Company Formation in UAE
Why choose UAE to start a Company?
United Arab Emirates (UAE) or simply called the Emirates is a country in the Middle East. UAE is a federation of seven emirates consisting of Abu Dhabi, Dubai, Ajman, Fujairah, Ras Al Khaimah, Sharjah and Umm Al Quwain. UAE's population consists of mainly expats with nearly 7.8 million expats living in the country with 1.4 million Emirati citizens. UAE offers a strong and conducive business ecosystem with stable political and macroeconomic conditions. UAE is currently ranked as the 26th best nation in the world for doing business by the Doing Business 2017 Report published by the World Bank Group.
Forms of Business Registrations in UAE
Sole Proprietorship
A sole proprietorship is owned by a single individual who has control over all its operations and is the simplest form of corporate structure in the UAE. An individual of any nationality can own a professional sole proprietorship but only a UAE and GCC resident can have commercial or industrial sole proprietorship.
Where the owner is not a local person the appointment of a Local Service Agent is required who shall overlook all license requirements.
Where the owner is not a local person the appointment of a Local Service Agent is required who shall overlook all license requirements.
Partnership
Partnerships are further constituted under two categories of General Partnership and Limited Partnership. The Constitution does not provide any restriction asto the capital or share ownership requirement but only UAE residents are allowed to be General partners in a partnership and other nationals can only be Limited partners.
LLC
The most preferred and flexible form of business registration in UAE is an LLC. It has limited liability based on the capital contribution of the shareholders in the Company. These are free to have commercial or industrial operations though professional activities other than banking and other prescribed activities are not permitted under this form.
This can have minimum 2 members and maximum of 50 shareholders. The UAE Companies Law does not prescribe any minimum share capital for an LLC. The LLC is required to have adequate share capital which can be decided by its shareholders.
This can have minimum 2 members and maximum of 50 shareholders. The UAE Companies Law does not prescribe any minimum share capital for an LLC. The LLC is required to have adequate share capital which can be decided by its shareholders.
Private Shareholding Company
This can be formed with 3 shareholders and should incorporate a board of at least 3 directors. Citizens of the UAE must own at least 51% of the shares of a private shareholding company. The minimum capital required for incorporation should be AED 2 million.
These entities cannot welcome any public shareholding.
These entities cannot welcome any public shareholding.
Public Shareholding Company
A public Share Holding Company is defined as a legal entity and is also called a Public Joint Stock Company in the UAE. These company must have appointed minimum 3 managers and 10 shareholders as per DED business regulations.
The promoter shareholders may have upto 35% shareholding but can offer 75% to the public. Though most of the management should be UAE citizens.
The promoter shareholders may have upto 35% shareholding but can offer 75% to the public. Though most of the management should be UAE citizens.
Free Zone Company in UAE – JAFZA
With no foreign ownership restrictions, Jafza is the perfect choice for international investors looking to establish their companies in the region. Businesses within these zones operate under the independent authority of the free zone that issues operating licences and regulates the activities of all enterprises within the zone.
Free Zone Company
Free Zone Company (FZCO) is a multiple shareholder limited liability company that can be incorporated in Jebel Ali Free Zone and there are no foreign ownership restrictions. There must be a minimum of 2 and a maximum of 50 shareholders where the liabilities of the company are limited to its capital paid.
Branch of a Company
Branch of a company is a legal entity of the parent company which is 100% owned by the parent company and operate under the same name and conduct the business activities.
Offshore Company
Offshore entity is a separate legal entity that is setup with the intention of operating outside the company’s registered office jurisdiction or location of its ultimate ownership. It requires one or more shareholders but has no maximum shareholder restriction. The Shareholders can be individual, company or a combination of both.
Taxation
There is currently no personal income tax in the United Arab Emirates thus, there are no individual tax registration or reporting obligations. Though, as per the UAE CT Law, natural persons who conduct a business or business activity in the UAE as specified in a cabinet decision, will be subject to UAE Corporate Tax at 9% on income from such business or business activities exceeding the threshold provided in the Cabinet decision.
The VAT rate varies from 0% & 5% where rate of 5% applies to most goods and services, with some goods and services subject to a 0% rate or an exemption from VAT.
For UAE residents, VAT registration threshold is AED 375,000 whereas voluntary threshold is AED 187,500. Though, no registration threshold applies to non-resident businesses making supplies on which the UAE VAT is required to be charged.
The VAT rate varies from 0% & 5% where rate of 5% applies to most goods and services, with some goods and services subject to a 0% rate or an exemption from VAT.
For UAE residents, VAT registration threshold is AED 375,000 whereas voluntary threshold is AED 187,500. Though, no registration threshold applies to non-resident businesses making supplies on which the UAE VAT is required to be charged.
FAQ
Qu. Do Jafza company has to comply with Wage Protection System?
Ans. Yes, all businesses registered with Jafza are required to comply with the WPS system of the United Arab Emirates.
Qu. Can one own multiple business in Jafza?
Ans. Yes, an entity may apply for multiple business formation within the free zone.
Qu. Can a company license be transferred from Mainland to Jafza?
Ans. No, for a company to shift from mainland to Jafza it has to dissolve its mainland entity.
Qu. What is the minimum share capital requirement for a Company in Jafza?
Ans. There is no longer a minimum share capital requirement in Jafza for an FZE or FZCO, but require that a company must have a share capital that is sufficient for the activities for which it is licensed
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