Sovereign Corporate Services JLT

 

About the United Arab Emirates

The United Arab Emirates (UAE) comprises seven member states: Abu Dhabi (the capital), Dubai, Sharjah, Ajman, Umm Al Qaiwain, Ras Al Khaimah and Fujairah. Dubai is the second largest and ranks as the UAE's most important port and commercial centre.

The UAE has concluded advantageous tax treaties with China, Czech Republic, Egypt, Finland, France, Germany, India, Indonesia, Italy, Malaysia, Netherlands (air transport), Pakistan, Poland, Romania, Singapore, Sri Lanka (air transport), Switzerland (air transport), UK (transport). It should be noted that the UAE is not on the OECD, UN or EU blacklists so Companies incorporated in this jurisdiction, if carefully structured with professional advice, may be extremely useful for tax planning purposes.

Registration in Dubai
There are a number of different ways of creating an establishment in Dubai, depending upon the function to be carried out. Below identifies the main and most common ones used.

1. Limited Liability Company (LLC)
   The main features on this type of set up are:
   • Non-national partners are permitted to hold shares not exceeding 49% of the capital, with the national partner holding the remaining 51%.
   • Minimum share capital required is no longer AED300,000 (US$ 81,750), but is determined by the DED at application (can actually be much lower - a move created in August 2009 to encourage new business).
   • Share capital must be fully paid up and deposited with a local bank
   • The shares of LLC companies are not open for subscription by the public
   • Despite the split in shareholdings, profits may be divided in other ratios agreed upon the two parties
2. Professional Licence
   
   • They are 100 % foreign owned
   • Must appoint a local services agent
   • The activities that are essentially allowed/appropriate are ones in the service area such as consultancy, civil engineering, medical and educational services
   • The individual applying must hold a relevant professional qualification to the activities they pertain to carry out
3. Branch Office of a Foreign Company
   The main features are:
   • They are 100% foreign ownership
   • The branch must have the same name as the parent company
   • Must have a national service agent
   • Branch office can only engage in the activities that are similar to those of the parent company
   • Branch office cannot carry on the business of importing products of its parent company
   • May not practice activities that involve banking, insurance, money investment or operate commercial agencies
4. Representative Office of a Foreign Company
   The main features are:
   • Represent their parent company in the U.A.E.
   • Can only promote activities of their parent company
   • They can carry out marketing and promotion of their sales/production of products as well as facilitate contracts in the U.A.E for the parent company
   • Not permitted to credit facilities nor put forward offers
5. Commercial Agents - Registered versus Non-Registered
   The main features are:
   • They are a representation of a principal (producer/manufacturer) for the purpose of distributing, selling, offering or providing merchandise or services within the state for commission or profit
   • Can Import goods into Dubai in large volumes
   • Comprises of a national owning 51% and the possibility of a foreigner owning the remaining 49%
   • Two forms of Commercial Agencies, Registered and Unregistered Commercial Agency. The main difference between the two is that a Registered Commercial Agent provides safeguards to protect the Principal and the Agent, opposed to the very few safeguards provided with Un-Registered ones.
6. Free Zone Registrations in Dubai and other Emirates
   The UAE now boasts many free zones including Jebel Ali Free Zone (which was the first), Ras Al Khaimah Free Trade Zone, Dubai International Airport Free Zone, Dubai Internet City, Dubai Media City, Sharjah Airport International Free Zone, and Ajman Free Zone. The main attraction of establishing an entity in one of the free zones is that there is no UAE national shareholding requirement (i.e. they are NOT governed by the Dubai Economic Department).
   
   A common procedure is to register a branch of an offshore company, but it is also possible to incorporate a Free Zone Establishment or a Free Zone Company. In all cases the following benefits apply:
   • 100% foreign ownership
   • 100% repatriation of capital and profits
   • 100% corporate and personal income tax exemption
   • No currency restrictions
   • Abundant and inexpensive energy
   • Modern efficient communications
   • Excellent support services from local authorities
   Once a company has been accepted into a free zone it will typically operate under one or more of four different licences being commercial licence, general trading licence, industrial licence and service licence. Free zone registrations do not require a local sponsor. Companies registered in the free zones have to pay 5% duty and appoint a local service agent if they wish to sell goods or services within the Emirates. Overseas sales are free of any duty.
   
   Costs of Free Zone set up will depend on the type of entity, size of office required, and the number of work visas requested.

UAE "Offshore Company"
As a G20 "White Listed" jurisdiction, with 47 tax treaties and no pressure from the OECD, if you want an Offshore Company, the UAE is an excellent alternative to the Caribbean.

Jebel Ali Offshore Company
One of the latest initiatives by the Jebel Ali Free Zone has been the setting up of offshore companies which are regulated by the Jebel Ali Free Zone (JAFZ) Offshore Companies Regulations 2003. This company can be used for the ownership of local Dubai property, but also for use as in international business company.

A minimum of one shareholder and two directors are required.
• Corporate shareholders are authorised but corporate directors are not permitted.
• One residence visa can be issued for one director provided the company maintains an office in the JAFZ, but the company will not be allowed to do business within UAE, with UAE residents or trade in JAFZ/UAE unless it has first obtained the appropriate licence in the free zone.
• The company can hold a bank account anywhere in the world, including the UAE (for conducting routine operational transactions).
• The Register of Members is open for inspection by any member of the offshore company and any other person.
• Details of Directors are not available for public inspection.
• Every company must appoint an Auditor (from an approved list) to examine and report on the accounts in accordance with the regulations.
• Registration of the company in free zone will take between 1 to 2 weeks.
• Shareholders MUST visit the Freezone to sign the initial incorporation documents.
• Jebel Ali Offshore companies can be established for approximately US$ 5,000 and a separate information sheet setting out greater details is available on request.

Ras Al Khaimah International Company - The RAK Offshore Company
In September 2006, Ras Al Khaimah Government launched an offshore facility, the second in the UAE, which is regulated by the Ras Al Khaimah Free Trade Zone Authority International Companies Regulations 2006. A very flexible legislative format has allowed the RAK IC to be international success very quickly.

Some features:

• An excellent option for an international Special Purpose Vehicle or Holding Company.
• G20 "White Listed".
• 100% foreign ownership is allowed.
• The company is designed for international trade with very few restrictions on type of activity.
• The company will have a Dubai registered office address.
• Can have a bank account anywhere in the world.
• Can own real estate, shares and have a bank account in the UAE.
• Can have "custodian shares" (the agent can act as Shareholder and Director, giving complete anonymity).

Incorporation documents can be signed at the offices of Sovereign Corporate Services without having to visit RAKFTZ. A shelf company list of RAK Offshore companies can also be provided upon request. RAK IC companies can be established for US$2,500.