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Transcript of DOING BUSINESS IN UAE UAE FREE TRADE ZONES/media/IE Singapore/Files/Events... · DOING BUSINESS IN...
DOING BUSINESS IN UAE
&
UAE FREE TRADE ZONES Sudhir Kumar, Partner & Head – Corporate Communications
Chief Executive Officer-Morison (UAE) Consulting
• Busiest trading hub of the Middle East
• High Per Capita Income
• No foreign exchange control, quotas, or trade barriers
• Competitive import duty (5%) with exemptions
• State policies permit full repatriation of profit and capital
• No income tax, no corporate tax and no withholding tax
• Most modern infrastructure
• Presence of major multinational corporations
• Mixed population from all over the world
• Stable currency
• Proximity to the Indian Subcontinent and Europe
• Largest Airports and Sea Ports
UAE (Dubai) – UNIQUENESS
• The UAE is the 17th exporter of the world
merchandise trade
• FDI into UAE – 2013 – USD 12 billion
• UAE Non oil foreign trade :USD 409 billion (2012)
• GDP per capita USD 65,600
• UNO’s world happiness report 2013 - Ranked 14
• Ease of doing business 2014 - Ranked 23
• Global Competitiveness Index 2013 - Ranked 19
• IRENA Headquarters is based in Abu Dhabi
UAE – ECONOMIC & COMMERCIAL ADVANTAGES
UAE (Dubai) – UNIQUENESS
Macro view of the surrounding regions
Levant (including Turkey & Iraq)
• Population: 145.8m • GDP: $ 1,172 Billion • Economic Growth:
4.95%
India Sub-continent • Population: 1,575m • GDP: $1,981 Billion • Economic Growth:
6.84%
GCC (& Yemen) • Population: 66.5 m • GDP: $ 1,122 Billion • Economic Growth:
6.23%
Iran & Central Asia • Population: 171m • GDP: $646 Billion • Economic Growth:
5.99%
North & Eastern Africa • Population: 318.6 m • GDP: $ 474 Billion • Economic Growth:
4.86%
GDP=$ 5,395B Population=2.28 B Avg. Growth= 5.77%
UAE Economic Profile
UAE Population
8.3 Million
GDP/Capita in USD
65,600 (#8)
UAE Trade
USD 409 Billion
Source: International Monetary Fund (IMF)2010 and Economist Intelligence Unit (EIU) 2010
GDP USD
358 Billion
GDP CAGR (05-09)
16%
35 UAE global rank by GDP
8 UAE global rank by Per Capita Income
21 UAE rank on Global Trade
7 Oil Reserves
Global Total Population of Young in
2013 (in millions)
Dubai – Trade, Logistics, Finance and Tourism Hub Dubai Economic Profile
$205 Billion Trade Value
2010 (17.8% growth)
1,868 Logistics
companies
130 Airlines
150 Shipping Lines
2 M Population
1 Quality of living in
MEA
52 Banks
12.5 Million Hotel
Guests
UAE –Singapore Trade Relations
• UAE-2nd largest Trading Partner of Singapore in the Middle East.
• The Trade value in 2013 is estimated at USD 20.8 billion
• More than 350 Singaporean Companies in UAE
• Singapore is the first non-Middle East country to sign a Free Trade Agreement with the GCC nations
• JAFZA hosts more than 70 and DAFZ has 30 plus Singaporean companies
• UAE ranked 11th in FDI inflow and Singapore 9
10
Setting up a Business
Mainland
Free Zones
11
Licensing Mainland
AUTHORITY • Department of Economic
Development.
• Ministry of Industry
• Ministry of Economy
• UAE Central Bank
TYPE
ACTIVITIES •Manufacturing
•Trading
•Services
•Professional Activities
REGULATIONS
Common form of legal entity:
UAE national : 51%
Foreign Investor: 49%
Capitalization : AED 150,000 (In Dubai AED 300,000)
12
Limited Liability Company
Ownership Pattern:
for
•Manufacturing
•Trading
•Services
13
Civil Company [Professional Firm]
Ownership Pattern:
for Common form of legal entity: •Consulting
•Professional activities
•Foreign Investor : 100%
•UAE national – Service Agent
•No Physical Capital
14
Branch of Foreign Company
Back-home taxation
for Preferred legal entity:
•Architecture/Engineering Firm
•Specialized Constructions
•Distribution of own products
(branded)
Specialized Consultancy
•Appointment of Service Agent
15
Free Trade Zones
• Free Trade Zones play a key role in attracting FDI
• Designated by the Govt. for duty free entry of non-prohibited goods
• Re-export can be done without payment of duties
• Duties are imposed, if merchandise pass outside the Free Zone
• Free Zone resolves the ownership issue of 51:49
(100% foreign ownership)
16
Licensing - Free Zones
TYPE
ACTIVITIES •Manufacturing/Assembling
•Trading
•Services
•Professional Activities
SELECTION
OF THE ZONE REGULATIONS
17
Major Advantages
• 100% foreign ownership of the enterprise.
• 100% import and export tax exemptions.
• 100% repatriation of capital and profits.
• No corporate taxes for 50 years, renewable
for an additional 50 years.
• No personal income taxes.
• Freedom to recruit employees
Role of Free Zones
• Drive economic and industrial development
• Offering world–class infrastructure, value added
services and incentives.
• Catalysts for country’s inward FDI
• Employment generation
• Backbone of diversification of economic activities
Free Zones in the UAE
Total 42 in number, having over 35,000 companies
Dubai – 24
Abu Dhabi – 6
Sharjah – 3
Ajman – 2
Ras Al Khaimah – 4
Um Al Quwain – 1
Fujairah – 2
Types of Free Zones
• Cluster Zones
– Jebel Ali Free Zone (8)
– Kizad (7)
• Specialized Zones
– Media, IT, Printing & Publishing
– Finance
– Outsourcing
– Film & Broadcasting
– Renewable Energy
– Commodities Trading & Exchange
– Bio-Technology, Healthcare and others
• Industrial Zones
– Kizad
– RAKIA
Free Trade Zones & FDI
• UAE ranked 11th Globally in terms of new FDI
Projects – 1.7% of global share
• UAE Foreign Trade currently at US $ 405 billion
outshines UAE’s GDP of US $ 358 billion.
• Formulating Government Strategies and Vision
• Catalysts for country’s growth and development
Regulations
• Recent regulatory changes allow Free Zone
companies to operate from Mainland
• Mainland companies can operate in certain Free
Zones in designated buildings
• Annual Audited Financials
• Yearly Licenses
• Leased Land
• Employee Visa – 3 years
Licensing Process - Single Window Clearance
Decision on the Free Zone
Prepare Business Plan
Submission of Project Profile / Business Plan
Preliminary Approval
Application Approval Office Space /
Land / Warehouse
Capital
Final Documentation
License Visas Overall Time Frame Trading: 10 – 30 Days Industries: 30 – 60 Days
Costs at a Glance
Jurisdiction Formation Fee - One Time (US $)
License Fee – Recurring (US $)
Land Cost Office Space Cost
Warehouse
JAFZA FZE – 2725 FZCO - 4100 Branch - 1365
US $ 1500 – Normally US $ 8180 – General Trading
US $ 9 / sqm / year
US $ 500 to US $ 700 / sqm / year (Min size – 30 sqm)
US $ 140 per sqm / year (Min Size – 313 sqm)
DAFZA Same as above Branch - NIL
US $ 2725 Not Available US $ 600 / sqm / year (Min size – 50 sqm)
US $ 300 per sqm (Min Size – 350 sqm)
KIZAD 2050 1365 US $ 4 / sqm / year
Yet to be fixed Not Available
RAKIA 1365 2725 US $ 2.7 / sqm / year
US $ 20 / sqm / year (Min size – 30 sqm)
US $ 55 per sqm (Min Size – 311 sqm)
Type of Entities
Type of Entities
Ownership Structure
Capital
JAFZA / DAFZA RAKIA Kizad
Free Zone Establishment (FZE)
Corporate – Wholly owned subsidiary Individual ownership
US $ 272,480 US $ 40,875 From US $ 40,875
Free Zone Company (FZC / FZCO / FZLLC)
Multiple ownership structure - corporate & individual
US $ 136,240 US $ 54,500
Branch License
Foreign Company or UAE Mainland Company
NA NA
Restrictions
• Local / Mainland Retailing
• Contracting and Installation in the mainland
• Logistics & Freight Forwarding allowed only
as branch of Dubai Company
• National Industrial License
Offshore Jurisdictions
• Mainly for SPVs
– if there is no need for local physical presence
– call account given by bank
– Registered Agent Needed
– Real Estate can be purchased in Dubai (only by
JAFZA Offshore Companies)
• Three Jurisdictions in UAE
– JAFZA Offshore
– RAK International Company (part of RAK FTZ)
– RAK Offshore (part of RAKIA)
DUBAI INTERNATIONAL FINANCIAL CENTRE (DIFC)
• Onshore Capital Market
• Financial Free Zone
• Independent legal system
• DFSA – independent regulatory authority
• NASDAQ Dubai
• 6 Indian Banks (SBI, BOB, PNB, Axis, IDBI,
ICICI)
• More than 1000 companies registered
• Freehold property
UAE VISION -2021
• The Vision charts next stage of journey
• Want to be among the ‘best countries’ in the
world
• GDP to be increased by 65%
• Confident and socially responsible citizens
• Enhanced international standing
• Sustainable and diversified economy
HIGHLIGHTS OF EXPO 2020
• Extra USD 23 billion of GDP in next 7 years
• 25 million visitors, 70% from outside UAE
• 300,000 new job opportunities
• 840,000 sq.meters gross retail space by 2016
• 6000 new hotel rooms by next year
• 200,000 hotel rooms by 2020
• AED 2 billion for Arabian Canal
• Construction, Tourism and Hospitality, Aviation
• Engineering, Transportation and Logistics
Visionary Projects…..
• Arabian Canal
Project cost USD545
million
Visionary Projects…..
• Blue Waters Island &
• Dubai Eye
Project cost USD 1.7 billion
Visionary Projects…..
Dubai Frame
Project cost
USD $32.3 million
Things to do...
• Conduct feasibility study
• Have preliminary meetings with Free Zone
authorities to finalize on the options
• Understand documentation requirements and other
formalities
• Submit on-time error-free documentation
• Choose the right advisor, if you are new to the
market
How an Advisor can help you...
• Understanding the business model
• Information on legal framework
• Initial awareness of the markets
• Understanding on cultural sensitivities
• First hand experience of the place; arranging preliminary visits
to all appropriate places – Free Zones and Mainland
• Correlating available options with investor needs – Mainland /
Free Zone / Offshore / Free Hold
• Assist in Market Research, Corporate Finance, Property & Real
Estate, HR, Replicating same business model to other GCC
countries