DUBAI • An offshore corporate formation offers unrestricted flow of capital and transfer of In Dubai , economic activity is regulated by assets globally individual emirates as well as the Federal • A Dubai corporate formation is attractive Government. Long recognized as the for entrepreneurs with an import-export leading regional trading hub in the Middle company, an international trading company East, Dubai has transformed itself in recent or intellectual property developers. It is years into a truly international business also common for independent consultants centre of global significance. Today, Dubai and contractors to make use of Dubai offers international companies an ideal company formation gateway for developing their business • No tax for majority of businesses throughout the Middle East, Asian subcontinent, East Africa, the Eastern The different types of companies available Mediterranean, CIS and Central Asia. in United Arab Emirates are as follows: Manufacturing, tourism and services are all growing strongly and steadily, helping to LIMITED LIABILITY COMPANY(LLC): create a well balanced and diversified economy. • Local & International Trade allowed • Office required Although Dubai was affected by the global • Visa provided recession, it has recovered well and • No minimum capital requirement stabilised. There were significant changes • No audit requirement implemented by the government to ensure • 51% shareholding held by local U.A.E. financial stability and protection. The national except for professional licenses, investments in infrastructure projects such where 100% shareholding is allowed as roads, bridges and public transport have continued inspite of the downturn. The FREEZONE COMPANY: economy is gradually coming back on track and has become the popular jurisdiction for • International Trade is allowed and local individuals and corporates. U.A.E. trade is possible only through a local distributor Dubai offers businessmen operating • Office required conditions that are among the most liberal • Visa provided and attractive in the region. Some of the • 100 % Foreign shareholding allowed and features are as follows: no local sponsor required• Dubai corporate formation is a legal way to OFFSHORE COMPANY: protect global assets• Dubai corporate formation projects are an • Only International Trade allowed excellent image to your clients, suppliers, • No office required banks and even potential venture • No Visa provided capitalists, since it is not considered an • No minimum capital requirement offshore tax heaven • No Audit requirement • 100% Foreign shareholding allowed and no local sponsor required
Types of Licenses issued in Dubai Taxation1. Trade License: A trade license is The UAE is no tax country. Accordinglyissued to a natural or juridical person to double taxation treaties are aimed at making Dubai a more attractive territory bypractice any trading activity for the purpose reducing taxation levied in the foreignof profit making through buying and selling jurisdiction on profits remitted abroad byof goods. These licenses are issued for foreign corporations operating in Dubai,engaging wholesale or retail trade with the exception of certain foreign oilenterprises, contractors, hotels, transport companies and branches of foreignand storing establishments etc., A Trading entities, where tax is payable. In the FreeLicense can be General Trading or Zones, a guaranteed tax holiday between 15 or 50 years is in force, depending uponSpecific Trading. A specific trading license the Free Zone location.limits the scope of activities to trade in onlyclosely related items. [For e.g. a company This tax environment has created many taxcan not trade in building materials, if its structuring opportunities and a interestinglicensed activity is trading in computer proposition for UAE entities. Transferperipherals] pricing and thin capitalization rules do not exist in the UAE and withholding taxes are2. Industrial License: An industrial license not levied. For employees too, there is lessis issued to a natural or juridical person to hassle, as personal income taxes andpractice any investment activity, the object wage taxes do not exist. Despite theseof which is to discover natural resources or important structural advantages, the UAEtransform raw materials in terms of its is often overlooked as a base for taxstructure or appearance into manufactured planning structures, inspite of the fact thatproducts or to transform the semi- the UAE Government has concluded overmanufactured products into fully 56 double tax treaties (“DTTs”). Countriesmanufactured products by using with whom DTTs have been signed includemechanical power and segregation of the many important players in the global arenaproducts, filling, assembling or packing such as China, France, Germany, India,them. Indonesia, Italy, Luxembourg, Malaysia, the Netherlands and Singapore.3. Professional License: A professionallicense is issued to a natural or juridical These make the region a more attractiveperson to practice any profession in which territory to operate by reducing taxationhe depends on his physical or mental levied in the foreign jurisdiction on profitsefforts rather than depending on a cash remitted abroad by foreign corporationscapital. This license is issued to practice operating in the UAE, as the UAE Ministrycertain professions such as engineering of Finance can issue UAE Tax Residenceconsultancy, other consultancy services Certificates to such companies. Given theand studies, auditing and accounting, fact that in principle UAE entities arebusiness set up, company formation, subject to tax, the UAE entities oftenmedical and educational services and qualify as ‘tax residents’ under DTTs.similar services
Investment Basics: located outside the free zone. Personal taxation:Currency-UAE Dirham (AED)Foreign exchange control-No Basics- Individuals are not taxed on theirAccountingPrinciples/financial income.statements- IAS/IFRS. Financial Residence-N/Astatements must be prepared annually. Filing status-N/A Taxable income- N/ATaxable income: Capital gains- N/A Deductions and allowances- N/AThere are no taxes imposed on the income Rates- N/Aof companies, except for oil and gasexploration and production companies andbranches of foreign banks. Administration and Compliance:Taxation of dividends- No Tax year- N/ACapital gains- No Filing and payment- N/ALosses- N/A Penalties- N/A Value added tax:Withholding tax: Taxable transactions- There is someDividends- No speculation that VAT may be introduced inInterest- No the future, but this has not been confirmedRoyalties- No at the time of writing.Technical Service fees- No Rates- N/ABranch remittance tax- No Registration- N/AOther- No Filing and payment- N/A Source of tax law:Anti-avoidance rules:Transfer Pricing- No Income tax decrees issued by 5 of the 7Thin capitalization- No Emirates (Dubai, Sharjah, Abu Dhabi,Controlled foreign companies- No Ajman and Fujairah) make up the UAE taxOther- No laws.Disclosure requirements- AnnualFinancial statements must be filed with theMinistry of Commerce by companies andbranches located outside the free trade zones. Entities located within a free tradezone report to the free zone authority of therelevant zone. These entities have neverofficially been requested to file or reportfinancial statements to a Ministry/Authority
Advantages of Dubai Company 6. Through a Dubai Branch Company,Formation international entrepreneurs can wholly own the entity and not be subject to an annual audit.1. A Dubai company is not perceived as aninternational tax haven. Dubai is a 7. To encourage Dubai companyreputable, highly regulated, international formation, the Dubai government offerstrading jurisdiction. Dubai is positively investor incentives, including low costranked as the 28th least corrupt country in energy and sound communicationsthe 2011 Corruption Perceptions Index infrastructure.by Transparency International, a globalmeasure of corruption amongst public 8. A wide range of licenses are availableofficials and politicians. In addition, Dubai depending on the type of business to behas also been ranked 27th by the World carried out. Many entrepreneurs obtain aEconomic Forum in its Global professional trade license which permitsCompetitiveness Report 2011-2012.Dubai them to submit invoices for services but notGovernment has concluded over 55 double reselling products, making it ideal fortax treaties. consultants.2.If properly-structured, Dubai companyincorporation is the perfect way to legallybook international profits without payinglocal corporation tax.3. Through a Dubai Offshore Company, itis possible to have a Dubai entity andbusiness address, without the legalrequirement to rent a physical office andemploy staff.4. International entrepreneurs can own100% of the Dubai company if it is locatedin one of the DubaiFreezones.5. Dubai company formation has nospecific minimum capital requirements,after a decree was introduced to dropformal minimum capital requirements inDubai. Capital requirements are dependenton factors such as the size, nature andgoals of the business. In this way, smalland medium enterprises benefit, as theymay have been at a disadvantage whenrequiring a relatively high capitalrequirement.