Economy and Commerce; manufacturing from the Ministry of Finance and Industry; and pharmaceutical and medical products from the Ministry of Health.

More detailed procedures apply to businesses engaged in oil or gas production and related industries.

Practising some trade activities (e.g. jewellery and insurance) requires the submission of a financial guarantee issued by a bank operating in Dubai.

In general, all commercial and industrial businesses in Dubai should be registered with the Dubai Chamber of Commerce and Industry.

Fifty-one per cent participation by UAE nationals is the general requirement for all Dubai-established companies except:

  • Where the law requires 100% local ownership;
  • In the Jebel Ali Free Zone, Dubai Internet City, or the Dubai International Financial Centre;
  • In activities open to 100% AGCC (Gulf Cooperation Council) ownership;
  • Where wholly owned AGCC companies enter into partnership with UAE nationals;
  • In respect of foreign companies registering branches or a representative office in Dubai;
  • In professional or artisan companies where 100% foreign ownership is permitted.

In the past, each emirate followed its own procedures governing the operations of foreign business interests. In practice, however, Dubai and the other emirates followed the same general system, whereby foreign companies operated in one of three ways: with a local sponsor, through a partnership with a UAE national or company, or through a private limited company or public shareholding company incorporated by Ruler's decree.

Since 1984, steps have been taken to introduce a codified companies law applicable throughout the UAE. Federal Law No. 8 of 1984, as amended by Federal Law No. 13 of 1988 - the "Commercial Companies Law" - and its by-laws have been issued. In broad terms the provisions of the Law are as follows:

The Federal Law stipulates a total local equity of not less than 51% in any commercial company and defines seven categories of business organisation which can be established in the UAE. It sets out the requirements in terms of shareholders, directors, minimum capital levels and incorporation procedures. It further lays down provisions governing conversion, merger and dissolution of companies.

The seven categories of business organisation defined by the law are:

General partnership company
Partnership-en-commandite
Joint venture company
Public shareholding company
Private shareholding company
Limited liability company
Share partnership company
Partnerships

Partnership companies are limited to UAE nationals only. The Dubai government does not presently encourage the establishment of partnerships-en-commandite or share partnership companies.

Joint Venture Company

A joint venture is a contractual agreement between a foreign party and a local party licensed to engage in the desired activity. The local equity participation in the joint venture must be at least 51%, but the profit and loss distribution can be prescribed. There is no need to license the joint venture or publish the agreement. The foreign partner deals with third parties under the name of the local partner who - unless the agreement is publicised - bears all liability.

In practice, joint ventures are seen as offering a suitable structure for companies working together on specific projects.

Public and Private Shareholding companies

The law stipulates that companies engaging in banking, insurance, or financial activities should be run as public shareholding companies. Foreign banks, insurance and financial companies, however, can establish a presence in Dubai by opening a branch or representative office.

Shareholding companies are suitable primarily for large projects or operations, since the minimum capital required is Dh. 10 million (US$ 2.725 million) for a public company, and Dh. 2 million (US$ 0.545 million) for a private shareholding company. The chairman and a majority of directors must be UAE nationals and there is less flexibility of profit distribution than is permissible in the case of limited liability companies.

Limited Liability Company

A limited liability company can be formed by a minimum of two and a maximum of 50 persons whose liability is limited to their shares in the company's capital. Such companies are recognised as offering a suitable structure for organisations interested in developing a long term relationship in the local market.

In Dubai, the minimum capital is currently Dh. 300,000 (US$ 82,000), contributed in cash or in kind. While foreign equity in the company may not exceed 49%, profit and loss distribution can be prescribed. Responsibility for the management of a limited liability company can be vested in the foreign or national partners or a third party.

The following steps are required in establishing a limited liability company in Dubai:

  • Select a commercial name for the company and have it approved by the Licensing Department of the Economic Department;
  • Draw up the company's Memorandum of Association and have it notarised by a Notary Public in the Dubai Courts;
  • Seek approval from the Economic Department and apply for entry in the Commercial Register;
  • Once approval is granted, the company will be entered in the Commercial Register and have its Memorandum of Association published in the Ministry of Economy and Commerce's Bulletin;
  • The licence will then be issued by the Economic Department;
  • The company should then be registered with the Dubai Chamber of Commerce and Industry.

Branches and Representative Offices

The Commercial Companies Law also covers the formation and regulation of branches and representative offices of foreign companies in the UAE and stipulates that they may be 100% foreign owned, provided a local agent is appointed.

Only UAE nationals or companies 100% owned by UAE nationals may be appointed as local agents (which should not be confused with the term "commercial agent"). Local agents -- also sometimes referred to as sponsors -- are not involved in the operations of the company but assist in obtaining visas, labour cards, etc and are paid a lump sum and/or a percentage of profits or turnover. In general, branches and offices of foreign commercial companies are not licensed to engage in importing activity except for re-export or in the case of products of a highly technical nature.

To establish a branch or representative office in Dubai, a foreign commercial company should proceed as follows:

  • Apply for a licence from the Ministry of Economy and Commerce, submitting an agency agreement with a UAE national or 100% UAE owned company.
  • Before issuing the licence, the Ministry will forward the application to the Economic Department to obtain the approval of the Dubai government and will forward the application specifying the activity that the office or branch will be authorised to undertake in the UAE, to the Federal Foreign Companies Committee for approval;
  • Once this has been done, the Ministry of Economy and Commerce will issue the required Ministerial licence specifying the activity to be practised by the foreign company;
  • The branch or office should be entered in the Economic Department's Commercial Register, and the required licence will be issued;
  • The branch or office should also be entered in the Foreign Companies Register of the Ministry of Economy and Commerce;
  • Finally the branch or office should be registered with the Dubai Chamber of Commerce and Industry.

Branches and Representative Offices of Foreign Professional Companies

Branches and representative offices of foreign professional firms may be 100% foreign owned provided UAE nationals or 100% UAE owned companies are appointed as local agents. Such agents are not involved in the operations of the firm but assist in obtaining visas, labour cards etc and are paid a lump sum as remuneration. The Economic Department is the authority in charge of licensing such branches or representational offices.


Sole Proprietorships

In setting up a professional firm, 100% foreign ownership, sole proprietorships or civil companies are permitted. Such firms may engage in professional or artisan activities but the number of staff members that may be employed is limited. A UAE national must be appointed as local service agent, but he has no direct involvement in the business and is paid a lump sum and/or percentage of profits or turnover. The role of the local service agent is to assist in obtaining licences, visas, labour cards, etc.

Offshore-Companies in the United Arab Emirates

Since the year 2003 the United Arab Emirates allow the formation of offshore companies in the Jebel Ali Freezone in Dubai. With this step Dubai is positioning itself as a regional alternative among the worldwide network of offshore locations such as Liechtenstein, Madeira, Malta and the Canal Islands.

The advantages of establishing an offshore company in the United Arab Emirates are obvious: there are no corporate or individual taxes existing in the Emirates as well as no value added tax, inheritance tax or tax on assets. In addition to the tax free environment there is a double taxation treaty existing since 1995 between Germany and the Emirates, which exempts German producers located in the Emirates from taxation according to the German tax law.

Substantial legal regulations for forming and operating an offshore company can be found in the „Jebel Ali Free Zone Authority Offshore Companies Regulations“ (consists of 126 paragraphs). Concerning the activity of the offshore business there is no limitation except for banking or insurance businesses. The offshore company does not require its own personnel or maintain office space in the Emirates. In every case the company has to appoint a local representative (so called registered agent), who acts as the contact person for authorities in the United Arab Emirates.

Due to the low magisterial requirements the formation of an offshore company in the Jebel Ali Freezone offers an interesting alternative for foreign companies.

 

http://www.etc-lowtax.net/    

http://www.firma-ausland.de / http://www.dubai-start.de
 

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