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Setting Up a Company in the UAE – Where? How? What comes next?

Setting Up a Company in the UAE – Where? How? What comes next?

25 April 2018

By: Suraya Turk

Part I: Where to set up in the UAE
Part II: How to set-up a company
Part III: Licensing and what comes next

Where to set up in the UAE

The United Arab Emirates (UAE) which consists of 7 Emirates and 45 free zones offers a variety of options to foreign investors who wish to set up a company. Deciding where to establish a company is a major decision that depends on your planned business activities, required infrastructure and the costs for obtaining and maintaining your new company’s license.

This article shall briefly introduce the basic conditions of establishing a company in the UAE.

1. United Arab Emirates

The United Arab Emirates (UAE) is a federation of seven emirates, established in 1971. The constituent emirates are Abu Dhabi (which serves as the capital), Ajman, Dubai, Fujairah, Ras al-Khaimah, Sharjah and Umm al-Quwain. In 2016, the UAE’s population was around 9.2 million, of which 1.4 million are Emirati citizens and 7.8 million are expatriates. The economically strongest and also most popular emirates are Dubai and Abu Dhabi. Although there are federal legislations such as Commercial Companies Law, Labour Law, Consumer Protection Law, Civil transactions law etc., each emirate can exercise its own sovereignty and is independent both from an organisational and legal perspective.

The UAE is renowned as one of the most investorfriendly countries in the Middle East. The investment environment within the UAE has witnessed significant changes over the past year and has improved the relevant legal and administrative framework substantially.

A foreign investor may choose between various opportunities when setting up a new business. The first and most important decision to make is whether to set up in the “mainland” or in one of
UAE’s free zones.

2. UAE Mainland – What does ‘setting up in the mainland’ mean?
The term ‘mainland’ refers to the territory of each Emirate except the free zones. Depending on where the investor plans to set up its business, the rules, regulations and require-ments of the chosen Emirate need to be consid-ered. The licensing process can vary widely from one Emirate to another.

The most relevant corporate forms available for foreign investors are:
1. Limited Liability Company
2. Branch of a foreign company
3. Branch of a free zone entity
4. Representative Office

The choice of a company’s legal form of incorporation is closely linked to the type of business. Generally, all forms of companies on the mainland require the participation of an Emirati citizen. In
the case of a limited liability company, an Emirati partner must legally hold at least 51% of that limited liability company. In the case of a branch, the branch can be wholly owned by a foreign
company or a free zone entity, however, a UAE national is required to be appointed as a Local Service Agent. The Local Service Agent manages licensing requirements and other governmentrelated
matters for the branch, in exchange for an annual fee. The Local Service Agent has neither any civil responsibility or financial obligations to the business of the branch nor shall he have any legal
interest in the management, business, profits or assets of the branch

3. UAE Free Zones
The UAE’s broad system of free zones provides modern facilities and infrastructure for doing business and are industry specific free zones. The first free zone at Jebel Ali (Dubai) was founded in 1985 and has provided international businesses and corporations with a logistical and commer-cial hub, connecting the East and the West.

Free Zones are zoned areas in the territory of the UAE where import, export and re-export to coun-tries other than the UAE are duty-free. The UAE Law applies in these special economic zones to a limited extent only. In fact, each free zone author-ity has issued their own rules and regulations de-termining the requirements and procedures for setting up a Free Zone entity.

The advantages of a free zone company are:
1. 100% foreign ownership of the entity
2. 100% import and export tax exemptions
3. No restrictions on repatriation of capital and profits
4. No personal and corporate income tax

Each Free Zone is designed around one or more business industry categories and only offers li-censes to companies within those categories. An independent Free Zone Authority governs each free zone, and is the body responsible for issuing operating licenses and assisting companies with establishing their business in the Free Zone.

Most common free zone corporate forms:
1. Free Zone Establishment (limited liability company one shareholder)
2. Free Zone Company (limited liability company with two or more shareholders)
3. Branch of a foreign company
4. Representative Office

Small selection of UAE’s free zones:
Abu Dhabi: Abu Dhabi Global Market (ADGM), Khalifa Industrial Zone
Dubai: Jebel Ali Free Zone, Dubai Multi Commodities Centre, Dubai Inter-net and Media City, Silicon Oasis, Dubai Financial Centre, Dubai Air-port Free Zone
Sharjah: Sharjah Airport Free Zone.                                                                                                                                                                                                                                                                                             Ras Al Khaimah: Ras Al Khaimah Free Trade Zone, RAK Investment Authority
Fujairah: Fujairah Free Zone
Um Al Quwain: Um Al Quwain Free Trade Zone
Ajman: Ajman Free Zone

4. What are the key factors in choosing your business location?

The key factors in choosing which Emirate to set up your business and whether to establish in the mainland or in one of the free zones of the UAE are the following:
1. Required license type and approvable business activities
2. Infrastructure (proximity to airport, sea-port etc.)
3. Prestigious reasons (e.g. customer traffic)
4. Ownership
5. Tax implications
6. Costs
7. Attractiveness and ease of access of the location for prospective employees.

Which criteria might be of importance for your business set up?

GERMELA-LOOTAH with its long-standing experienced team of legal consultants is always available to answer your questions and to guide you through your company’s set up.
For further information or assistance, please contact our colleagues at Germela-Lootah at +971-4-288-8345 or at info@germela-lootah.com

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