At a time where the world is in battle with the pandemic UAE’s riches financial wealth grew by $600bn despite Covid-19 headwinds. Based on published reports it is projected that UAE’s economy is expected to grow at a faster pace in 2022 amid the Expo boost and digital economy push. Forbes in its September 2021 article has stated that “World's millionaires are moving to Dubai for safety, luxury and tax benefits”.
UAE recently allowed 100% Ownership of businesses to Expat Investors & has significantly eased out on immigration norms for the wealthy by issuing 10 Year Golden Residency. Also, the Government of Dubai has been on war footing to push the economy for growth by introducing various stimulus packages. Anticipating certain growth of the economy this would indeed be the best time to capitalize on the opportunities and establish your business in Dubai. Dubai has accounted 69% growth in business licenses issued.
Business Setup in Dubai
Starting business in Dubai has become easiest for the investor than ever before as the government has also offered various incentives to investors to help them grow effortlessly. However, for a sound startup and to ensure constant growth it is essential to understand right entry strategy, optimal tax structure, and appropriate company legal structure for expansion or diversification. UAE’s federal structure for business setup is classified in 2 categories Mainland & Freezone. Which will be the best option either Mainland or Freezone company is subject to the nature of industry, demography of the consumer & logistical support.
What is a Mainland Company?
Mainland companies are considered as one of the most advanced and flexible business entities in the UAE. In addition to that, in terms of professional and commercial licenses, mainland companies have full authority to conduct business freely across UAE. Now with the recent amendment to the companies law you can now be 100% Owner of your company without partnering with a UAE National.
Free Zone Company
If your objective is to establish your business in Dubai but you are likely to trade outside of UAE or in international markets, then Freezone Setup is the place for you. Apart from 100% ownership of your business there are benefits of foreign exchange controls. There are 45 self-governing free zones throughout the United Arab Emirates. Many free zones are setup with a core focus on certain sectors that include financial services, ports and logistics, telecom, and others
Take Expert Advice on Entry Strategy to Setup a Business in Dubai
Business setup in Dubai is a matter of professional expertise and judgement. Determination of the most appropriate company legal structure is subject to your country’s tax and legal regulations.
The most utilized legal forms for mainland and freezone entities in UAE are:
- LLC – Limited Liability Company
- Est – Sole Establishment – Single Shareholder
- Branch – Foreign Co. or a Local Co.
- Representative Office - Foreign company
- Subsidiary – 100% Subsidiary of a Foreign Co.
- FZE – Freezone Establishment – Single Shareholder
- FZCO – Freezone Limited Liability Co – Minimum 2 Shareholders
Double Tax Treaties (DTTs) and Tax Residency Certificate (TRC)
UAE has a wide network of 127 Double Tax Treaties DTTs, of which 91 are in force. Interestingly, the country has a DTT in force with Saudi Arabia as well – as usually GCC countries don’t have mutual DTTs. For optimal tax structure and to avoid double taxation investors and business houses can take the benefit of the DTT & TRC.
Economic Substance Requirements & CbCR
UAE government has introduced “Economic Substance Requirements” for UAE entities in order to locally maintain “economic substance” pertaining to certain types of business and economic activities and revenues. Economic substance typically comprises premises, employees, costs and management. The regulations shall apply to any local entity that is engaged in conducting relevant activity. It has also introduced and implemented domestic CbCR rules with certain requirements that apply to entities that are considered as “tax residents”.
Dubai – Next Gen for Corporate Growth
- No Withholding Tax.
- No Transfer Pricing Regulations.
- No Thin Capitalization
- Value Added Tax @ Standard Rate of 5%, with Zero Rates for Exports.
- Customs duty rate @ 5% on the majority of goods entering the GCC
- Once paid in Dubai, UAE, no further duty should be generally applicable within GCC states.
- Excise tax is only applicable to certain goods including energy drinks, carbonated drinks, sweetened drinks and juices, tobacco products and tobacco.
- 4% property transfer registration fee is applicable on transfer of real state.
Avyanco is a professional services firm offering a range of corporate advisory services for domestic and global business of all sizes. The firm enhances value for clients by focusing on solutions that are innovative yet practical, and that can be implemented. This is achieved by blending domain expertise with analytical rigor while maintaining an uncompromising focus on quality, and by hiring and nurturing high quality professionals with a passion for excellence. We are committed to making a difference to clients and to its people and delivers this through the integrity of its efforts and by living its core values. We have helped thousands of investors to successfully set up their businesses across the UAE successfully.
Director Finance - Avyanco Group