Arguably the biggest competitive advantage of any UAE company is its 100% exemption from paying any corporate taxes.*
There are three main types of companies in the UAE:
- International business companies (also known as IBCs or offshore companies)
- Free zone companies (FZE or FZC)
- Local companies (LLC)
* Banks and oil companies are the only exclusion from that rule. 5% VAT also applies for the purchase and sale of products and services in the local market.
1. International business companies (legal form: "Ltd" or "Inc") have no minimum required paid-in capital, no license, no physical office in the UAE and can only conduct their operations outside of the UAE. Annual audit or any filing of accounts is not required.
- 100% ownership;
- 100% tax exemption;
- 100% capital and profit repatriations;
- corporate bank account in the UAE;
- absolute confidentiality;
- protection of assets and information;
- right to own real estate in the UAE and all over the world;
- right to own intellectual property (copyrights, patents, trademarks, etc.);
- transparency in laws and regulations;
- choice of law (common or civil law at your discretion);
- low cost of company formation and maintenance;
- easy and fast incorporation (between 2 hours and 3 working days).
Despite the simplicity and cost-effectiveness of offshore companies, they are nowadays less attractive due to a number of recent scandals connected with them (e.g. Panama Papers or more recent Paradise Papers) as well as due to the introduction of more stringent laws regarding capital transfers and international investments (such as the Common Reporting Standard implemented worldwide). However, the establishment of offshore companies is perfectly legal, and these vehicles can still be used to minimise taxes and maintain privacy of their owners.
2. Free Zone companies, on the other hand, are enjoying growing popularity not only as an alternative to offshore companies, but also thanks to the broad range of business opportunities they offer.
Like offshore vehicles, free zone companies are also exempt from any taxes, import and export duties. A free zone company conducting its operations within free zones or outside of the UAE, is also exempt from the VAT which has been introduced in the UAE in 2018. However, if a free zone company sells its goods or services to the local companies, these become subject to 5% VAT.
Companies registered in Dubai free zones are required to deposit a minimum registered share capital on their newly opened bank account which may be used straight after the incorporation. There are also a number of free zones outside Dubai which do not require the companies to pay in any share capital. Annual audit and accounts filing requirements also vary depending on the free zone.
- UAE tax resident status;
- physical presence in the UAE (office, warehouse, land, etc.);
- right of shareholders and employees to obtain UAE resident visas;
- opportunity to take out a loan or mortgage;
- a broader choice of banks.
Shareholders of any free zone company are entitled to obtain resident visas and may become UAE tax residents. UAE banks treat free zone companies and their shareholders as UAE residents. That means that information about them may not be passed on to the tax authorities in their respective home countries.
3. Local companies are currently required to have one local shareholder who must hold a 51 percent stake in the company. In order to set up a local company, a foreign investor needs to sign a partnership agreement with Emirati stakeholders.
This company type suits entrepreneurs who intend to conduct business in the UAE local market (outside of free trade zones). However, the UAE government recently announced plans to allow foreign shareholders 100% ownership of local businesses as well as started granting 5- and 10-year resident visas to certain investors. Besides, four Dubai free zones – DAFZA, DMCC, DIFC, Jebel Ali – and one Abu Dhabi free zone – KIZAD – already offer dual licenses allowing free zone companies to conduct business in the mainland without a local sponsor.
Are you planning to enter the UAE market and don’t know which company type to choose? Do get in touch – our local team of professional consultants will help make up your mind and will provide you with great ideas, tailor-made advice and any support you may require.
Become owner of an International Business Company (IBC) with a bank account and business address in Dubai, the UAE, for only US$3,900.00.
Formation costs include:
- Name check and approval
- Drafting of Memorandum and Articles of Association
- Filing with the official register
- Payment of government fees
- Provision of local agent for one year
- Provision of registered address (PO Box) in Dubai for one year
- Corporate stamp
- Assistance in bank account opening with a local bank
- Delivery of documents and stamp via courier to your home/business address
Time required for the offshore company formation: 1-3 working days.