DUBAI

In Dubai , economic activity is regulated by individual emirates as well as the Federal Government. Long recognized as the leading regional trading hub in the Middle East, Dubai has transformed itself in recent years into a truly international business centre of global significance. Today, Dubai offers international companies an ideal gateway for developing their business throughout the Middle East, Asian subcontinent, East Africa, the Eastern Mediterranean, CIS and Central Asia. Manufacturing, tourism and services are all growing strongly and steadily, helping to create a well balanced and diversified economy.

Although Dubai was affected by the global recession, it has recovered well and stabilised. There were significant changes implemented by the government to ensure financial stability and protection. The investments in infrastructure projects such as roads, bridges and public transport have continued inspite of the downturn. The economy is gradually coming back on track and has become the popular jurisdiction for individuals and corporates.

Dubai offers businessmen operating conditions that are among the most liberal and attractive in the region. Some of the features are as follows:

• Dubai corporate formation is a legal way to protect global assets

• Dubai corporate formation projects are an excellent image to your clients, suppliers, banks and even potential venture capitalists, since it is not considered an offshore tax heaven

• An offshore corporate formation offers unrestricted flow of capital and transfer of assets globally

• A Dubai corporate formation is attractive for entrepreneurs with an import-export company, an international trading company or intellectual property developers. It is also common for independent consultants and contractors to make use of Dubai company formation

• No tax for majority of businesses

The different types of companies available in United Arab Emirates are as follows:

LIMITED LIABILITY COMPANY(LLC):

• Local & International Trade allowed • Office required • Visa provided • No minimum capital requirement • No audit requirement • 51% shareholding held by local U.A.E.

national except for professional licenses, where 100% shareholding is allowed

FREEZONE COMPANY:

• International Trade is allowed and local U.A.E. trade is possible only through a local distributor

• Office required • Visa provided • 100 % Foreign shareholding allowed and

no local sponsor required

OFFSHORE COMPANY:

• Only International Trade allowed • No office required • No Visa provided • No minimum capital requirement • No Audit requirement • 100% Foreign shareholding allowed and

no local sponsor required

 

 

Types of Licenses issued in Dubai

1. Trade License: A trade license is issued to a natural or juridical person to practice any trading activity for the purpose of profit making through buying and selling of goods. These licenses are issued for engaging wholesale or retail trade enterprises, contractors, hotels, transport and storing establishments etc., A Trading License can be General Trading or Specific Trading. A specific trading license limits the scope of activities to trade in only closely related items. [For e.g. a company can not trade in building materials, if its licensed activity is trading in computer peripherals]

2. Industrial License: An industrial license is issued to a natural or juridical person to practice any investment activity, the object of which is to discover natural resources or transform raw materials in terms of its structure or appearance into manufactured products or to transform the semi-manufactured products into fully manufactured products by using mechanical power and segregation of the products, filling, assembling or packing them.

3. Professional License: A professional license is issued to a natural or juridical person to practice any profession in which he depends on his physical or mental efforts rather than depending on a cash capital. This license is issued to practice certain professions such as engineering consultancy, other consultancy services and studies, auditing and accounting, business set up, company formation, medical and educational services and similar services

Taxation

The UAE is no tax country. Accordingly double taxation treaties are aimed at making Dubai a more attractive territory by reducing taxation levied in the foreign jurisdiction on profits remitted abroad by foreign corporations operating in Dubai, with the exception of certain foreign oil companies and branches of foreign entities, where tax is payable. In the Free Zones, a guaranteed tax holiday between 15 or 50 years is in force, depending upon the Free Zone location.

This tax environment has created many tax structuring opportunities and a interesting proposition for UAE entities. Transfer pricing and thin capitalization rules do not exist in the UAE and withholding taxes are not levied. For employees too, there is less hassle, as personal income taxes and wage taxes do not exist. Despite these important structural advantages, the UAE is often overlooked as a base for tax planning structures, inspite of the fact that the UAE Government has concluded over 56 double tax treaties (“DTTs”). Countries with whom DTTs have been signed include many important players in the global arena such as China, France, Germany, India, Indonesia, Italy, Luxembourg, Malaysia, the Netherlands and Singapore.

These make the region a more attractive territory to operate by reducing taxation levied in the foreign jurisdiction on profits remitted abroad by foreign corporations operating in the UAE, as the UAE Ministry of Finance can issue UAE Tax Residence Certificates to such companies. Given the fact that in principle UAE entities are subject to tax, the UAE entities often qualify as ‘tax residents’ under DTTs.

 

 

Investment Basics: Currency-UAE Dirham (AED) Foreign exchange control-No AccountingPrinciples/financial statements- IAS/IFRS. Financial statements must be prepared annually. Taxable income: There are no taxes imposed on the income of companies, except for oil and gas exploration and production companies and branches of foreign banks. Taxation of dividends- No Capital gains- No Losses- N/A Withholding tax: Dividends- No Interest- No Royalties- No Technical Service fees- No Branch remittance tax- No Other- No Anti-avoidance rules: Transfer Pricing- No Thin capitalization- No Controlled foreign companies- No Other- No Disclosure requirements- Annual Financial statements must be filed with the Ministry of Commerce by companies and branches located outside the free trade zones. Entities located within a free trade zone report to the free zone authority of the relevant zone. These entities have never officially been requested to file or report financial statements to a Ministry/Authority

located outside the free zone. Personal taxation: Basics- Individuals are not taxed on their income. Residence-N/A Filing status-N/A Taxable income- N/A Capital gains- N/A Deductions and allowances- N/A Rates- N/A Administration and Compliance: Tax year- N/A Filing and payment- N/A Penalties- N/A Value added tax: Taxable transactions- There is some speculation that VAT may be introduced in the future, but this has not been confirmed at the time of writing. Rates- N/A Registration- N/A Filing and payment- N/A Source of tax law: Income tax decrees issued by 5 of the 7 Emirates (Dubai, Sharjah, Abu Dhabi, Ajman and Fujairah) make up the UAE tax laws.

 

 

 

Advantages of Dubai Company Formation  

1. A Dubai company is not perceived as an international tax haven. Dubai is a reputable, highly regulated, international trading jurisdiction. Dubai is positively ranked as the 28th least corrupt country in the 2011 Corruption Perceptions Index by Transparency International, a global measure of corruption amongst public officials and politicians. In addition, Dubai has also been ranked 27th by the World Economic Forum in its Global Competitiveness Report 2011-2012.Dubai Government has concluded over 55 double tax treaties.

2.If properly-structured, Dubai company incorporation is the perfect way to legally book international profits without paying local corporation tax.

3. Through a Dubai Offshore Company, it is possible to have a Dubai entity and business address, without the legal requirement to rent a physical office and employ staff.

4. International entrepreneurs can own 100% of the Dubai company if it is located in one of the DubaiFreezones.

5. Dubai company formation has no specific minimum capital requirements, after a decree was introduced to drop formal minimum capital requirements in Dubai. Capital requirements are dependent on factors such as the size, nature and goals of the business. In this way, small and medium enterprises benefit, as they may have been at a disadvantage when requiring a relatively high capital requirement.

6. Through a Dubai Branch Company, international entrepreneurs can wholly own the entity and not be subject to an annual audit.

7. To encourage Dubai company formation, the Dubai government offers investor incentives, including low cost energy and sound communications infrastructure.

8. A wide range of licenses are available depending on the type of business to be carried out. Many entrepreneurs obtain a professional trade license which permits them to submit invoices for services but not reselling products, making it ideal for consultants.