fallback-article

YOUR COMPREHENSIVE GUIDE IN COMPANY FORMATION IN THE UAE

Posted on 10/12/2023

Table of Contents

    FREQUENTLY ASKED QUESTIONS

    Why should I consider establishing my business in the UAE?

    The United Arab Emirates (UAE) presents a host of compelling reasons to set up your business there. With its strategic location, political stability, world-class infrastructure, tax benefits, diverse and growing economy, access to global markets, and business-friendly environment, the UAE offers a fertile ground for entrepreneurial success. The federation comprises seven emirates, namely Abu Dhabi, Dubai, Sharjah, Ajman, Fujairah, Ras Al Khaimah, and Umm Al Quwain.

    What are the types of companies that can be formed in the UAE?

    In the UAE, you have several options for company formation, each with its own advantages and limitations. These include mainland companies, free zone companies, and offshore companies. Mainland companies allow you to conduct business throughout the UAE, while free zone and offshore companies offer specific benefits and restrictions tailored to your business objectives.

    What is a mainland company?

    A mainland company refers to a registered and licensed business entity that can operate anywhere within the UAE. It grants you the ability to conduct business in the local market and engage in government contracts, providing extensive market access and opportunities.

    What are free zone companies?

    Free zone companies cater to businesses focused on international trade and services. They offer incentives such as 100% foreign ownership, tax exemptions, simplified regulations, and customs benefits. However, they have limitations on conducting business within the local UAE market. Free zones are designated areas with specialized facilities and regulations designed to promote business growth.

    What are offshore companies?

    Offshore companies in the UAE are non-resident entities established primarily for asset protection, wealth management, and international investment purposes. They provide benefits like privacy, tax optimization, and ease of conducting international business operations. It’s important to note that offshore companies cannot engage in business activities within the UAE market.

    How do I choose the right company structure in the UAE?

    Selecting the appropriate company structure in the UAE depends on various factors, including your business objectives, target market, industry, and operational nature. To make an informed decision, it is advisable to seek guidance from experienced legal and business advisors like IsraEmiratesLink. Their expertise and insights can help assess your specific requirements and guide you through the decision-making process, ensuring you choose the most suitable company structure for your venture.

    Why should I consider establishing my business in the UAE?

    The UAE offers numerous advantages for businesses, including its strategic location, political stability, world-class infrastructure, tax benefits, a diverse and growing economy, access to a global market, and a favorable business environment.  The country has excellent infrastructure, a stable political landscape, and a diverse economy, offering ample growth opportunities. The welcoming and cosmopolitan atmosphere, coupled with a skilled workforce, makes the UAE an ideal choice for businesses aiming for success and international expansion.

    What are the types of companies that can be formed in the UAE?

    You can establish different types of companies in the UAE, including mainland companies, free zone companies, and offshore companies. Mainland companies allow you to conduct business throughout the UAE, while free zone and offshore companies offer specific advantages and limitations.

    Do I need a local sponsor to establish a company in the mainland?

    Previously, local UAE sponsors were required for mainland companies, but recent initiatives and regulations allow for 100% foreign ownership in certain sectors and activities. The availability of 100% ownership varies based on the emirate and prevailing regulations.

    What is an LSA, and do I need it to establish a company in the mainland?

    A local service agent (LSA) is a UAE national or a company wholly owned by UAE nationals who acts as a representative or sponsor for mainland companies. They facilitate legal and administrative requirements but do not have ownership or financial involvement in the business.

    How long does it take to register a company in the UAE?

    The registration timeframe depends on the company type and emirate. Mainland company registration typically takes 7 to 14 days, free zone registration ranges from 1 to 4 weeks, and offshore company registration usually takes 1 to 2 weeks.

    Can I choose any business activity for my company in the UAE?

    The UAE offers a wide range of business activities, but some may require additional approvals or licenses. It’s important to ensure your chosen activity aligns with the selected company structure and jurisdiction.

    What are the document requirements for company formation in the UAE?

    Required documents include passport copies of shareholders and directors, Memorandum and Articles of Association, lease agreements for office or warehouse space, power of attorney (if applicable), and additional documents specific to certain activities.

    Do I need a physical office space for company formation in the UAE?

    Physical office space is generally required for mainland and some free zone company formations, although specific requirements may vary. Flexible office solutions cater to different business needs.

    Can I open a corporate bank account in the UAE for my company?

    Yes, once your company is registered, you can open a corporate bank account. Each bank has its own requirements, which typically include company documents, shareholder information, and proof of address.

    Can I apply for residency visas for myself, employees, and family?

    Once your company is established, you can apply for residency visas. The requirements and procedures may vary based on company structure and emirate. Family sponsorship is possible once you obtain your own visa.

    Do I need to renew licenses for my company?

    Yes, company licenses in the UAE require annual renewal. This involves submitting documents, paying fees, and meeting regulatory requirements. Timely renewal is crucial to avoid penalties or disruptions.

    What is an LLC (Limited Liability Company)?

    An LLC is a popular business entity in the UAE that combines aspects of a partnership and a corporation. It provides limited liability protection to shareholders while offering flexibility in management and operations.

    What is a sole establishment in the UAE?

    A sole establishment, or sole proprietorship, allows individuals to own and operate a business without a local sponsor. While it offers 100% ownership, the owner is personally liable for all debts and obligations of the business.

     

    What are the taxation policies in the UAE?

    The UAE boasts a favorable tax environment, with no personal income tax imposed at the federal level. In 2018, the country introduced Value Added Tax (VAT) at a standard rate of 5%. Recently, from 1 June 2023, Corporate Tax (CT) has been implemented at a standard rate of 9%, making it the lowest corporate income tax rate within the GCC region.

    What is VAT?

    VAT, or Value Added Tax, is an indirect consumption tax applied to the supply of goods and services. It is added to the final price of the goods or services provided. The standard VAT rate in the UAE is 5%, with few exceptions for specific goods and services.

    Who is required to register for VAT in the UAE?

    Businesses must register for VAT if their annual taxable supplies and imports exceed the mandatory registration threshold, currently set at AED 375,000. Voluntary registration is also permitted for businesses with an annual turnover between AED 187,500 and AED 375,000.

    What are the benefits of being VAT registered?

    VAT registration enhances your business’s credibility and professionalism, instilling trust among customers, suppliers, and partners. It ensures compliance with legal requirements set by the Federal Tax Authority (FTA), helping you avoid penalties and legal complications. Moreover, VAT registration enables you to recover the VAT paid on your purchases (input tax) by offsetting it against the VAT collected from your customers (output tax). This reduces your overall tax liability and improves cash flow.

    What is Corporate Tax (CT)?

    Corporate Tax (CT) is a direct tax levied on the net income or profit of corporations and other business entities. It is sometimes referred to as “Corporate Income Tax (CIT)” or “Business Profits Tax” in other jurisdictions. The UAE has introduced Corporate Tax from 1 June 2023.

    How is Corporate Tax calculated?

    According to Chapter Two of the UAE Corporate Tax, if the taxable income of a business does not exceed AED 375,000, the Corporate Tax rate is 0%. If the taxable income exceeds AED 375,000, the Corporate Tax rate is 9% of the excess amount.  Taxable income is defined as the net profit remaining after accounting for all deductions. The 9% corporate tax is applicable only when the taxable value surpasses AED 375,000.

    Categories

    Recent Posts