Benefits and problems of registering a company in the UAE
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Benefits and problems
Benefits of UAE company registration
United Arab Emirates has the 2nd largest economy in the Arab World, with its GDP having grown 231 times since 1971. This has been the result of the country’s extensive oil reserves, its growth as a transport and aviation hub and its liberal business environment.
Dubai and Abu Dhabi are the two major financial centres in the Middle East. UAE offshore facilities are major attractions for foreign capital. However, UAE is not blacklisted as a tax haven by either the OECD or the FATF.
If properly structured, a UAE company is an ideal way to legitimately book international profits without paying local corporate taxes. In addition, foreign entrepreneurs resident in UAE pay no personal income tax, capital gains tax, withholding tax or value added tax (VAT).
- Investors in UAE free zones generally enjoy the following benefits: i) 100% foreign ownership of the enterprise ii) 100% tax exemptions on imports and exports to and from the free zone iii) unrestricted repatriation of capital and profits iv) corporate tax exemptions for up to 50 years v) no personal income taxes vi) assistance with labor recruitment and additional support services, such as sponsorship and housing;
- There are 38 free zones operating in the UAE. These include:
- Abu Dhabi Airport Business City Free Zone, which focuses on aviation, defence, freight, logistics and professional services;
- Technopark, which attracts research and development operations from industries as diverse as energy, water, health and engineering;
- Dubai Academic City, which caters to education providers delivering their products both online. The free zone also accepts general services businesses including i) insurance providers ii) law firms iii) hospitality and leisure establishments and iv) call centres and administrative offices;
- Dubai Gold and Diamond Park, which specialises in the processing, manufacturing and sales of precious materials and jewellery; and
- Creative City, which serves media companies establishing themselves in the UAE.
- UAE boasts the highest per capita incomes in the Middle East. Therefore, a high demand for foreign goods and services exists in the country.
- UAE is establishing world class industrial zones through economic diversification with priority given to petrochemicals, building materials, chemical industries, metal industries, food industries, oil and gas services, and transportation sectors.
Problems with UAE company registration
It is important that our Clients be aware of the potential challenges they might face while operating a UAE company:
- Operating a company in the UAE can be very costly due to high incorporation costs and complex corporate laws. For example, in addition to the government incorporation fees of an LLC, investors must pay to the government 5% of the annual lease rent of the office premises;
- An onshore company can not be wholly foreign owned. Therefore, a foreign company must legally appoint a UAE national as a shareholder or as an agent in order to market products within the country. For example, a Dubai LLC must be 51% owned by a UAE citizen;
- The government tenders favor i) UAE nationals ii) companies with UAE nationals. Disputes with shareholders and agents cause serious problems for foreign investors. For example, Abu Dhabi courts can impose precautionary restraint on company assets pending the adjudication of a commercial dispute;
- Majority of visas and licenses filed on the behalf of the company can only be sponsored by UAE nationals;
- The UAE offshore company can neither trade products or provide services within the country, nor rent local premises;
- Share capital is payable before the business registration process is complete. Healy Consultants will arrange for the share capital to be lodged into a resident bank, which will issue a certificate confirming the same. This certificate is presented as part of the incorporation process;
- While incorporating in the free zones, our Clients will be required to comply with national laws, emirate laws and individual free zone laws which can be highly complicated and cumbersome;
- The business license registration process in UAE can often take up to 6 months for completion.
Best uses for a UAE company
Gateway to the Middle East and Africa
- A UAE business allows foreign entrepreneurs to tap into the lucrative growth of the Middle Eastern and African (MEA) markets. Emirates like Dubai and Sharjah boast highly developed infrastructure, making the country the perfect distribution center for trading companies;
- Dubai and Abu Dhabi are the most business-friendly cities in the MEA region. In addition to world class infrastructure, these cities have highly liberal trading policies with no quotas or barriers to discourage foreign investments. Furthermore, companies in these emirates enjoy a highly favorable image across the globe;
- There are no restrictions on inward UAE investment, currency accounts, or the repatriation of capital and earnings for resident businesses.
- Foreign investors can set up a tax exempt UAE company that allows them to collect proceeds from subsidiaries incorporated within MEA region;
- The UAE is the most liveable country in the Middle East, at the confluence of East and West. Liberal laws along with first-class work, residential infrastructure and low taxes have made the country highly attractive for foreign businesses;
- According to the World Economic Forum 2015 – 2016 Competitive Rankings, UAE has the world’s best roadways, 2nd best aviation infrastructure, 3rd best ports and overall world’s best transport infrastructure. Hence, a UAE resident company can serve as a regional distribution headquarters for our Clients.