Benefits of setting up your business in the UAE
On June 25th Creative Zone organised a webinar to educate people on gaining Dubai residency by setting up a business. As the UAE continues to remain a coveted place amongst foreign investors and global nomads to set up a regional base that has good connectivity, ease of doing business and favourable tax and fiscal structure. The process of setting up a business in the UAE requires a thorough knowledge of the system and understanding the business landscape. Creative Zone’s business set up advisors addressed the commonly asked questions and educated the participants about getting residency in the UAE through company formation. The panellists comprised Nilesh Ashar, Tax Partner, KPMG, Alistair Paine and Jamie Harvey, Business Setup Advisors, Creative Zone. The session was moderated by Lorenzo Jooris, CEO, Creative Zone.
HIGHLIGHTS
WHY DUBAI?
The UAE and Dubai, in particular, has always been one of the top cities that people chose to migrate. Connectivity will be key to the growth of all future megacities and is the reason for Dubai’s rise as one of six truly global cities in the world. The large coastline and the global aviation hub eases the transportation and connection of people from all around the globe to come together in one place. The country’s free economy is always open to foreign business and investment, and the government policies are extremely favourable for the business landscape and the SMEs. A range of support is offered by the government for the companies who are looking to set up a business in Dubai. Also, businesses operating in the free-zone have permission to be 100% foreign owners with minimum import duties.
The tax structure of the country is one of its most attractive features. There is no federal income tax and corporate tax is applied only to the banking and oil industry. VAT has been fixed at the nominal rate of 5%, making the UAE’s tax and fiscal landscape one of the best in the world.
Tax Residency Certificate for investors launching a business vehicle in the UAE
One of the key questions that foreign investors ask while setting up a banking or trading vehicle in the country is whether they can obtain a Tax Residency Certificate? Yes, depending on nature and structure that Creative Zone will set up for the client, one can get a Tax Residency certificate. To be qualified for tax exemption one needs to have a residency visa that will allow them to get an Emirates ID, proving a person resides in the country. Next, one has two option for setting up a business- Mainland and Free Zone, acquiring a license in any of these two jurisdictions will allow you to open bank accounts and conduct business overseas, and generate local invoices for international transactions.
What are the benefits of setting up in Free Zone and Mainland?
It will entirely depend on the nature of the business, whether one is conducting some business locally or is it only used for invoices. If the business is mostly conducted outside the country then getting a FreeZone license makes more sense alternatively Mainland license has increasingly become a popular choice ever since the traditional regulations have been lowered. The new FDI laws now allow 100% ownership by the expats.
Tax Benefits
The tax structure in the UAE is very straightforward, on an individual level, there is no personal/Income tax. There are also no corporate taxes on the profit that your company makes. Since the UAE Dirham is pegged with the American dollar, the fiscal environment is also very stable.
Apart from that UAE has a very strong double tax treaty with many countries including African nations. Where if the company is based in the UAE and has made profits in another country, the taxes withheld by the country can be lowered due to the double tax avoidance treaty.
How competitive is Dubai’s market when it comes to setting up a company.
The amount is determined by the jurisdiction but setting up a company in Dubai can start with as low as around 2000$ in Free Zones and around 5000$ for Mainland.
How many visas can one get by setting up a company in Dubai?
Creative Zone is a one-stop-shop when it comes to setting up in Dubai. The Creative Zone’s team will begin by taking the passports to start the visa process, then comes the medical and once the owner’s visa is processed they can sponsor their wives, parents, children even domestic help. The concierge department of Creative Zone takes care of all the paperwork and ensures that it is aligned with the UAE law, which essentially means that the Birth certificate and Marriage certificate are attested by the Government here and the country where one was born/married, the same then has to be translated into Arabic, all of this is done under one roof by Creative Zone. The process from start to end takes up about 36 days, however, the expat doesn’t need to be in the country for the entire duration they only need to be physically present for 7-8 working days till their visa is stamped.
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How will CZ help companies open a bank account since it’s one of the most tricky things
Setting up a company is a very straightforward process, what is tricky is to open a bank account if you don’t know what exactly is to be done. Creative Zone’s concierge team’s main focus is also on opening company’s bank accounts, they maintain relationships with various bankers in the country and can advise which one will suit the company’s needs the best. They do this by acquiring some documents before engaging with the banks and understanding the nature of the business, its overview, where is the funding coming from etc. So, the concierge team will have a confirmation before opening an account.
How many days does one need to stay in the country to get a tax residency certification?
According to the new OECD law, one needs to stay in the UAE for 183 days in order to be qualified for tax residency certificate. Apart from that, they need to show a lease agreement and a bank account statement of the last six. Based on these documents the ministry of finance will issue a tax residency certificate that has to be renewed every year with the same documents. For the home or any other country, it is mostly 180-13 days threshold for a person to qualify as a non-resident and if the person has stayed in the UAE for more 183 days, his/her Global income will be taxed in the UAE(where there are not taxes) but if any income was generated outside the UAE it will be only that income which will be taxed.
How beneficial is the setting up of big Holdings, Special Purpose Vehicles, trusts etc?
It is quite beneficial, the UAE has two regulated Free Zones- Dubai International Financial Center (DIFC) and Abu Dhabi Global Market (ADGM). These two Zones follow the English-welch common law and if you are someone who is looking to structure a trust or SPV in these areas then you can take advantage of the well-connected geographical location together with the tax benefits.
Difference between Mainland and Free Zone
A Mainland license allows one to carry out business at the onshore part of the city, most Mainland companies have a 49% and 51% ownership arrangement, where the larger portion percentage is owned by a local representative, in some even 100% and in others expats are allowed to own 100% of the business.
Free Zones are a kind of Special Economic Zone (SEZs) spread all across the UAE. There are more than 50 such zones and are dedicated to specialised industries like Shipping, logistics, Media etc.
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Mainland Company |
Free Zone Company |
Offshore Company |
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Ownership |
An expat can acquire only 49% of the company shares. Remaining 51% must be acquired by a local sponsor |
A free zone company has no such restriction. The foreign expat can hold complete 100% shares of the company. Neither a local partner nor a service agent is needed to start a company |
An expat can have full ownership of the company only if it’s located outside the UAE An offshore company cannot have any physical presence in the UAE |
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Business Scope |
A company present in the mainland is free to do business anywhere in the UAE. They are allowed to do business inside any free zone in the emirates |
Unlike mainland, a free zone company is not usually allowed to business (manufacturing and selling) outside its free zone. |
They are free to business outside the emirates. They are restricted from doing business inside the UAE |
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Audit |
The mainland companies must prepare audit at the end of every financial year |
Not all FZ companies are required to audit, except some businesses.This includes free zone companies (FZCO) and free zone establishments (FZE). |
Offshore company does not have to prepare audits. |
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Visas |
A residence visa is given depending on the size of the office/ work premises |
A residence visa is given depending on the size of the office/ work premises |
Since there is no need of office space, an offshore company is not issued with residency visa |
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Capital requirement |
Minimum capital requirement for a company on the mainland vary according to the legal form of business |
A free zone company has a minimum capital requirement depending on the emirate it belongs to |
An offshore company in the UAE has no minimum capital requirement |
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Privacy/Secrecy |
The details of a Mainland company is available to the general public upon request |
The details of a free zone company is available to the general public upon request |
The names and identities of owners, directors and shareholders of offshore companies are not made public |
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Govt Authorities for Company setup |
They need to take permission from authorities like DED, Ministry of Labor (MIL), Dubai Municipality, Ministry of Interior (MOI) etc. |
Free zones have their own rules for approval of any company inside its jurisdiction and they don’t require approvals from authorities outside of the free zone. |
Ras Al Khaimah (RAK) and the Jebel Ali Free Zone (JAFZA) offer offshore formation. The free zone authorities of that jurisdiction look after their approval |
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Cost of Company Set up |
High |
Medium |
Low |
