The UAE is changing into a very standard jurisdiction amongst high-net-worth people and aspiring entrepreneurs to arrange corporations, trusts, and foundations. One of many issues we at SetHub have realized advising them on establishing trusts, foundations, and firms is that almost all of them don’t actually perceive the UAE’s authorized and free zone system. We perceive, it may be a little bit tough to navigate, and we hope to set the report straight and present you the Benefits of Holding a Dubai Free Zone License for Worldwide Companies. Understanding the UAE’s authorized and free zone system is vital to establishing the precise sort of entity in the precise UAE jurisdiction. On this weblog, we’re going to offer you a fundamental overview of the UAE’s authorized and free zone methods.
Understanding the Authorized Construction and Free Zones
So right here’s a little bit little bit of an outline in case you didn’t know: UAE stands for the United Arab Emirates. Now, the UAE consists of seven totally different emirates, and every emirate is type of like its personal state. We begin with Abu Dhabi, which is the capital; Ajman; Dubai, which after all is probably the most well-known emirate; Fujairah; Ras Al Khaimah; Sharjah; and Umm Al Quwain.
Now, the UAE’s authorized system is a little bit totally different than it’s in lots of international locations you’re in all probability accustomed to. We now have UAE federal regulation that applies emirate-wide, so this is applicable in the entire emirates inside the UAE. Then we’ve the legal guidelines of every emirate, very similar to you’d have the legal guidelines of a state in the US, for instance. After which you could have the free zone legal guidelines. So, inside every emirate, there are designated geographic areas often called free zones, they usually have their very own guidelines and rules governing the enterprise performed inside these free zones.
Mainland Corporations vs. Free Zone Corporations
So, incorporating within the UAE, you could have your mainland corporations, that are corporations included in an emirate, after which you could have your Free Zone License for Worldwide Companies, that are corporations included inside one in all these free zones we simply talked about. So, they’re included within the geographic space of the free zone.
First, let’s speak a little bit bit about mainland corporations. Mainland corporations can conduct enterprise wherever within the emirate the place they’re included. Take into consideration shops, inns, eating places, stuff like that. Now, 100% overseas possession of mainland corporations is permitted, however a number of occasions it’s simpler to tackle a neighborhood associate who owns 51%. Now, that doesn’t imply they’re going to get 51% of the earnings; you may negotiate that individually. A number of occasions, you will get a neighborhood associate for a flat payment or a small share of income or revenue, which frequently makes establishing the mainland firm a lot simpler and extra environment friendly.
You possibly can lease actual property wherever within the emirate the place your mainland firm is included. You possibly can sponsor workers, deliver them from overseas, and provides them employment visas right here within the UAE. Beginning subsequent yr, mainland corporations shall be topic to a company revenue tax of 9%, which comes into impact in the course of subsequent yr. Mainland corporations usually qualify to reap the benefits of tax treaty advantages. The UAE has a number of tax treaties—117, I believe—greater than Switzerland. Mainland corporations are in all probability probably the most versatile enterprise entity sort when it comes to what kinds of companies you are able to do and the place.
Now let’s speak a little bit bit about Advantages of Acquiring a Free Zone License in Dubai. Free zone corporations can solely conduct enterprise inside the free zone the place they’re included, so that you’re usually not going to see a free zone firm that’s a retailer, resort, or restaurant. Free zone corporations are usually buying and selling corporations or service companies situated inside the geographic space of the free zone. They will solely lease actual property inside that free zone. Nonetheless, they will sponsor workers, to allow them to present employment visas to workers they convey from overseas. They will additionally conduct enterprise with the mainland from inside the free zone. For instance, you can have an accounting agency that gives providers from inside the free zone to corporations outdoors it—that may be permitted.
You possibly can commerce with companies on the mainland, so you may promote merchandise to them. One of many good issues about free zones in comparison with mainland corporations is that free zone corporations are exempt from the UAE’s 9% revenue tax. Now, there’s a catch, although: if the free zone firm has any income from doing enterprise with the mainland, it turns into topic to the UAE’s revenue tax. So, it’s a must to be very cautious when you have a free zone firm when doing enterprise with the mainland, because it may set off tax legal responsibility. Free zone corporations usually additionally qualify for treaty advantages. They’re a bit extra restrictive than mainland corporations when it comes to the kind of enterprise they will conduct and the place, as a result of they’re restricted to doing enterprise inside the geographic space of the free zone and to the strains of enterprise that the free zone presents licenses for.
Offshore Corporations in UAE Free Zones
Inside free zones, there are additionally offshore corporations. After we speak about free zone offshore corporations, we imply IBCs, worldwide enterprise corporations, like a Cayman or BVI firm. These offshore corporations can’t do enterprise with UAE residents or corporations. They will’t lease workplace house or premises wherever within the UAE, together with the free zones the place they’re included. They will’t sponsor workers and customarily don’t qualify for treaty advantages. You possibly can incorporate this firm within the UAE, however it might solely do enterprise outdoors of the UAE or with individuals or companies outdoors of the UAE.
Trusts and Foundations
The UAE has trusts and basis legal guidelines out there below each federal and free zone legal guidelines. Not all free zones supply trusts and foundations, however I’m going to cowl which of them do. First, let’s speak about trusts. You possibly can kind a belief below UAE federal regulation, which implies it’s a mainland belief and might function wherever inside the UAE. You may also arrange trusts within the Dubai Worldwide Monetary Centre (DIFC) or within the Abu Dhabi World Markets Free Zone (ADGM). Foundations can be found in three totally different UAE free zones: DIFC, ADGM, and the Ras Al Khaimah Worldwide Company Centre (RAK ICC).