United Arab Emirates are considered one of the most attractive countries for carrying out of business, so-called “tax paradise”. The economy of the country is based on oil production, tourism, financial services and electronic commerce. The developed system of state legislation provides for a comfortable business development in the UAE.
United Arab Emirates is a federation of seven emirates: Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al-Quwain, Ras Al-Khaimah and Fujairah. Each emirate is a micro-state with absolute monarchy. Government of UAE has developed effective methods for attracting foreign investment, trade and industry. Free Economic Zones (FEZ), one of the most successful methods, are designed for the establishment of companies carrying out in different activities. Companies incorporated in FEZ, are not classified as offshore, which, of course, raises their status and facilitate the carrying out of business. The activities of companies in the free economic zone are governed exclusively by the authorities of this zone. Such a company must have a registered office and registered agent, it must keep accounting records, to provide annual financial reports to shareholders and deliver them to Companies House.
The UAE currently operates 16 free zones. The largest and best known one is the Jebel Ali Free Zone in Dubai. Companies established in Jebel Ali, are used to work as outside the free zone, and outside the country as a whole. These companies are not required to rent an office in the territory of FEZ. There are no requirements for the minimum value of the authorized capital. The main advantages of free trade zone of Jebel Ali are:
– the possibility of 100% ownership by the company by foreign owners;
– companies are exempt from all customs duties;
– no restrictions on the transfer of capital and profits;
– companies are exempt from taxation for the period up to 50 years;
– no restrictions on hiring of foreign workers.
Companies incorporated in FEZ, have the following characteristics:
– The authorized capital of the company shall be not less than one million dirham;
– Liability of members of the company is limited to the size of the authorized capital;
– The company is a separate legal entity.
Dubai is the largest financial, commercial and tourist center. This is the city-state in the United Arab Emirates. In Dubai there are no following taxes: organizations income tax, capital gains tax, personal income tax and the repatriation of earnings tax. UAE legislation complicates the incorporation of resident companies to foreign citizens (maximum of 49% of the shares of such companies can be owned by non-residents). Therefore, foreigners enter into partnership with local entrepreneurs, or they work exclusively in the free economic zone of Jebel Ali, where according to the legislation all 100% stares in the company may be owned by foreign citizens. Companies that intend to carry out the business in the free economic zone or on the territory of the United Arab Emirates, can receive a special license. There are the following types: license for general commercial activity, license for commercial operations, the license to the right to render services and license to the right to render production and technical services. United Arab Emirates have an agreement for avoidance of double taxation with more than twenty countries.
Despite the fact that foreign citizens have the opportunity to establish a company in Dubai through a partnership with residents of the UAE, we recommend to incorporate companies in the SEZ, which most suitable for carrying out of offshore business.