UAE has always been a unique jurisdiction for businessmen and corporates to start their operations with huge benefits gained in terms of tax free jurisdiction, excellent infrastructure, access to an international market, world’s largest seaports and airports and an excellent record of per capita income. The ease of operating from Free Zones has always been an edge to the existing businessmen as well as new entrants to the market, all of which makes UAE the best place for doing business.
We do know the benefits and advantages of starting up businesses in UAE but there are chances of failure if the startup is not well planned and executed. Businesses looking to establish in UAE are faced with challenges such as selection of an appropriate activity to license for, what kind of license to opt for whether an L.L.C. company registered in mainland suits you more or a Company registered in any of the free zones, selecting the best office and warehouse locations e.t.c. We are a team of Professional Consultants providing the market leading services for Company formations and setup in any part of UAE. We not only advise you on the right business activity to opt for, right jurisdiction to locate your business in UAE, we also have the ability to source a reliable local sponsor to you and advise you on the right location to choose for your office(s) and/or warehouse(s).
Push Digits Consultancy is the market leader in helping individuals and companies set up their business in the most appropriate way. We always walk with our clients side by side in not only setting up and starting their business perfectly, we also cater to their accounting and audit requirements, which are compulsory for any business in UAE, through our teams of Professional Accountants and Auditors. We are into a strategic Partnership with a renowned Audit Firm of UAE, to serve you the best for your audit requirements.
We are not only proud to have the ability to provide these services of business setup to accounting and audit, we are also capable to provide you all of these services at unbeatable competitive prices. So the team of Push Digits not only benefits you with supreme quality services, they also make sure that these services are provided to you on best market prices. Our expert consultants are available 24/7 to talk to you and meet you to explain further on how best we can help you in setting up your Company, however to walk you briefly over the initial knowledge base from our expert consultants, we have compiled the below for your initial understanding.
As per the laws of UAE (United Arab Emirates), there are only five kinds of business establishments which the foreign organizations can apply for if they wish to be formally present or operate in the UAE. These applicable business establishments include:
|Types of Companies||Consultancy by Push Digits|
|3||Entity in a UAE free zone||✓|
|4||Civil Company (confined to the Emirates of Dubai and Sharjah)||✓|
|5||Commercial Agency Arrangement||✓|
According to the requirements of Commercial Companies Law of UAE, every company established in UAE must have 1 or more UAE national partner(s) who must have at least 51% stake in the company’s capital. The 51% rule is not applicable on companies that undertake specific activities including the companies in the:
- Oil and gas sector,
- the entities involved in the treatment of water and distribution and transmission,
- Companies which produce gas and electricity,
- Oil companies with concession agreements.
The foreign banks are not required to have a sponsor. Furthermore, if any free zone has specific provisions regulating the companies, the companies established in that free zone are exempt from 51% rule.
Our expertise and experience in professional accounting and consultancy equips us to provide our services to a wide range of clients ranging from service providers, traders to manufacturers. Our clients have every reason to say that we are the best professionals in the town in terms of our quality work and competitive prices.
Steven M Curbelo
Husni Al Bayari
Michael T. Love
The permanent establishments can be created in following eight ways:
|1- General Partnerships:
General partnerships can only be established between the nationals of UAE. Two or more general partners can establish this entity who are liable for the obligations of the entity to extent of their personal assets.
|2- Limited Partnerships:
Limited Partnerships require at least two partners. There must be at least one active partner and at least one inactive or silent partner. Active partner manages daily operations of the entity and is responsible for the entity’s liabilities. Inactive partner is not involved in operations of the entity and is responsible for the entity’s obligations to the extent of his capital contributions.
|3- Joint Ventures:
Joint ventures can be formed between at least two partners. The partners share the profit and loss generated by the businesses; managed by one partner in his/her name.
|4- Public Joint Stock Companies:
Any company whose capital comprises of publicly subscribed negotiable shares of equal value or any company in which a public body of UAE holds share capital is public joint stock company.
The minimum amount of capital required to establish such an entity is AED 10 million. There must be at least 10 founding members and it is vital for the foreign entities to know that anyone who signs the articles and memorandum of association initially is considered as founding member and hence liable. The businesses in UAE relating to insurance, investment of money on behalf of 3rd parties and banking are required to be established as public joint stock companies.
|5- Private Joint Stock Companies:
At least 3 founding members are required to establish a private joint stock company and there must be a minimum subscribed capital of AED 2,000,000 between them. The shares of such entity cannot be offered to public. Private joint stock companies can be converted into public joint stock companies if following four conditions are fulfilled:
The shares are fully paid up.
The entity has been operating for 2 or more financial years.
Majority shareholders holding at least seventy five percent of company’s share capital must approve a resolution of the extraordinary general assembly to transform their entity.
During the 2 years preceding the application for conversion, the entity has attained distributable net profits of at least 10% of its capital on an average.
|6- Limited Liability Companies:
A LIMITED LIABILITY COMPANY is an association of minimum 2 and maximum 50 partners. The obligation of each partner is limited to the extent of its capital contribution in the company. The earlier minimum capital requirements (AED 0.3 million in Dubai and AED 0.15 million in Abu Dhabi and rest of Emirates) have been removed. However Department of Economic Development of the related Emirate is required to judge the test of ‘Sufficient Capital’ based on intended operations and size of the entity.
|7- Partnerships Limited with Shares:
The minimum required capital to establish partnership limited with shares is AED 500,000. This type of entity is formed between general partners and participating partners. General partners should be nationals of UAE and are jointly responsible for entity’s obligations to the extent of their personal assets. Participating partners are not allowed to participate in the daily management of the entity and are liable to the extent of their contribution in capital.
|8- Establishments by GCC Citizens:
In 1981, the United Economic Agreement was signed by the states of Gulf Cooperation Council (GCC) including Sultanate of Oman, Qatar, Saudi Arabia, Kuwait, Bahrain and the UAE. The agreement was endorsed by UAE in 1982. The aim of the agreement was to develop unification and coordination among the commercial, economic, fiscal and industrial regulations.
As per the requirements of Federal Law No. 2 of 1989, a GCC citizen who is permitted to conduct a business operation in UAE must be a natural person who is resident of UAE and he must practice the required activity by himself and have a license to conduct the activity in his country of origin. If the investor is a juridical person who wishes to conduct wholesale or retail business then the investor must be in the form of a company whose at least 50% shares are held by UAE nationals.
Branch Offices vs. Representative/Liaison Offices
A branch office operates under the name of its parent entity and carries the same legal identity as its parent company does. Every Emirate has its own set of rules related to the grant of license for branch office. This form of entity can perform various activities as authorized by the Department of Economic of the related Emirate. Branch offices are considered as full-fledged businesses and can carry out its operations as per the specifications of the license.
For example, if a foreign entity wishes to open a branch in Abu Dhabi then it must comply with the following:
- Acquire the below mentioned documents in the above mentioned company’s country of origin
Resolution from the foreign entity’s board of directors in respect of establishing a branch in Abu Dhabi and conducting its operations there.
The official documented proof that confirms the existence and proper registration of the entity in that country and also includes its legal status, the power of its representatives, paid-up capital and the title.
A copy of the memorandum or articles of association of the foreign entity.
The latest two audit reports and approved financial statements of the entity.
A valid power of attorney granted to the person who will represent the entity in front of authorities of Abu Dhabi and who will sign the agency agreement with the entity’s national agent.
A declaration given by the entity and addressed to the Ministry of Economy of UAE containing the company’s undertaking to assume all the financial obligations incurred by the branch office in UAE.
All the above mentioned documents, except financial statements and audit report, are required to be attested by the UAE Embassy in the country of origin. Also the documents must be translated in Arabic and certified by the UAE certified translator. These must then be attested by the Ministry of Justice of UAE.
- The following additional documents must be submitted by the applying entity but these documents do not need to be attested from outside the UAE
Application for license.
Details of operations the entity wants to perform in the Abu Dhabi.
Signed agency agreement (concluded between local agent and foreign entity).
List of major activities performed by the entity outside the UAE and past experience in the activities which the entity intends to carry out in the state.
The statement reflecting the number of people estimated to be employed in the Abu Dhabi’s branch office of the entity.
The branch’s working capital should not be less than AED 250,000 which may be needed to be deposited in a bank of Abu Dhabi or the UAE Ministry of Economy may require an open ended unconditional bank payment guarantee, provided by a UAE bank, of AED 50,000 in its favor.
Alternatively, a liaison/representative office can be established in UAE but its operations are limited only to the promotion of the activities of its parent entity. This indicates that the liaison offices are only supposed to perform tasks like marketing projects of parent entity, soliciting orders and collecting information. The number of employees in such office is limited to 3 or 4.
The UAE authorities allow foreign entities to function within ‘Free Zones’. Full (100%) ownership is allowed in Free Zones. These are subject to lower or different tariffs, quotas and trade barriers. However, the activities of the entities established in Free Zones must be limited to as listed in their licenses. If the entity wishes to operate outside theses limits, it should follow the requirements of the Commercial Companies Law of UAE in compliance with the licensing mechanism in the related Emirate.
Following types of licenses can be issued in Free Zones:
|1- Trading License||2- Industrial License||3- General Trading License|
|4- National Industrial License||5- Service License|
There are currently 10 Free Zones in the United Arab Emirates. They offer the following inducements to investors:
1- Full foreign ownership (100%) 2- Exemption from corporate tax for fifty years (a renewable concession) 3- Liberty to repatriate total income and capital
4- Full exemption from personal income tax 5- No duties on import 6- No constraints on currency
7- No bureaucratic red-tapism 8- No issues regarding recruitment 9- Latest efficient system of communication
10- State of the art infrastructure 11- Ample energy
Type of Entity:
Three types of entities can be established in any Free Zones:
1- A foreign entity’s branch 2- FZE (Free Zone Establishment) 3- FZCO (Free Zone Company)
Foreign investors can fully own these types of entities with no sponsor or local partner required. Prior approval from relevant authorities may be required for some activities.
If the entity wishes to trade within Mainland of UAE then it would require a company of UAE as trade agent and also a custom duty of 5% shall be imposed if the goods are exported to Dubai from Free Zone. There is no requirement for agent and nor any duty is imposed if the trade is carried outside of UAE.
The documents which are necessary for the establishment of entity either as FZC or FZE are:
Planned trade name
Planned activities with a summarized business plan
Passport copies of manager and director
Passport copies of shareholders
Bank references on shareholders
To establish a branch of a foreign entity in Free Zone, following documents are required:
Certificate of incorporation
Memorandum of association
Resolution from the board of directors approving the branch opening in Free Zone of Dubai and appointing manager as in charge of branch
Power of attorney in the name of Manager
Passport copies of the Directors and Manager
All of the above listed items except copies of passport need to be attested by the UAE Embassy in the home country of the applying entity and also by the UAE Ministry of Foreign Affairs in Dubai.
Civil companies can be currently formed in Sharjah and Dubai only. These entities can be established as sole traders which operate under a license. These cannot be established within Emirate of Abu Dhabi. Usually civil companies are not established for the purpose of trade (transport, finance, banking, contracting, purchase and sale of goods etc.) and are usually used by professions.
Commercial Agency Agreement
Under commercial agency agreement, a UAE agent represents a foreign entity and buys, sells or provides services and goods and services in UAE on the company’s behalf for a profit or commission. The agent must be a UAE national person or a company fully (100%) owned by UAE nationals. Further the agent must be registered with the Ministry of Economy. Unless agreed otherwise between the agent and foreign entity in writing, the agent has a right to receive commission on the company’s sales in his designated Emirate even if the sales are not made through him.
Other Business Opportunities
Below mentioned are some other business opportunities available in UAE:
The foreign companies can establish JAFZ (Jebel Ali Free Zone) offshore companies since the introduction of regulations for JAFZ offshore companies in 2003. Such entities enjoy the same advantages as other global offshore jurisdictions. Since 2006, Ras Al Khaimah has permitted the formation of offshore companies.
Public Sector Procurement:
Every Emirate has its own set of regulations regarding the government procurement activities. The work related to public sector is usually granted as per the public tender law which requires minimum standards relating to government procurement across the UAE. Public Defense Contracts have their own industry specific regulations.
Specialized Economic Zones:
There are specialized economic zones (as established by Zones Corp in Abu Dhabi) in the UAE which encourage investment by providing incentives such as administrative assistance, reduced infrastructure costs, simple approval processes and residential cities for the workforce etc. The companies which are established in the specialist economic must adhere to the requirements of the UAE Commercial Companies Law including the requirement of having 51% UAE control.
Dubai Fast-Track License:
This fast-track trade license is currently being offered by the Department of Economic Development which remains valid for 120 days. This facilitates the companies as they get extra time for the completion of documentation for their registration and licensing. It also allows companies to hire employees, establish new ventures and test their products. Business owner’s past working record and legal rental contract are pre-requisites for the license. Further information can be obtained from Department of Economic Development in Dubai.
The above mentioned details serve as general guidelines; our Expert Team of Professional Consultants is based in Dubai and able to talk to you 24/7 and meet you, to assist in exercising the due diligence and specific guidance.
A dedicated Partner can be reached at [email protected] or at +971 50 395 8931 to discuss your requirements for company formation in detail and we will ensure that you are served in the best way.