Over the past 50 years, the United Arab Emirates has been able to transform its fishing and agriculture-based economy into an advanced and competitive economy. The United Arab Emirates is building solid foundations that support the growth and prosperity of knowledge-based, future-focussed business sectors and offers many benefits and incentives.

There are seven emirates in the UAE: Abu Dhabi, Sharjah, Fujairah, Dubai, Umm Al Qaiwain, Ras Al Khaimah and Ajman. Although the federal laws have power along all the United Arab Emirates, each emirate provides its own rules and procedures for establishing a business. Therefore, the requirements to start a business will differ according to each particular emirate.

Establishing a company typically involves identifying the location, specifying the nature of business and paying ascribed fees, for the issuance of a commercial license. Foreign businesses have three main types of entities to choose from in order to conduct business in the UAE: a Free Zone entity (FZE or FZCO), a local limited liability company (LLC), and an international business company (IBC). In each Emirate there are different options for the company formation and it is essential to define the right type of the company and the exact scope of the services the company would provide.

Free Zones

The UAE offers special multidisciplinary Free Zones, in which expatriates and foreign investors can have full ownership of companies. These zones are characterized by their highly efficient infrastructure and corporate benefits such as favorable tax, customs and imports regime. Each Free Zone is governed by its system of regulations and has its own specific requirements concerning minimum share capital, office space and permitted activities. At the moment, there are about 45 Free Zones operating in the UAE each possessing the relevant licenses for the permitted activities.

Main advantages of establishing a Free Zone entity:

• 100% foreign ownership of the enterprise
• 100% repatriation of capital and profits
• 100% exemption from corporate and income taxes
• 100% exemption from customs duty if the goods are not supplied to the local market
• Independent law and regulations
• Modern and sophisticated infrastructure
• Access to world class logistic facilities
• Eligibility to apply for the UAE Tax Residency Certificate
• Obtaining residence visas for employees and other support staff without any problems
• Confidentiality is assured throughout the operation
• Access to multicultural and highly-skilled labour market
• Can be owned by 1 or more foreign shareholders (individuals or corporate bodies)

LLC (Mainland company)

The standard type of company in the UAE mainland is the Limited Liability Company (LLC) that may conduct any type of activity except for insurance, banking or investment. The government body issues licences for LLCs according to the type of economic activity that may be undertaken. Unlike the Free Zone companies, the mainland companies are not restrained by territorial restrictions on business activities or the location of offices/premises. This means that the mainland LLCs have freedom to trade anywhere in the UAE including all the Free Zones Gulf Cooperation Council (GCC) states as well as have a far wider range of real estate options from which to choose.

Foreign investors should take into account the UAE foreign ownership restrictions while setting up an LLC. The law prescribes that at least 51% of shares must be registered to an UAE national sponsor – either the UAE national individual or a corporate entity 100% owned by the UAE nationals.

Although there is no minimum share capital for opening an LLC in the UAE, there are a few requirements to be observed in relation to the value of the shares issued by such a company. One of these requirements implies a minimum value of 1,000 AED per share.

IBC (Ras al Khaimah/RAK company)

International Business Company (IBC) is an offshore company with a local setup but only operating internationally and not performing business activities inside the United Arab Emirates. The IBC registered in Ras al Khaimah (RAK) can be fully owned by the foreign investors and can enjoy 0% income tax, 0% sales tax, 0% capital tax and 0% dividend tax. Moreover, IBCs are not required to seek licenses, there is no required accounting as well as disclosure for company records. There is no minimum capital requirement for the IBC so the founders can define the amount of registered capital themselves. The IBC will be required to appoint a local registered agent and to maintain a local registered office address.

Main advantages of establishing the IBC in RAK:

• 100% foreign ownership, no local partner/sponsor required
• No physical presence/office
• Exempted from tax and duties
• Limited liability company by default
• All company and ownership details are kept anonymous
• Paying share capital is not required by definition
• The UAE is not included on the black list of tax havens by the FATF or the OECD