Benefits and problems of registering a company in Dubai
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Benefits and problems
Benefits of Dubai company registration
Dubai is the most successful and the most cosmopolitan city in the Middle East as it combines elements of both East and West. Therefore, registering a company in Dubai has several advantages which are mentioned below:
- Company registration in Dubai allows foreign entrepreneurs to legally enhance their profits by minimizing their tax liabilities in a highly reputable jurisdiction. A Dubai company faces no company tax, personal tax, withholding taxes, VAT, import/export taxes and capital gains tax;
- Resident businesses also benefit from the city’s 66 international double tax treaties which help reduce the withholding tax on foreign remittances.
- Dubai is the undisputed financial capital of the MEA. The city’s financial centre (DIFC) is used by several bank and non bank financial institutions, insurance firms and asset management firms;
- Lastly, if you start a Dubai business, you can get easy access to local currency as there are no exchange controls in the country.
Dubai business registration guide
Problems with Dubai company registration
Before investing in Dubai, foreign entrepreneurs should be aware of the following challenges:
- Registering a business in Dubai can be expensive due to i) multiple government fees and ii) compulsory office rentals;
- To start a Dubai business, a foreign entrepreneur must legally appoint a UAE national as a shareholder or as an agent. 51% shareholding of all Dubai companies must belong to a UAE citizen;
- A business in Dubai will suffer as the city is uniquely susceptible to a terrorist attack. A terrorist attack would have a devastating impact i) on the property prices ii) on the economy iii) on foreign investment iv) on the personal safety enjoyed by residents and tourists and v) business confidence;
- The majority of company visas and licenses are sponsored by UAE nationals, giving the latter indirect control over the Dubai business;
- The city’s business practices and laws still favor UAE nationals over foreigners in business disputes. As a result, disputes with UAE shareholders and agents can make business in Dubai difficult;
- Over the past few years, the government tenders have favored i) UAE nationals and ii) Dubai company with UAE nationals;
- If creditors petition winding up of a Dubai company and the court auditors find incomplete accounting records explaining insolvency, then shareholders and directors will personally pay outstanding company liabilities;
- Upon his death, the shareholding of the UAE partner in a Dubai company will be transferred to his family;
- During company registration and corporate bank account opening, the Dubai Government frequently requests documents to be attested by the Dubai Embassy in the country of origin of our Client. This is both a costly and time consuming exercise and complicates the company registration process. Examples of documents include: i) parent company certificate of registration and M&AA; ii) parent company share certificate or certificate of incumbency; iii) parent company certificate of good standing; iv) Board Resolution issued by the parent company; and v) power of attorney issued by the parent company.
Best uses for a Dubai company
Gateway to the Middle East and Africa
- Dubai is the historic trading hub in the Middle East and Africa (MEA). Due to its strategic location and well developed shipping sector, the city currently hosts several international trading companies and freight and shipping companies;
- Dubai boasts highly developed logistics and transportation infrastructure, making the city a perfect choice for product distribution. Furthermore, the city allows duty free exports to 17 Middle Eastern countries which encourages foreign investors to opt for offshore company formation in Dubai;
- Dubai is the most business-friendly city in the MEA with simple import/export policies and no trade barriers. Several international banking firms and non bank financial institutions operate here, making the city an excellent source for trade finance facilities.
- Most cities in the MEA region do not view foreign companies positively. By contrast, a company registered in Dubai will benefit from the most liberal business laws in the region, while giving it access to Middle East, African and Asian markets;
- Offshore business solutions in Dubai are available to foreign entrepreneurs which allow them to register a legally tax exempt company to extract funds in the form of dividends, management fees, and royalties from regional subsidiaries;
- Besides, being business friendly, Dubai is also the most livable city in the MEA due to well-developed infrastructure for both residential accommodation, studies, work, entertainment and tourism.
- Registering a business is Dubai allows access to several other international entrepreneurs as 80% of the city’s population is foreigners. This forms the perfect ingredients for creativity and exchange of skills across industries and cultures, stoked by the free market environment. The East and West blend quite happily in the city;
- The city is a paradise for high net worth foreign entrepreneurs due to its location in the heart of one of the world’s richest nations. Also, Dubai life is highly luxurious as the city houses many of the world’s biggest brands.
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