United Arab Emirates is a land of opportunities. The country is a shining example of visionary leadership and foresight of the founding fathers of the nation. The adaptability of the leadership to the changing economic landscape to be competitive and offer the best environment for investors to invest and conduct business in the UAE.
UAE is also strategically positioned geographically as a gateway to the MENA region and offers logistics and connectivity to the world, making it a very attractive investment destination. UAE ranks 11th as per World Bank’s annual Ease of Doing Business survey 2021.
Different types of companies that can be formed in UAE can be broadly divided into Mainland Companies and Free Zone Companies.
The main difference between a mainland company and a Free Zone is that a Mainland Company is formed by virtue of Commercial Laws of UAE and can operate anywhere in UAE, including mainland UAE, free zones and overseas. Whereas, Free Zone companies are formed in specific zones with the specific laws as applicable to free zones. Free zone companies can operate only within the same zone or overseas.
Most commonly used Mainland structures by investors are into Establishments, Civil Companies, Single Company Limited Liability Companies and Limited Liability Companies. There are other forms which are Public Joint Stock company (PJSCs) etc., which are used by very large companies.
With recent changes to the Commercial Laws, the majority of the business can now be owned by expats or local nationals directly as Sole Establishments, or through assigned Local Service Agents. Expats are allowed 100% ownership in more than 1000 commercial or industrial activities and there are some activities that require 51% shareholding by local UAE nationals and 49% shareholding by expats. Some industries or sectors of strategic importance are governed by additional compliance, requirements and generally only open to local national investors.
Free zone companies allow 100% shareholding ownership and are permitted to operate with the same zone where they are registered or where companies are looking to trade or operate in countries other than UAE. There are over — different zones in UAE, and some of the zones are very specially designed to cater to certain kinds of companies – TECOM- designed to foster the promotion and incorporation of Technology companies, Design companies, etc.
The top 7 advantages of establishing a company in UAE are as below:
a. Ease of Incorporation process: Whether to form a company in Mainland or Free Zone, the formation process is easy and standardized. Wherever the shareholders are individuals the process is pretty simple and straightforward. The document requirements are also the standard set of documents such as passport copies, education certificates, entry stamp, where it requires the investors to be in UAE, CV of the investors, shareholding pattern, activity to be conducted in UAE as per the published list, and three options of names to be chosen from.
b. Minimal Tax Compliance: At present the businesses in UAE have only VAT compliance to be adhered to, again subject to the minimum (AED 375,000) turnover limits that a business makes by operating in UAE.
– Other than VAT, depending on the nature of product, additional compliance such as product registrations (valid for a 5-year period) and customs on import.
– With introduction of Corporate Taxes on profits announced recently, that would be an additional compliance to be adhered to. At present there are no personal income tax levied or collected in UAE.
c. Simple Tax Structures: Unlike some economies, the present VAT rules and VAT rates are very simple. For companies registered or incorporated in mainland or free zone – there are only two rates – one standard rate – which is at 5% and the other which is an export rate which is at 0% for supplies made within the same zone or exports (subject to certain conditions).
d. Defined Labor Laws: Laws of employment are pretty simple and clear for the employers to follow and all the more beneficial for employees which offers protection in terms of timely payments through Wage Protection Systems, and Gratuity and end of service payments etc. Employees also enjoy a one month paid holiday for every year of completed service and mandatory air tickets once in two years and so on.
e. Ease of Opening and Operating Bank Accounts: Earlier it was very painful and long drawn process to open and operate a bank account for companies. With introduction of new age online and digital transactional banking, many banks have introduced Zero Balance Accounts for new companies which enable the investors to operate the company and stabilize their business without blocking funds in the bank account towards minimum balance maintenance.
f. User-friendly Customer Services: One of the most attractive features in starting a business in UAE is the presence of world-class customer service of the Government Departments who are available to resolve any of the queries an investor may so have in relation to establishing the company and operating the same in UAE.
g. Connectivity to the World: The important element while establishing a business in UAE is that it acts as an entry into the middle eastern countries and provides a gateway to the world and offers world-class connectivity to all the parts of the globe with flight connectivity, sea connectivity for cargo shipping and banking systems to support the business transactions.
Apart from these reasons, it is also important to note that UAE has the world-class IT and Telecom infrastructure and the internet penetration is close to 100% leaving all classes and categories of society covered with easy and low-cost access to internet and data facilities.
To sum up, UAE now offers to the world a vibrant platform of investment opportunities and ease of doing business. While the market size of the UAE itself is small, the opportunities of reach out to the rest of the world is one of the most advantageous and strategic locations to be situated in and do business from.
To know more about the details of starting up a company please do connect with us at Centurion Consulting.