Benefits and problems of registering a company in the UAE

Benefits and problems of business registration in UAE

Benefits of UAE company registration

  1. The UAE is the preferred destination for the foreign investment in the Middle East because:
    • UAE ranks 17th in the world in the Global Competitiveness Index and number one in the Arab Word with the best business environment and infrastructure;
    • The country 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;
    • The two major financial centers, Dubai and Abu Dhabi are both located in the Middle East and provide offshore facilities that are major attractions for foreign capital;
    • Despite offering lucrative tax advantages, United Arab Emirates is not blacklisted as a tax haven by either the OECD or the FATF;
    • With the preparations for the Dubai Expo 2020 underway, the country’s economic growth is expected to accelerate and spur business development.
  2. Our Clients setting up in the United Arab Emirates will benefit from numerous tax advantages including:
    • If properly structured, a UAE company is an ideal way to legitimately book international profits without paying local corporate taxes;
    • Exemption from income tax for both foreign entrepreneurs resident in UAE and company employees working in the UAE;
    • A simplified financial reporting system that is not obligated to annual statutory auditing;
    • Exemption from capital gains tax, withholding tax or value added tax (VAT).
  3. Our Clients registering their businesses in the UAE Free Zones will benefit from:
    • 100% foreign ownership of the enterprise;
    • Corporate tax exemptions for up to 50 years and complete tax exemptions on import and export duties;
    • There are no exchange controls and no restrictions on repatriation of capital and profits abroad;
    • Availability of readymade ultra-modern offices, warehouses and factories;
    • Assistance with labor recruitment and additional support services, such as sponsorship and housing.
  4. The UAE is an attractive jurisdiction to establish a global offshore company because:
    • An offshore company can be 100% foreign owned and only requires one director of any nationality who must not be resident in UAE;
    • The entity is 100% exempt from taxation on international business activity and income. Additionally, no auditing is required;
    • This entity provides higher level of confidentiality as directors, shareholders and UBOs are not disclosed to the public;
    • Registering an offshore company is fast and straight forward and all corporate documents can be provided in English.
  5. Other aspects that make United Arab Emirates attractive for setting up a new business include:
    • UAE has a high demand for foreign goods and services and thereby has the highest per capita incomes in the Middle East;
    • 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;
    • It is cost-effective and easy to recruit foreign employees from all over the globe due to the country’s liberal labour policies;
    • The country permits foreign ownership of properties, is home to perfectly organized infrastructure and exhibits very minimal crime rates.
  6. The economy of UAE is a pro-immigrant and business-friendly economy
    • There are no limits on the number of employment visas that a company can procure to hire its foreign employees. Moreover, the recruitment process of foreign workers is quite simple and hassle-free;
    • A wide range of business activities are available for which licenses can be procured easily;
    • The services sector is fairly advanced and supports the growth of international trade through global merchant accounts, and other sophisticated financial instruments.
    • Post adoption of the common tariff for GCC countries, custom duties are now 5% of the CIF (Cost, Insurance, and Freight) value of majority of the products;
    • Office spaces are readily available mostly anywhere along with benefit of flexible rent.

Problems with UAE company registration

  1. Effective 1 January 2019, UAE onshore and free zone companies engaging in i) holding company activities ii) banking business iii) distribution and service centre business iv) finance and leasing v) fund management vi) headquarters business vii) insurance viii) intellectual property holding and ix) shipping are required to employ local staff and lease a physical office. For more information on UAE economic substance requirements, click here;
  2. Our Clients setting up and operating businesses in the UAE stand to encounter challenges because:
    • Each Emirate and Free Zone within the UAE has its own corporate laws that govern company setup process that can be complex and time consuming;
    • Setting up a local limited liability company in mainland Dubai requires mandatory 51% UAE national shareholding and thereby cannot be wholly foreign owned;
    • Operating a company in the UAE can be very costly due to high business setup costs and demanding rental requirements and costs;
    • The government tenders favor UAE nationals and 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.
  3. Our Clients setting up in the UAE Free Zones will experience certain limitations including:
    • Free Zone companies are only license to operate within the Free Zone boundaries and may not transact elsewhere in the UAE;
    • Trading companies registered in the Free Zone must appoint a local agent or distributor in order to trade their products within the country;
    • Free Zone companies must appoint a locally approved audit firm before commencement of activity within the Free Zone;
    • Different Free Zones impose i) minimum requirements for office and warehouse space and ii) restrict the number of employment visas per space;
    • While incorporating in the Free Zone, our Clients will be required to comply with national laws, emirate laws and individual Free Zone laws which can be highly complicated and cumbersome.
  4. Other limitations that our Clients establishing their business in the UAE stand to encounter include:
    • Majority of visas and licenses filed on 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 must be deposited 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;
    • Depending on the Emirate and type of activity, the business license registration process in UAE can often take up to 6 months to complete.
  5. UAE does not have a high quality of human capital due to its poor primary and tertiary education levels as well as poor health service facilities for its workers
    • 87% of Emirati nationals work in either government or semi-government organisations;
    • UAE has been ranked 38th out of 140 countries in terms of competitiveness in health and primary education on the 2018 Global Competitiveness Index;
    • The nation got 37th rank in terms of its competitiveness in higher education and training on the 2018 Global Competitiveness Index.

Best uses for a UAE company

  1. Gateway to the Middle East and Africa
    • A UAE incorporation allows foreign entrepreneurs to tap into the lucrative and growing markets of the Middle Eastern and African (MEA) region. Emirates like Dubai and Sharjah boast highly developed infrastructure, making the country a perfect distribution center for trading companies;
    • Dubai and Abu Dhabi are the most business-friendly cities in the MEA region. In addition to a world class infrastructure, favourable business regulations as well as an open and politically stable economy, 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.
  2. Regional headquarters
    • Foreign investors can start a new tax-exempt company in UAE that allows them to collect proceeds from subsidiaries incorporated within the MEA region;
    • The UAE is the most livable 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’s 2017 – 2018 Global Competitiveness Rankings, UAE has been ranked as the 4th best in infrastructure, 7th best for its macroeconomic environment and overall as the world’s 3rd best for having an efficient goods market. Hence, a UAE resident company can serve as a regional distribution headquarters for our Clients.

Contact us

For additional information on our business registration services in UAE, please contact our in-house country expert, Ms. Chrissi Zamora, directly:
client relationship officer - Chrissi