Company Formation United Arab Emirates, Dubai Company Formation- Free Zone UAE- Dubai Offshore Company

Company Formation United Arab Emirates (UAE)/Dubai: Free Trade Zone

Company formation UAE / Dubai: Introduction / Summary

Dubai has a unique set of selling propositions, namely:

No corporate tax
No income tax
No capital gains tax
No property tax
No wealth tax
Low property transaction cost
Ease of access to home finance

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.

Company Formation UAE/Dubai: Free Trade Zone Company -Offshore-Company- RAS AL Khaimah

Any company that wishes to operate at the RAK FTZ should register as a legal entity at the RAK FTZ (company registration), open a bank account, acquire a valid permit to undertake approved activities (business license) and sign a lease contract for using the selected facility at the RAK FTZ.

Once all of these procedures have been completed successfully, the company will be entitled to activate a P.O. Box, a bank account, apply for the approved number of visas (UAE residence permits) and to start the business activities in the RAK FTZ.

A company or individual wishing to operate a business at the RAK FTZ can be registered at the zone in one of the following four legal forms:

A branch of an existing company

Foreign Branch
Local Branch

A new establishment

Free Zone Company
Free Zone Establishment

Business licenses

Every company operating within the RAK FTZ is required to obtain a business license. A business license is a time-limited permit granted to a company to undertake commercial, consulting, service or industrial activities within the RAK FTZ. It does not, however, authorise the holder to do business in the UAE – a special agent has to be appointed for trading activities in the UAE market.
Each license is valid for one year starting from the date of issue and must be renewed annually.

Four types of business licenses:

Commercial license
Consultancy license
General trading license
Industrial license

Company Formation UAE/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.

Company Formation UAE/Dubai: 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
Supportive environment: Government backed e-business initiatives, business incubators, venture capital funds and e-education programs;
procedures;
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.