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.
International business companies (legal form: "Ltd" or "Inc"), or, simply put, offshore companies, 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.
Advantages:
- 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.