Dubai Company Formation- Company Formation United Arab Emirates, UAE, Free Zone VAE Dubai- Dubai Offshore Company-Company Formation, offshore company formation -General information on company formation in a free trade zone of UAE, RAK
   

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Company Formation United Arab Emirates - UAE: Free Trade Zone Company and Offshore-Company "RAS AL Khaimah"

Company Formation UAE- Free trade Zone RAK:

 

Company formation UAE: General information on company formation in a free-trade-zone of UAE

Shares of companies within one of the free-trade-zones of the UAE (RAK, Jebel Ali, Sarah) may be owned by foreigners in whole. These companies are allowed to do their business within the FTZ or abroad UAE only. Business wthin the UAE can only be made via a representative.

Foreign investors must fulfil the following requirements to their companies:

The following steps have to be realized in any case: 

-Incorporation

-Visa for Management, shareholders and resident employees

-Office (UAE does not allow a sole registered office or a virtual office; affordable office space is available e.g. in RAK)

-Licence (approval to run a certain business. For each business a license is required and only after obtaining the license may the appropriate action be taken.) 

If the only business of an enterprise is in the UAE, please notice chapter 5 of the DTA:

Company Formation UAE: Double Taxation Agreements, Definition of Permanent Establishment (Article of the DTA)

(1) For the purposes of this Convention, the term "permanent establishment" means a fixed place of business through which the business of an enterprise is wholly or partly carried on.

(2) The term "permanent establishment" includes especially:
(a) a place of management ;
(b) a branch ;
(c) an office ;
(d) a factory ;
(e) a workshop ; and
(f) a mine, quarry or any other place of extraction of natural resources.

(3) A building site or construction or installation project constitutes a permanent establishment only if it lasts more than nine months.

(4) Notwithstanding the preceding provisions of this Article, the term "permanent establishment" shall be deemed not to include :

(a) the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise ;
(b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery ;
(c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise ;
(d) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or of collecting information, for the enterprise ;
(e) the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character ;
(f) the maintenance of a fixed place of business solely for any combination of activities mentioned in sub-paragraphs (a) to (e) of this paragraph, provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character.

(5) Notwithstanding the provisions of paragraphs (1) and (2) of this Article, where a person - other than an agent of an independent status to whom paragraph (6) of this Article applies - is acting on behalf of an enterprise and has, and habitually exercises, in a Contracting State an authority to conclude contracts on behalf of the enterprise, that enterprise shall be deemed to have a permanent establishment in that State in respect of any activities which that person undertakes for the enterprise, unless the activities of such person are limited to those mentioned in paragraph (4) of this Article which, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that paragraph.

(6) An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in that State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business.

(7) The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other. 

If there is no factory, workshop, mine, quarry or any other place of extraction of natural resources or a building site or construction or installation that lasts more than nine months, a resident of the UAE has to manage the operations of the business, to located the permanent establishment in the UAE. Besides this, a non-resident director can bring the proof that he is present to fulfill his management duties (place of management).

We cannot provide a trustee director in the UAE.

Companies in the FTZ are tax free

The initial capital is very different and we have to refer to our survey on our Internet sites.

Fees for an incorporation in the FTZ vary by services of ETC and governmental fees.

Governmental fees are available on our Internet site. Our fees are between € 2,900.00 and € 4,900.00, depending on the service.

Notwithstanding this, it is possible to incorporate an Offshore Company (Exempted Company).  An UAE Offshore Company may only do business outside the UAE, does not need any intial capital and can be owned by foreigners at 100% also. A trustee director can be provided.

Company Formation UAE/Dubai: RAK

Any company that wishes to operate at the RAK FTZ should register as a legal entity at the RAK FTZ (company registration), open a bank account, acquire a valid permit to undertake approved activities (business license) and sign a lease contract for using the selected facility at the RAK FTZ.

Once all of these procedures have been completed successfully, the company will be entitled to activate a P.O. Box, a bank account, apply for the approved number of visas (UAE residence permits) and to start the business activities in the RAK FTZ.

A company or individual wishing to operate a business at the RAK FTZ can be registered at the zone in one of the following four legal forms:

A branch of an existing company

  • Foreign Branch
  • Local Branch

A new establishment

  • Free Zone Company
  • Free Zone Establishment

Business licenses

Every company operating within the RAK FTZ is required to obtain a business license. A business license is a time-limited permit granted to a company to undertake commercial, consulting, service or industrial activities within the RAK FTZ. It does not, however, authorise the holder to do business in the UAE - a special agent has to be appointed for trading activities in the UAE market.
Each license is valid for one year starting from the date of issue and must be renewed annually.

Four types of business licenses:

  • Commercial license
  • Consultancy license
  • General trading license
  • Industrial license

Business Center Services 

The RAK Innovation and Promotion Centre is a free zone facility which gives investors an opportunity to start business with minimum hassles. Some of the key features of the RAK Innovation and Promotion Centre are the serviced, fully-functional and ready-to-use offices, flexi-offices and flexi-desks, plus a wide variety of services. All of these are offered at highly cost-effective rates.

The RAK FTZ Business Centre is designed to be one-stop shop. The RAK FTZ BC will meet all the clients’ needs.

 Offices
The client can choose of these solutions according to their needs and requirements:

• EXECUTIVE OFFICE (14-28 square m)

The Executive Offices are serviced, fully-functional and enclosed offices. The standard offices range from 14 to 28 square m, expandable as per client requirements.

Features:
• Fully furnished
• Cisco phones
• Dedicated fax number
• Private e-mail address
• Shared printer (optional)
• Shared post box (optional)


FLEXI-OFFICE (18 square m)


The Flexi-Office is a shared, networked and modern office with its own phone, computer, network, and Internet access. Regular users of Flexi-Office are people normally working from home or traveling, but nevertheless, want to benefit from having a professional base with access to a team for call handling, secretarial services and all other advantages of being in the office, without the expense of setting up a full-fledged office. Clients can log in and use the Flexi-Office to create and print documents, access the Internet to check e-mail or conduct research, or just make some calls.

Features:
• Furnished and enclosed office
• Shared fax services
• Has two executive desks and chairs per office
• Shared workspace environment
• Two personal computers in each Flexi-Office

• Direct incoming/outgoing telephone (Telephone devices are shared, but specific numbers will be assigned to clients)
• Five hours of free usage per week for each client
• Shared Post Box number
• Private e-mail address

FLEXI-DESK


The Flexi-Desk is a shared and networked desk designed for single-person users such as professionals, self-employed businessmen or establishments.

Features:
• Furnished and semi-enclosed office
• Shared workspace environment
• One executive desk and chair
• Private email address
• Allocation of five hours of free usage per week

• Direct incoming/outgoing telephone
(Telephone devices are shared, but specific numbers will be assigned to clients)
• One personal computer in each Flexi-Desk
• Shared Post Box number
• Shared fax services


REMOTE ACCESS DESK


The Remote Access Desk will enable you to operate with all the advantages of a multinational corporation. You will be registered with RAK Free Zone, but you will have the flexibility and mobility for your company operations.

Features:
Contact Centre Services – Your calls will be answered by a receptionist in your company name and forwarded to your office, home, mobile or voicemail.

 Front Desk Services
• Photocopying
• Scanning
• CD Burning
• Printing
• Typing
• Translation
• Faxes Handling
• Contact Centre

The Contact Centre will enable you to receive your calls even when you are not in the office or site. The Contact Centre Operator will receive and answer the call on your company's behalf.

Features:


Available (at cost) to clients leasing the Executive Offices, Flexi-Offices and Flexi-Desks.
• Part of the package for the Remote Access Desk clients.
• Personalized and company-specific answering service
• Interactive Voice Response (IVR) System-Capable
• Call Forwarding and Intra-office forwarding
• Message Processing (Receiving & Forwarding) Costs AED 350 per month

• Business Catering Arrangements
• Private Secretarial Services
• Hotel Booking Arrangements
• Car Rental Arrangements
• Accommodation Arrangement
• Media Services
        o Logo Design
        o Letter head
        o Advertisement Design
        o Brochure Design
        o Poster Design

 Additional Facilities

 

• Health Club
• Restaurant
• Nursery
• Business Lobby
• Training Centre
• Conference Rooms
       o Internet Connection
       o Audio Conferencing
       o Video Conferencing
       o LCD Projector
       o Business Catering Arrangement

 

Prices Flexi Facilities

Attorney fees: 3.900 Euro

 

Typ

 

Nominal Charge (AED)

Frequency of Payment

Lizenzen

Commercial License

3.650

per year

 

Consultancy License

7.500

per year

 

General Trading License

 

15.000

per year

 

Facilities

 

Flexi Desk

 

12.500

 

per year

 

Flexi Office

(Commercial and Consultancy License)

 

per year

 

Special Flexi Office

(General Trading and Special License)

 

26.000

per year

 

Registration

 

Registration

 

 

7.000

 

one time fee

 

Services

 

Service

 

1.200

 

per year

 

Flexi Facilities-Packages

Flexi Desk

Package includes:

  • License to operate a business at RAK FTZ

(Commercial or Consultancy License)

  • One visa
  • Furnished and semi-enclosed workstations
  • One executive desk and chair
  • One Shared computer
  • Assigned phone number
  • Dedicated email address
  • Fax handling services
  • Shared fax number
  • Five to ten hours of free usage per week
  • Use on a prior booking basis
  • Electricity, water and air-conditioning
  • Cleaning service and parking facilities

Flexi Office

Package includes:

  • License to operate a business at RAK FTZ

(Commercial, Consultancy or General Trading License)

  • Two visas
  • Furnished and enclosed office
  • Two executive desks and chairs per office
  • Two shared computers
  • Assigned phone numbers
  • Dedicated email address
  • Fax handling services
  • Shared fax number
  • Five to ten hours of free usage per week
  • Use on a prior booking basis
  • Electricity, water and air-conditioning
  • Cleaning service and parking facilities

Executive Office Package

Package includet:

  • Business license to operate at RAK FTZ (Commercial, consultancy or General Trading License)
  • Fully-furnished office space (open or enclosed space)
  • Dedicated phone number(s)
  • Dedicated fax number(s)
  • Dedicate email address
  • IT/Telecommunications services (phone, internet, analog port, network access port, voice mail, email)
  • Electricity, water and air-conditioning
  • Cleaning services and parking facilities
  • Visa(s)

Location:

ˇ         RAK FTZ Business Park in Ras Al Khaimah

Prices 

 

Type

 

Nominal Charge (AED)

Frequency of Payment

Lizenzen

Commercial License

3.650

per year

 

Consultancy License

7.500

per year

 

General Trading License

 

15.000

per year

 

Facilities

 

Office Rent

 

1,250 to 1,700

 

per m˛ / year

 

Registration

 

Registration

 

 

7.000

 

one time fee

 

Services

 

Service

 

1.200

 

per year

 

Maintenance

one month rent

one time fee

 

Security (refundable deposit)

3,000

one time fee

 

IT / Telecommunications (fixed charge)

360

per month

 

IT / Telecommunications Installation

550

one time fee

 

Furniture / Equipment

per request

per year

 

Introduction/summary

 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.


Company Formation UAE: Introduction

The basic requirement for all business activity in Dubai is one of the following three categories of licence:

  • Commercial licences covering all kinds of trading activity;
  • Professional licences covering professions, services, craftsmen and artisans;
  • Industrial licences for establishing industrial or manufacturing activity.

These licences are all issued by the Dubai Economic Department. However, licences for some categories of business require approval from certain ministries and other authorities: for example, banks and financial institutions from the Central Bank of the UAE; insurance companies and related agencies from the Ministry of Economy and Commerce; manufacturing from the Ministry of Finance and Industry; and pharmaceutical and medical products from the Ministry of Health.

More detailed procedures apply to businesses engaged in oil or gas production and related industries.

Practising some trade activities (e.g. jewellery and insurance) requires the submission of a financial guarantee issued by a bank operating in Dubai.

In general, all commercial and industrial businesses in Dubai should be registered with the Dubai Chamber of Commerce and Industry.

Fifty-one per cent participation by UAE nationals is the general requirement for all Dubai-established companies except:

  • Where the law requires 100% local ownership;
  • In the Jebel Ali Free Zone, Dubai Internet City, or the Dubai International Financial Centre;
  • In activities open to 100% AGCC (Gulf Cooperation Council) ownership;
  • Where wholly owned AGCC companies enter into partnership with UAE nationals;
  • In respect of foreign companies registering branches or a representative office in Dubai;
  • In professional or artisan companies where 100% foreign ownership is permitted.

In the past, each emirate followed its own procedures governing the operations of foreign business interests. In practice, however, Dubai and the other emirates followed the same general system, whereby foreign companies operated in one of three ways: with a local sponsor, through a partnership with a UAE national or company, or through a private limited company or public shareholding company incorporated by Ruler's decree.

Since 1984, steps have been taken to introduce a codified companies law applicable throughout the UAE. Federal Law No. 8 of 1984, as amended by Federal Law No. 13 of 1988 - the "Commercial Companies Law" - and its by-laws have been issued. In broad terms the provisions of the Law are as follows:

The Federal Law stipulates a total local equity of not less than 51% in any commercial company and defines seven categories of business organisation which can be established in the UAE. It sets out the requirements in terms of shareholders, directors, minimum capital levels and incorporation procedures. It further lays down provisions governing conversion, merger and dissolution of companies.

The seven categories of business organisation defined by the law are:

General partnership company
Partnership-en-commandite
Joint venture company
Public shareholding company
Private shareholding company
Limited liability company
Share partnership company
Partnerships

Partnership companies are limited to UAE nationals only. The Dubai government does not presently encourage the establishment of partnerships-en-commandite or share partnership companies.

Joint Venture Company

A joint venture is a contractual agreement between a foreign party and a local party licensed to engage in the desired activity. The local equity participation in the joint venture must be at least 51%, but the profit and loss distribution can be prescribed. There is no need to license the joint venture or publish the agreement. The foreign partner deals with third parties under the name of the local partner who - unless the agreement is publicised - bears all liability.

In practice, joint ventures are seen as offering a suitable structure for companies working together on specific projects.

Public and Private Shareholding companies

The law stipulates that companies engaging in banking, insurance, or financial activities should be run as public shareholding companies. Foreign banks, insurance and financial companies, however, can establish a presence in Dubai by opening a branch or representative office.

Shareholding companies are suitable primarily for large projects or operations, since the minimum capital required is Dh. 10 million (US$ 2.725 million) for a public company, and Dh. 2 million (US$ 0.545 million) for a private shareholding company. The chairman and a majority of directors must be UAE nationals and there is less flexibility of profit distribution than is permissible in the case of limited liability companies.

Limited Liability Company

A limited liability company can be formed by a minimum of two and a maximum of 50 persons whose liability is limited to their shares in the company's capital. Such companies are recognised as offering a suitable structure for organisations interested in developing a long term relationship in the local market.

In Dubai, the minimum capital is currently Dh. 300,000 (US$ 82,000), contributed in cash or in kind. While foreign equity in the company may not exceed 49%, profit and loss distribution can be prescribed. Responsibility for the management of a limited liability company can be vested in the foreign or national partners or a third party.

The following steps are required in establishing a limited liability company in Dubai:

  • Select a commercial name for the company and have it approved by the Licensing Department of the Economic Department;
  • Draw up the company's Memorandum of Association and have it notarised by a Notary Public in the Dubai Courts;
  • Seek approval from the Economic Department and apply for entry in the Commercial Register;
  • Once approval is granted, the company will be entered in the Commercial Register and have its Memorandum of Association published in the Ministry of Economy and Commerce's Bulletin;
  • The licence will then be issued by the Economic Department;
  • The company should then be registered with the Dubai Chamber of Commerce and Industry.

Branches and Representative Offices

The Commercial Companies Law also covers the formation and regulation of branches and representative offices of foreign companies in the UAE and stipulates that they may be 100% foreign owned, provided a local agent is appointed.

Only UAE nationals or companies 100% owned by UAE nationals may be appointed as local agents (which should not be confused with the term "commercial agent"). Local agents -- also sometimes referred to as sponsors -- are not involved in the operations of the company but assist in obtaining visas, labour cards, etc and are paid a lump sum and/or a percentage of profits or turnover. In general, branches and offices of foreign commercial companies are not licensed to engage in importing activity except for re-export or in the case of products of a highly technical nature.

To establish a branch or representative office in Dubai, a foreign commercial company should proceed as follows:

  • Apply for a licence from the Ministry of Economy and Commerce, submitting an agency agreement with a UAE national or 100% UAE owned company.
  • Before issuing the licence, the Ministry will forward the application to the Economic Department to obtain the approval of the Dubai government and will forward the application specifying the activity that the office or branch will be authorised to undertake in the UAE, to the Federal Foreign Companies Committee for approval;
  • Once this has been done, the Ministry of Economy and Commerce will issue the required Ministerial licence specifying the activity to be practised by the foreign company;
  • The branch or office should be entered in the Economic Department's Commercial Register, and the required licence will be issued;
  • The branch or office should also be entered in the Foreign Companies Register of the Ministry of Economy and Commerce;
  • Finally the branch or office should be registered with the Dubai Chamber of Commerce and Industry.

Branches and Representative Offices of Foreign Professional Companies

Branches and representative offices of foreign professional firms may be 100% foreign owned provided UAE nationals or 100% UAE owned companies are appointed as local agents. Such agents are not involved in the operations of the firm but assist in obtaining visas, labour cards etc and are paid a lump sum as remuneration. The Economic Department is the authority in charge of licensing such branches or representational offices.


Sole Proprietorships

In setting up a professional firm, 100% foreign ownership, sole proprietorships or civil companies are permitted. Such firms may engage in professional or artisan activities but the number of staff members that may be employed is limited. A UAE national must be appointed as local service agent, but he has no direct involvement in the business and is paid a lump sum and/or percentage of profits or turnover. The role of the local service agent is to assist in obtaining licences, visas, labour cards, etc.

Offshore-Companies in the United Arab Emirates

Since the year 2003 the United Arab Emirates allow the formation of offshore companies in the Jebel Ali Freezone in Dubai. With this step Dubai is positioning itself as a regional alternative among the worldwide network of offshore locations such as Liechtenstein, Madeira, Malta and the Canal Islands.

The advantages of establishing an offshore company in the United Arab Emirates are obvious: there are no corporate or individual taxes existing in the Emirates as well as no value added tax, inheritance tax or tax on assets. In addition to the tax free environment there is a double taxation treaty existing since 1995 between Germany and the Emirates, which exempts German producers located in the Emirates from taxation according to the German tax law.

Substantial legal regulations for forming and operating an offshore company can be found in the „Jebel Ali Free Zone Authority Offshore Companies Regulations“ (consists of 126 paragraphs). Concerning the activity of the offshore business there is no limitation except for banking or insurance businesses. The offshore company does not require its own personnel or maintain office space in the Emirates. In every case the company has to appoint a local representative (so called registered agent), who acts as the contact person for authorities in the United Arab Emirates.

Due to the low magisterial requirements the formation of an offshore company in the Jebel Ali Freezone offers an interesting alternative for foreign companies.

 

 

 
 
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