About the UAE and Market Entry

As the geographic and economic lynchpin of the Middle East, the United Arab Emirates (UAE) is a key operational hub for international investors. It is well established as a tax efficient regional base from which to serve the high growth markets in the Middle East, Africa and South Asia. It is also the perfect location for new business set-ups across diverse sectors.

Dubai is the second largest emirate and ranks as the most important port and commercial centre in the United Arab Emirates. It has worked to transform itself into a broadly diversified economy. Critical sectors include manufacturing, logistics, financial services, information technology, retail, travel, tourism, healthcare and education, in addition to a strong focus on green technologies.

To attract international business, Dubai has invested heavily in its transport, telecommunications, energy and industrial infrastructure.

As of 1 June 2023, the UAE has implemented the corporate tax (CT) regime. Mainland companies are liable to pay 9% CT on profits exceeding AED 375,000 (0% CT rates apply up to AED375,000). Free Zone persons will be taxed at 0% on qualifying income and at 9% on taxable (non-qualifying) income meaning companies in free zones can still take advantage of 0% CT and CT holidays assuming they meet the conditions:

Must be a free zone person
Maintain adequate substance
Derive qualifying income
Not elect to be subject to CT
Prepare audited accounts
Comply with transfer pricing regulations

The CT regime is applicable to all businesses and commercial activities operating within the seven Emirates, with certain sector-specific exceptions and there is tax relief available for small businesses.

The introduction of Corporate Tax is intended to help the UAE achieve its strategic objectives and accelerate its development and transformation. The certainty of a competitive Corporate Tax regime that adheres to international standards, together with the UAE’s extensive network of double tax treaties, will cement the UAE’s position as a leading jurisdiction for business and investment.

The OECD Transfer Pricing Rules are also now applicable in the UAE. All companies have to comply with the Transfer Pricing rules and documentation requirements, which may also be applicable to domestic transactions.

There are no capital gains taxes and no withholding taxes in the UAE. Companies in Dubai can obtain further significant advantages from the absence of foreign exchange controls, trade barriers or quotas, making it an ideal location for business setup and company formation.

Company formation in Dubai

A foreign investor wishing to start a business in Dubai can choose to set up operations as a Branch, Representative Office or a registered Company, or it can appoint a commercial agent to sell its products in the UAE market or for export.

New companies can also choose to conduct their activities from a Free Zone, which is a designated, self-regulated area set up to encourage economic activity within an Emirate. There are around 40 Free Zones in the UAE, with more coming to market.

The UAE Commercial Companies Law (CCL) provides for the establishment of the following business entities for foreign investors: joint stock companies (JSC), Limited Liability Companies (LLC), unincorporated joint ventures and branch offices of foreign companies. The CCL does not apply to companies that are established in the Free Zones.

An amendment to the CCL, effective 1 June 2021, permitted 100% foreign ownership of UAE mainland companies for the first time. It removed the requirement for a local partner or sponsor to own 51% in UAE mainland companies. As a result, mainland UAE companies (existing and new) are allowed to be 100% foreign-owned, subject to the proposed activity of the company and obtaining specific approval from the relevant authorities in each Emirate.

It is important to have a full understanding of your options before deciding how to establish your company’s presence in the UAE. The potential growth of your business in the UAE can be damaged by making the wrong choice, so please consider the following points when deciding the best structure for your needs:

The current nature of your business
Your business expansion plans
The current capital to invest
The need for outside investors now or in the future
The tax implications of the structure
Your personal liability and company risk
The need for audits and other accounting requirements to remain compliant
What sort of physical presence and PRO services do you require in the UAE
Sovereign is highly experienced in company formation and business setup in Dubai. We also provide the support services needed to make your business sustainable. To find out more about our corporate services, please contact one of our Company Formation consultants.

UAE Company Formation – FAQs

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Please contact us if you have any questions or queries and your local representative will be in touch with you as soon as possible.