Company Formation
UAE-Company
Formation United Arab Emirates (UAE):
Jebel Ali Free Zone (Jafza)
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:
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 United Arab Emirates (UAE):
Jebel Ali Free Zone (Jafza)
Jebel Ali Free Zone (Jafza)
is a part of Dubai based, state owned Economic
Zones
World, one of the world’s biggest developers of Economic Zones,
Logistics and R&D driven Industrial Parks.
Created under an Emiri Decree, Jafza commenced
operations in 1985 with standard size office units and warehouses to
provide ready built facilities to customers. In 1990 Jafza expanded its
facilities to include light industrial units.
Located next to Jebel Ali Port, the largest port in
the Middle East and, at 30 minutes drive to Dubai International Airport,
Jebel Ali Free Zone is well positioned to enable its partners the
fastest possible access to a market of over 2 billion people in the
South and West Asia, the CIS and Africa. Supported with the region’s
extensive highway network Jafza presents itself as the most efficient
ally for all types of business opportunities.
Jafza is one of the world’s most services
driven, customer centric free zones.
Free form of red tape and vexing restrictions, Jafza provides its
customers an environment which is most conducive for growth. Jafza’s
deep commitment to service excellence has enabled it to win ISO
9001:2000 certification in 1996, making it the world’s first ISO
accredited free zone.
The incredible journey from
a base of 19 member companies has manifested itself into a present where
we are a globally renowned commercial and industrial hub, home to nearly
6,000 Dubai businesses
from well over 110 countries.
A business climate where your ambitions have
opportunities to grow to any length. A vibrant networking atmosphere
where new relationships and opportunities present themselves with
refreshing regularity. It’s in these surroundings of entrepreneurship
and historical richness that Jafza welcomes you.
Business Centers World
(BCW), a division of
Dubai World’s flagship company EZW
offers you ready-to-use, fully furnished office
spaces in Dubai designed
for short-term or long-term use.
Besides office leasing,BCW helps you simply eliminate
the administrative red tape that goes into setting up offices so that
you can focus on running and growing your business.
Getting yourself an office space in Dubai through BCW
gives you many benefits:
- No office setting-up costs
- Low market penetration costs
- Flexible terms for
leasing office spaces,
varying from one month to two years.
- Round-the-clock workstation access with network
connections, meeting and conference rooms,equipped with the latest
audio-visual equipment
- Business Lounges
- Professional support staff, administrative
and secretarial services (upon request)
Free Zone Business
The three types of jafza
free zone commercial facilities
provided are:
Office Space
– to provide clients with the freedom to
express, Jafza offers unfurnished offices of any size, equipped with
air-conditioning, light fixtures, power points, internet, and telephone
access. Office space provided by
Jafza is specially designed
with the options for future expansion.
Light Industrial Units
(LIU) – These facilities exist for
two purposes: as storage warehouses
for distribution and storage, and
as factories for light-production and assembly, sizes of LIU’s range
from 313 square meters to 619 square meters. Power supply is readily
available in Jafza’s LIU’s, ranging from 10 to 50 KVA for warehouses and
100 to 125 KVA for factories. Additional benefits include 24-hour access,
two entry/exit points, sufficient parking space and a ramp for light
vehicles, as well as a loading dock for containers and trucks; not to
mention, every LIU is equipped with an office.
Land
– Jafza provides land plots of various sizes ranging from 2,500 square
meters up to any size requested by the client. In terms of
commercial property for lease,
Jafza offers the flexibility of both short-term and long-term leases
with flexible payment methods. All land plots and
Jafza properties
are well provided with the necessary utilities and
amenities that are fundamental to their developments.
Jafza is located in Dubai,
UAE and offers a number of
administrative services, essential
authorities and a wide range of
licensing services under
one roof. These services include:
- Licensing
- Registration
- Leasing
- Immigration Services
- Roads & Transport Authority (RTA) related
Services
- Emirates Telecommunications Corporation (Etisalat)
Services
- Dubai Electricity & Water Authority (DEWA)
Services
- Postal Authority Services
- Police
- Consulate Affairs
Having
Jafza authorities
at your fingertips enables your business needs to
be meet with ease and efficiency.
Company formation Dubai /UAE-
Introduction/summary
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.
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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