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United Arab Emirates corporate law regulates the governance, finance and power of corporations in the United Arab Emirates (UAE) through UAE law. Every emirate has its own basic corporate code. [1]
The types of Business Licenses issued in the United Arab Emirates (UAE) are professional, commercial, industrial and tourism. The professional license covers services offered by professionals, artisans and craftsmen; the commercial license covers all trading and commercial activities performed with an intention of making profit ; the industrial license covers all industrial and manufacturing activities. The tourism license covers all activities related to hospitality & tourism. The type of license depends on the business activity of the company or enterprise.
In UAE, a company can be formed in any of the following three jurisdictions: Mainland, Free Zone and Offshore. The licensing authority in mainland is the Department of Economic Development of the respective emirates. In Free Zones, the relevant Free Zone Authority will be the licensing authority and respective Offshore Authority in the case of Offshore jurisdiction.
A mainland company is an onshore company and license to establish the entity is issued by the Department of Economic Development (DED) of the respective emirate. A mainland business is allowed to do business in the local UAE market as well as outside UAE without any restrictions. It is necessary to understand the term "Mainland" as per DED's definition in order for an entrepreneur to take a decision to register a Mainland Company in UAE. Different types of license under mainland are: [2]
For all licenses, the UAE now allows 100% of shares to be owned by expat individuals. As indicated in the latest decree. [3]
Following are the facts about Mainland Companies in UAE: [4]
Establishing a business entity in one of the UAE's many Free trade zones (FTZs) can be an attractive option for foreign investors. UAE has over 35 FTZs of which more than 20 are located in Dubai. The main attraction for setting up a company in a free zone is that there is no UAE national shareholding required. All free zones in UAE offer the following incentives:
UAE Free Zone companies can only operate within the free zone boundaries and are generally limited to performing solely those activities listed in their license(s).
It is mandatory for every company registered in the Free Zone to lease minimum office space within that particular Free Zone. If the number of employees are few - the company can also lease a co-working space which is located within the freezone. However, if the no. of employees are higher - they would be required to lease a dedicated office space within the freezone. A Free Zone Company can obtain UAE residence visas for the director, shareholder and also employees of the company through the Free Zone where it is registered.
UAE Offshore company registration is a very popular method of doing business in the Middle East region. In UAE there are three offshore jurisdictions – Dubai (Jebel Ali Offshore Company) Ras Al Khaimah and Ajman. They offer similar services but serve different strategic goals of offshore company registration. The Jebel Ali Offshore Company is an International Business Crown/holds the only offshore vehicle that is permitted to own / hold real estate in the Emirate of Dubai. JAFZA Offshore operated under JAFZA Free zone.
The RAK Offshore and the RAK International Company (RAKICC) are International Business Companies. They provide a flexible and credible option for foreign investors to register an offshore company in UAE without the need to establish a physical presence in the UAE. RAKICC is also allowed to hold the freehold property in Dubai. [6]
UAE Offshore companies offer the following benefits:
The common legal forms of business in Mainland, Free zone and Offshore formation in the UAE are:
Under Law of UAE, there are five types of business establishments applicable to foreign entities interested in establishing their presence in the UAE. UAE government has implemented wide range of economic and administrative policies which has made UAE an attractive business destination.
A company can create a permanent establishment, create an entity in any of the UAE free zone, enter into a commercial agency agreement, establish a branch office, create a civil company (currently possible to establish a company in Dubai, Sharjah and Ajman). [7]
A Limited Liability Company (LLC) is the most common type of registration in the UAE and is recommended where the purpose of the entity is to make sales within the region. However, 100% foreign ownership of such an entity is not permitted. Under the UAE Commercial Companies Law (CCL), foreign investors are permitted to hold up to 49 per cent equity ownership in UAE companies and 51 per cent of the equity must be held at all times by one or more UAE nationals.
In accordance with Article (218) of the CCL a Limited Liability Company can be formed by a minimum of 1 (as per Article 8 of the Federal Commercial Company Law of 2015) and a maximum of 50 shareholders whose liability is limited to their shares in the capital of the company. Recent amendments to Article (217) of the CCL that came into force in June 2009 removed the requirement for minimum share capital (previously AED 300,000 in Dubai and AED 150,000 in other Emirates) allowing founders of a limited liability company the freedom to determine the company’s share capital which could be less than the earlier prescribed bottom line.
A LLC must appoint a minimum of one manager and up to a maximum of five managers for the business. Managers must be appointed by a Memorandum of Association or by a management contract, for a fixed term or an unlimited term. Unless the Memorandum of Association states otherwise, the manager has full powers of administration and management of the LLC. LLC is not allowed to practice its activities in the UAE without a Trade License and Commercial Registration Certificate.
A branch office has the same legal identity as its parent company and conducts business under the name of its parent company. A branch office may only be engaged in activities similar to those of its parent company but it is not permitted to carry on the business of importing the products of its parent company, a function reserved for local trade agents. In some cases the Branch of a foreign company are required to obtain an additional license from UAE Ministry of Economy.
Representative office, on the other hand, is limited to promoting its parent company’s activities i.e. gathering information and soliciting orders and projects to be performed by the company’s head office.
A UAE national must be appointed as a ‘service agent’ for the branch or representative office.
A civil company is a business partnership for professionals like doctors, lawyers, engineers and accountants. A civil company is 100% owned by the professional partners (except for engineering civil company), however, a UAE National Local Service Agent is normally required. A foreign company can be a partner in a civil company, as long as the foreign company is in the same field as the civil company.
In 2019, the UAE implemented economic substance requirements for mainland and Free Trade Zone companies engaged in specific "relevant activities" as outlined in the UAE Cabinet of Ministers Resolution No. 57 of 10 August 2020. These activities include banking, insurance, investment fund management, lease-finance, headquarters, shipping, holding company, intellectual property, and distribution and service centre businesses.
To comply, companies must demonstrate substantial economic presence within the UAE, including conducting core income-generating activities locally, being directed and managed within the country, and maintaining adequate employees, operating expenditure, and physical assets in the UAE. [8]
UAE companies must annually notify the competent authority about their relevant activities, income, and financial year details, with a submission deadline of 30 June for the preceding year. This requirement applies to all companies, including those exempt from the economic substance obligations, such as investment funds, certain tax residents outside the UAE, and entities conducting business solely within the UAE.
Additionally, companies subject to these requirements must submit an Economic Substance Report within 12 months of their financial year-end, detailing their relevant activities, income, expenses, assets, employees, and confirming compliance with the economic substance test.
The United Arab Emirates is a high-income developing market economy. The UAE's economy is the 3rd largest in the Middle East, with a gross domestic product (GDP) of US$415 billion in 2021-2023.
The Emirate of Ajman is one of the seven emirates of the United Arab Emirates. It joined the United Arab Emirates federation on December 2, 1971. It has an area of 259 square kilometers, which makes it the smallest of the emirates in terms of area, while its population of approximately 504,846 in 2017 according to the Federal Competitiveness and Statistics Center makes it the fourth most populous emirate in the country. It is named after the city of Ajman, which is its seat of government. The main landmass of the emirate is a semi-enclave, surrounded on the north, east, and south by the Emirate of Sharjah.
A private limited company is any type of business entity in "private" ownership used in many jurisdictions, in contrast to a publicly listed company, with some differences from country to country. Examples include the LLC in the United States, private company limited by shares in the United Kingdom, GmbH in Germany and Austria, Besloten vennootschap in The Netherlands, société à responsabilité limitée in France, and sociedad de responsabilidad limitada in the Spanish-speaking world. The benefit of having a private limited company is that there is limited liability.
Dubai Internet City (DIC) is a neighborhood and an information technology and business park created by the Government of Dubai as a free economic zone and a strategic base for companies targeting regional emerging markets in Dubai, United Arab Emirates.
Dubai World Trade Centre (DWTC) is a convention and exhibition centre.
The Dubai International Financial Centre (DIFC) is a special economic zone in Dubai covering 110 ha, established in 2004 as a financial hub for companies operating throughout the Middle East, Africa, and South Asia (MEASA) markets.
A company, abbreviated as co., is a legal entity representing an association of legal people, whether natural, juridical or a mixture of both, with a specific objective. Company members share a common purpose and unite to achieve specific, declared goals.
The economy of Dubai represents a per capita gross domestic product as of 2022 of US$46,665. Thani Bin Ahmed Al Zeyoudi, Minister of State for Foreign Trade, announced that the UAE's non-oil trade over 10 years totalled Dhs16.14 trillion. The UAE GDP jumping from $407 billion in 2021 to $440 billion in 2022 and $467 billion in 2023. Similarly, per capita GDP will also expand from $43,868 in 2021 to $46,665 in 2022 and $48,822 in 2023.
A wholly foreign-owned enterprise is a common investment vehicle for mainland China-based business wherein foreign parties can incorporate a foreign-owned limited liability company. The unique feature of a WFOE is that involvement of a mainland Chinese investor is not required, unlike most other investment vehicles.
Ajman Free Zone (AFZA) is a free trade zone and one of the designated freezones located in Ajman, United Arab Emirates (UAE). First established in 1988, it is one of a number of unbonded free zones in the UAE offering offshore company setup and operation to investors. As of Q1 2018, 12,362 companies operated out of AFZA.
This article covers the best practices and movement for reform in entrepreneurship policies in the United Arab Emirates.
The United Arab Emirates is a federation of seven Emirates, with autonomous federal and local governments. The UAE has historically been a low-tax jurisdiction. The federal government and local governments are entitled to levy taxes on citizens and companies. The federal government currently levies a value added tax, corporate income tax, and excise taxes. Some emirates levy property, transfer, excise and tourism taxes. Some emirates also charge corporate taxes on oil companies and foreign banks.
KEZAD or Khalifa Economic Zones Abu Dhabi - KEZAD Group was launched by AD Ports Group on September 19, 2022, as part of the plan to consolidate and grow its Economic Cities and Free Zones offering.
Dubai Airport Freezone is a designated free economic zone in Dubai, United Arab Emirates, providing company formation and business setup services in Dubai. DAFZ is home to more than 2,000 registered businesses from over 20+ sectors and various industries, with 20,000+ professionals.
Citibank National Association, United Arab Emirates commonly known as Citibank U.A.E., is a franchise subsidiary of Citigroup, a multinational financial services corporation headquartered in New York City, United States. Citi U.A.E. is connected by a network spanning 98 markets across the world. The phone support call center for Citibank U.A.E. retail banking clients is based at Citibank Bahrain.
Designated Freezones in the United Arab Emirates are special areas in the United Arab Emirates that are subject to special rules for supplies of goods within the region for VAT purposes. They are instrumental components of the country's economic landscape, contributing significantly to its development and global standing. Established to diversify the economy away from oil dependence, these zones serve as pivotal entities fostering international trade, foreign investment and economic growth.
