Dubai Company Formation, Company Formation United Arab Emirates, UAE, Tax Dubai- Free Zone VAE Dubai- Dubai Offshore Company, offshore company, limited company, free trade zone uae
UAE Company Formation -Company Formation United Arab Emirates (UAE): Free Zone Company Sharjah
- Index Company formation UAE/Dubai
- Free Zone Company RAK
- Offshore Company formation UAE/RAK
- Dubai/VAE Free Zone
- Dubai E-commerce law
- Dubai Forms of Offshore Operation
- Tax planning via a network of international tax advisers and attorneys
- Offshore Company Formation: Tax haven rankings
- Examples for the legal reduction of corporate taxes
- DTA permanent establishment concept
- Our services and fees
- Parent companies and their subsidiaries in the European Union
- OECD: Articles of the Model Convention with Respect to taxes on income and on capital
- Beware of cheap founders!
- Basic considerations within the framework of international taxation
Company Formation UAE/ Dubai: General information on company formation in a free-trade-zone of UAE
Shares of companies within one of the free-trade-zones of the UAE (RAK, Jebel Ali, Sarah) may be owned by foreigners in whole. These companies are allowed to do their business within the FTZ or abroad UAE only. Business wthin the UAE can only be made via a representative.
Foreign investors must fulfil the following requirements to their companies:
The following steps have to be realized in any case:
- Incorporation
- Visa for Management, shareholders and resident employees
- Office (UAE does not allow a sole registered office or a virtual office; affordable office space is available e.g. in RAK)
- Licence (approval to run a certain business. For each business a license is required and only after obtaining the license may the appropriate action be taken.)
If the only business of an enterprise is in the UAE, please notice chapter 5 of the DTA:
Company Formation UAE / Dubai: Double Taxation Agreements, Definition of Permanent Establishment (Article of the DTA)
- For the purposes of this Convention, the term “permanent establishment” means a fixed place of business through which the business of an enterprise is wholly or partly carried on.
- The term “permanent establishment” includes especially:
- a place of management;
- a branch;
- an office;
- a factory;
- a workshop; and
- a mine, quarry or any other place of extraction of natural resources.
- A building site or construction or installation project constitutes a permanent establishment only if it lasts more than nine months.
- Notwithstanding the preceding provisions of this Article, the term “permanent establishment” shall be deemed not to include :
- the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise;
- the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery;
- the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise;
- the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or of collecting information, for the enterprise;
- the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character;
- the maintenance of a fixed place of business solely for any combination of activities mentioned in sub-paragraphs (a) to (e) of this paragraph, provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character.
- Notwithstanding the provisions of paragraphs (1) and (2) of this Article, where a person – other than an agent of an independent status to whom paragraph (6) of this Article applies – is acting on behalf of an enterprise and has, and habitually exercises, in a Contracting State an authority to conclude contracts on behalf of the enterprise, that enterprise shall be deemed to have a permanent establishment in that State in respect of any activities which that person undertakes for the enterprise, unless the activities of such person are limited to those mentioned in paragraph (4) of this Article which, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that paragraph.
- An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in that State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business.
- The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other.
If there is no factory, workshop, mine, quarry or any other place of extraction of natural resources or a building site or construction or installation that lasts more than nine months, a resident of the UAE has to manage the operations of the business, to located the permanent establishment in the UAE. Besides this, a non-resident director can bring the proof that he is present to fulfill his management duties (place of management).
We cannot provide a trustee director in the UAE. Companies in the FTZ are tax free.
The initial capital is very different and we have to refer to our survey on our Internet sites.
Fees for an incorporation in the FTZ vary by services of ETC and governmental fees.
Governmental fees are available on our Internet site. Our fees are between € 2,900.00 and € 4,900.00, depending on the service.
Notwithstanding this, it is possible to incorporate an Offshore Company (Exempted Company). An UAE Offshore Company may only do business outside the UAE, does not need any intial capital and can be owned by foreigners at 100% also. A trustee director can be provided.
About Sharjah
For our clients our law firm is incorporating companies in the UAE free trade zone Sharijah. Our legal fees for an incorporation is 3,900 EUR plus governmental fees for licencing and visa plus costs for Office or registered office. (see below). If you need help by applying for visa and/or search for office space or tenancy contract etc., we charge a legal fee of 225,00 EUR/hour.
The Emirate of Sharjah with an area of 2,590 square kilometers, which is equivalent to 3.3 per cent of the country’s total area excluding the islands, is the third largest emirate of the United Arab Emirates and the cultural capital of the Arab World as declared by the UNESCO in 1998. It is located between Dubai and Ras Al Khaima interrupted by a part of Ajman. Sharjah is 10 Kilometers away from Dubai and 76 Kilometers away from Abu Dhabi the capital of the United Arab Emirates.
Sharjah is known for its strength as the industrial backbone of the U.A.E… 40% of the total number of industries in the U.A.E. is based in Sharjah. The majority of these industries are petrochemicals, textiles, leather, food and basic non-metal industries.
Sharjah contains the main administrative and commercial centers along with cultural and traditional projects. Links with the outside world are provided by Sharjah International Airport, Port Khalid, Port Khorfakkan and Hamriyah Free Zone Port.
Living in Sharjah means experiencing a different and a unique life style. All the outstanding facilities of accommodations, multinational education, medical services, shopping malls, museums, clubs and a large variety of sports and social activities to enjoy; make Sharjah the perfect place to set up your business and reside.
Branch of a Local / International company
Basically, whether the branch is of a local company or of an international company, no capital is required to be deposited with the bank. The following documents should be provided.
Companies
| Local Company | International Company |
|---|---|
| License or Certificate of Commercial Registration from the Economic Department. (Notarized copy) | Certificate of Incorporation/Good-standing (Notarized copy) |
| Memorandum and Articles of Association of the company. (Notarized copy) | Memorandum and Articles of Association of the company (Notarized copy) |
| Board Resolution for opening a branch in Hamriyah Free Zone and to appoint the manager for the Free Zone operations (Notarized copy) with his passport copy and Power of Attorney. | Board Resolution for opening a branch in Hamriyah Free Zone and to appoint the manager for the Free Zone operations (Notarized copy) with his passport copy and Power of Attorney. |
| Bank’s reference letter regarding creditworthiness of the company (Original). | Bank’s reference letter regarding |
New Incorporation: Free Zone Establishment (FZE) / Free Zone Company (FZC)
Free Zone Establishment (FZE) is a single share holder limited liability company which can be incorporated in Hamriyah Free Zone. The minimum capital requirement for incorporating a Free zone Establishment (FZE) is Dhs.150,000 (Approximately US$ 40,000). However Free Zone Company (FZC) will be a similar incorporation with multiple shareholding (maximum 5 shareholders).
Important aspects of an FZE / FZC
- An FZE / FZC is a limited liability entity.
- Not only natural persons but juristic persons like Companies can also incorporate FZE/FZCs in Hamriyah Free Zone.
- The Registration/Incorporation Charge is Dhs. 9,000.
- FZE / FZC’s, like branches of local or foreign companies, will have to get a Free Zone License after incorporation/Registration.
- An FZE will be sole shareholder company. An FZC will be multi shareholder company with 2 to 5 shareholders.
- The minimum share capital for FZE/ FZC is AED.150,000. This will not be blocked, but can be used for business.
- An FZE Shares shall be in multiples of AED. 150,000/- whereas an FZC Shares shall be in multiples of AED. 1,000/-
- No share may be transferred without prior written approval of HFZA.
- The Financial Years shall be from January to December each year, except the commencement of the first year which shall be the date of Incorporation.
Incorporation Procedure
- An FZE Application (contains format of Memorandum also) needs to be submitted with documents.
- On Approval of the Project for which the FZE/FZC is proposed to be incorporated, HFZA will issue a letter to a UAE bank of the Investor’s choice to open an account in the name of the FZE/FZC and to deposit the minimum capital.
- On production of bank’s letter for receiving the minimum capital in the new FZE/FZC bank account, HFZA will issue a FZE / FZC Certificate of Incorporation after signing the agreement and making payments.
- The Investor can start withdrawing the amount for his business on submission of original Certificate of Incorporation to the bank.
Minimum Legal Requirements
- Free Zone Establishments (FZE) / Free Zone Company (FZC) should abide by the FZE / FZC Implementing Rules and Regulations. FZE Implementing Rules and Regulations are equivalent to its Memorandum and Articles of Association where as FZC Implementing Rules and Regulations are equivalent to its Articles of Association.
- FZE/FZE should submit its audited financial statements to Hamriyah Free Zone Authority every year within 3 months from the end of the financial year.
- There should be at least 2 Directors and a Secretary for FZE / FZC’s.
- If a foreign national is to be appointed as a Director or Secretary, HFZA may require that such persons hold valid residence and work permit from the relevant authorities.
- At least one of the Directors and the Secretary must be residents.
- The offices of Director and Secretary may be held jointly by a single person.
- For Individuals For Companies Personal details of the Owner Certificate of Incorporation/Registration of the Company. (Notarized) Bank’s reference (Original) Bank’s reference letter regarding creditworthiness of the company. (Original) Letter of Appointment for the Manager with specimen signature (Notarized) along with his passport copy and Power of Attorney. Letter of Appointment for the Manager with his specimen signature (Notarized) along with his passport copy and Power of Attorney.
- Upon signing the agreement for Facility Lease and Personal Secondments the Free Zone prepares the license.
- On payment, the Free Zone issues the license and all other related documents.
Type of License
The type of License that will be issued to an applicant company will be defined by the activity the applicant company is permitted by the Hamriyah Free Zone to undertake as follows:
1. Industrial License
This license will allow the holder to import raw materials for the purpose of manufacturing, processing and/or assembly of specified products. The finished products may be exported outside the UAE. If the finished products are sold in the UAE market then the License holder will need to do this through a local distributor or a local agent.
2. Commercial License
This license will allow the holder to import, export, sell, distribute and store items specified on the license. If the finished products are sold in the UAE market then the License holder will need to do this through a local distributor or a local agent.
3. Service License
This license allows the holder to carry out the services which are specified on the license within the Hamriyah Free Zone only.
4. National Industrial License
Companies holding a National Industrial License are allowed customs duty exemption on their products imported into the AGCC states.
This License provides the license holder the same status as local or AGCC companies inside the UAE. A National Industrial License is issued on the following conditions:
- The company is a manufacturing concern registered in any of the AGCC (Arabian Gulf Cooperation Council – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates) countries.
- At least 51% of the ownership or shareholding is held by an AGCC citizen.
- At least 40% of the value of the product is added in the Free Zone.
The holder of National Industrial License can import raw materials for the purpose of manufacturing, processing and/or assembly of specified products. The finished products may be exported outside the UAE. The activity must comply with the National Industrial Production Certificate, issued by the Ministry of Finance & Industry to the License holder.
License Fees
| Fees | Dhs. | US$ (Approx) |
|---|---|---|
| Industrial License | 2,750 | 750 |
| Commercial License (5 Items) | 2,750 | 750 |
| General Trading License (exceeding 5 Items) | 12,000 | 3,270 |
| Service License | 2,750 | 750 |
| Incorporation – FZE & FZC (one time fee) | 9,000 | 2,460 |
| Revision of License | 500 | 140 |
Office Units For Leases
Flexible space designed with state-of-the-art communication facilities. The business center provides space for over 100 executive offices suits ranging in size from 15 m2 to 42 m2 with conferencing and internet facilities.
Conditions of Lease Agreement
- Lease Term: The lease term will be for a period of one year, renewable with a 3 months notice period.
- Terms of Payment: One payment for the full rental due at the signing of the lease for one year.
- Insurance: Insurance will be provided by Hamriyah Free Zone. The insurance rates for the office is Dhs 100/- (US$ 27/-) per year.
Rates:
| Unit Size m2 | Rent / m2 | Misc | Refundable Deposit | |||
|---|---|---|---|---|---|---|
| Dhs | US$ (Approx.) | Dhs | US$ (Approx.) | Dhs | US$ (Approx.) | |
| 15.30 m2 | 17,000.00 | 4,658.00 | 1,500.00 | 414.00 | 4,280.00 | 1,172.00 |
| 20.00 m2 ($274.00/ m2) | 24,000.00 | 6,575.00 | 1,500.00 | 414.00 | 4,280.00 | 1,172.00 |
| 22.00 m2 ($274.00/ m2) | 26,400.00 | 7,232.00 | 1,500.00 | 414.00 | 4,280.00 | 1,172.00 |
| 25.00 m2 ($295.00/ m2) | 30,000.00 | 8,219.00 | 1,500.00 | 414.00 | 4,280.00 | 1,172.00 |
| 42.00 m2 ($295.00/ m2) | 50,400.00 | 13,808.00 | 1,500.00 | 414.00 | 4,280.00 | 1,172.00 |
Visas
Visas & Residence Fees 2008
| Description | Fees |
|---|---|
| Employment Visa | 1550 |
| Residence Renewal 3 years | 1330 |
| Residence Transfer to HFZ | 2190 |
| Residence Transfer outside HFZ | 3300 |
| Residence Transfer outside HFZ less 1years(Admit) | 4300 |
| Residence Transfer outside HFZ less 1years (Labor) | 3700 |
| Residence Transfer within HFZ 1< | 600 |
| Residence Transfer within HFZ 1>2< | 940 |
| Residence Transfer within HFZ 2>3< | 1010 |
| Family Sponsor | 320 |
| Entry Permit/Reapply after expire date | 370 |
| Visit Visa | 470 |
| Transit Visa | 570 |
| Airport deposit fees | 450 |
| Visit Visa Extension | 420 |
| Urgent Processing | 170 |
| Change of Designation | 320 |
| Loss of ID card | 870 |
| Delay in Process Residence visa 14 days | 320 |
| Cancellation before Applied | 120 |
| E.P Cancellation before arrival | 220 |
| E.P Cancellation before Residence Stamp | 320 |
| Residence Visa Cancellation | 400 |
| Residence Cancellation W/O Original Passport | 800 |
| Absconding | 1500 |
| Issuing New Authorized Signatures card | 520 |
| Authorized Signatures Card Renewal | 250 |
| Loss of Authorized Signatures Card | 420 |
| Amendment in Authorized Signatures Card | 270 |
| Letter to Bank | 250 |
| S.C Applying dependent Visa | 350 |
| N.O.C – Others | 120 |
| No Ban Letter | 250 |
| Ban Letter One Year | 600 |
| Temporary ID card 3 month | 150 |
| Temporary ID card 6 month | 200 |
| Temporary ID card one year | 250 |
| Guest Card | 300 |
| Renewal Guest Card | 300 |
| Non Exit | 270 |
| List of Active Employee | 120 |
| Employee list | 100 |
| Attestation | 30 |
| Late of Passport Submission | 30 |
| Late Submission Salary Report | 500 |
| Failure in deposit EP at Airport | 1000 |
| Inspection on New License | 200 |
| Request for Additional Visas | 750 |
| Outside Inspection Request Per day | 1300 |
| Labor Contract Attachment | 80 |
| Empliyee New Contract | 220 |
| Renewal Employee Contract | 220 |
| Contract Attachment – Renewal | 50 |
| Approved | 620 |
| Agreement for Temporary Accommodation Facility | 900 |
| Kitchen Facility for Temporary Accommodation | 1200 |
| Agreement for Temporary Permission for working outside HFZA (3month) | 700 |
| Agreement for Temporary Permission for working outside HFZA (6month) | 1100 |
| Agreement for Temporary Permission for working outside HFZA (one year) | 1700 |
| Agreement for Temporary Permission for working at another company inside HFZA (3month) | 900 |
| Agreement for Temporary Permission for working at another company inside HFZA (6month) | 1800 |
| Agreement for Temporary Permission for working at another company inside HFZA HFZA (one year) | 3600 |
| Complaint | 100 |
| Abu Dhabi Airport deposit fees | 800 |
| Dubai Airport deposit fees |
Company formation Dubai /UAE- 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.