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Dubai Company Formation
Dubai Forms of Offshore
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:
General Trading Licence allows the holder to import,
distribute and store all items as per Jafza rules and
Trading Licence allows the holder to import, export,
distribute and store items specified on the licence.
Industrial Licence allows the holder to import raw
materials, carry out the manufacture of specified
products and export the finished product to anycountry.
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.
National Industrial Licence is designed for
manufacturing companies with an ownership or
shareholding of at least 51% AGCC (Arabian Gulf
Zone Establishment - or FZE - is an establishment formed and
registered in Jebel Ali and regulated solely by the Free
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.
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.
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.
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.
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.'
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
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.
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."
(to which the DFSA has provided access on its website) are:
Law on the Application of Civil and Commercial Laws in the
Law Relating to the application of DIFC Laws;
Limited Liability Partnership Law;
Data Protection Law;
Commercial Court Law;
General Partnership Law; and
2005, five new laws dealing with legal obligations, employment
and security interests in relation to the Dubai International
Financial Centre were enacted.
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;
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;
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;
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
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.
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
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.
both the Companies Law and the Limited Partnerships Law were
Dubai Tax Treatment of Offshore Operations
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
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
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
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.
Naturalization & Residency Department (DNRD) issues
different types of visas which are listed below.
1) 96 hour visa:
upon arrival at the airport
Applicants should have onward booking
have a minimum of 8 hour transit break
2) Visit visa:
2.1 In case of Personal sponsorship:
permit application form with completed typed data
Marriage certificate and copy of it, in case of wife
Certificate; The monthly salary should not be less than Dhs.
4000 in case of wife
sponsorship, and Dhs. 6000 in case of first relatives
the Sponsor passport
the Sponsored passport.
case of Establishments sponsorship:
permit application form with completed typed data
Establishment card and copy thereof
the Sponsored passport.
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.
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.
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:
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."
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."
2006, the Dubai International Financial Centre Authority (DIFCA)
published draft legislation that will allow foreign freehold
ownership of property in the DIFC.
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
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.
on the proposed laws ended in September 2006.
Dubai The Jebel Ali
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
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
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
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
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.
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.
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
Legal and fiscal
privileges in the DIC are similar to those applying in the Free
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
- 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
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
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
Submission of the License application
form can be done electronically through the Dubai Internet City
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
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
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.
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.
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
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
- 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:
Joint venture company
Public shareholding company
Private shareholding company
Limited liability company
Share partnership company
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.
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.
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.
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
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
- Draw up the company's Memorandum
of Association and have it notarised by a Notary Public in the
- 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
- The licence will then be issued by
the Economic Department;
- The company should then be
registered with the Dubai Chamber of Commerce and Industry.
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
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
- 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
and Representative Offices of Foreign Professional Companies
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
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
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.