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 Dubai - UAE  Company Formation

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Dubai Company Formation - Company Formation United Arab Emirates (UAE) - Free Trade Zone UAE

Company formation Dubai /UAE- Introduction/summary

Regarding a company incorporation there are the following options:

  • Incorporation of a Dubai- or Abu Dhabi LLC: 51% oft he shares have tob e ket by a UAE resident. Although, they might be held by a nominee shareholder. A Dubai LLC does not require a minimum capital anymore.

  • Incorporation of a company in the free-trading-zones of the UAE, e.g. RAK (Ras Al-Khaimah) Companies within the free-trading-zones may be owned by foreigners totally. Companies in the free-trading-zone may offer their business to a certain level to the UAE, only. Their minimum initial capital depend on which free-trading-zone is choosen: in Ras Al-Khaihma it is AED 100,000.00 for example.

  • Incorporation of a branche of a foreign company in the free-trading-zones of the UAE. A minimum capital is not required.

Fornamed companies require always the following:

  • Permission for business (licence), e.g. General Trading Licence,

  • Proper place of business within the UAE; sole registred offices or virtual offices are not sufficient,

  • Visa for management and employees.

Complete solutions for licence, business site and Visa are offered by Ras Al-Khaimah at affordable prices.

Company law of UAE is not directed to nominee solutions or brass-plate companies. So no nominee director (place of management as place of taxaition) can be offered.

Although RAK free-trading-zone offers the installation of an offshore company: These offshore companies may not trade with onshore company businesses in the UAE or make business in other ways, may not import goods. But an offshore company may acquire real estate in UAE.

Existing DTA (agreements on double taxation) are not applicable. These companies can be staffed with nominee directors, a minimum initial capital is not required.

Dubai has a unique set of selling propositions, namely:

  • No corporate tax No income tax

  • No capital gains tax

  • No property tax

  • No wealth tax Low property transaction cost Ease of access to home finance

Dubai/UAE has double taxation agreements = DTA with most other countries. EU freedom of establishment is not applicable. For approval of the permanent establishment according to tax laws, a commercially equipped business operation must be installed in Dubai/UAE, and active business must be transacted in UAE/Dubai.

Since only oil companies and banks are subject to taxation in the UAE/Dubai, and any other companies do not pay any taxes, this results in interesting opportunities for investment in Dubai/UAE.

In order to be able to use the tax advantages, a permanent establishment according to DTA must be installed in Dubai. On the one hand, a Dubai company is no offshore company in this sense, since the UAE/Dubai also maintain double taxation agreements with many countries – including Sweden and Denmark – but on the other hand, the EU freedom of establishment is not applicable. Therefore, the following prerequisites for approval of a permanent establishment according to tax laws in Dubai must be met:

  • Place of management: A manager resident in the UAE/Dubai according to tax laws must – at least on the outside – control the company’s businesses.

  • There must be a commercially equipped business operation, i.e. at least one office and one employee.

  • It must be demonstrated that the Dubai company does actively transact business in the UAE.

Under the stated conditions, for example the Swedish could be a majority shareholder of the Dubai company, but nevertheless Dubai/UAE has the sole right of taxation, provided that the Articles of Association state that all relevant decisions are made at the shareholders’ meetings, which exclusively take place in Dubai, at which the Swedish shareholder must be present. However, the UAE company law stipulates that 51% of the company shares must be held by persons resident in Dubai. As a rule, the founder will use a “sponsor”. This requirement may be omitted in case of company formations in the free zones. In the free zones, 100 % of the shareholders may be foreigners.

 

 
 
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