Dubai’s impressive growth and business-friendly environment have made it a popular choice for entrepreneurs and investors. To successfully navigate this landscape, it’s essential to be familiar with the legal and regulatory requirements for businesses in the region.
Here is a quick overview of the aspects you need to consider curated by expert company setup in uae consultants, when it comes to Understanding Dubai’s Legal and Regulatory Requirements for Businesses in UAE.
1. Setting up a Limited Liability Company in Dubai
As an expat considering a limited liability company in Dubai, you should know that the law allows for 2 to 50 shareholders. These companies can engage in any lawful activity, excluding insurance, banking, and investment. For approval and licensing, the Economic Department must be consulted, and the business should be registered with the Dubai Chamber of Commerce and Industry. The chosen commercial name must also be approved by the Licensing Department of the Economic Department.
2. Forming Joint Ventures in Dubai
When establishing a joint venture between a foreign and local party, the local party must own 51% equity. Official contract documents are not required, but the joint venture should have a specific project or technology focus. For strategic partnerships, Dubai lawyers can provide guidance on structuring, drafting, and negotiating agreements.
3. Foreign Companies and Representative Offices
Under UAE Commercial Company Law (13) of 1988, foreign companies cannot undertake financial obligations. Representative offices must be registered with the UAE Ministry of the Economy and the Dubai Department of Economic Development. These offices must also engage with a UAE National Local Service Agent, either an individual or a UAE National-owned company.
4. Branch Offices and Local Service Agents
Foreign companies can wholly own branch offices, but a local service agent must be appointed, who should be a UAE national or a company owned by UAE nationals. Branch or representative offices are prohibited from engaging in import activities and cannot generate profit.
5. Opening a Branch Office in Free Zones
To open a branch office in a free zone, companies need license approval from the Ministry of Commerce and Economy. The approved activities for the authorized brand or office must also be noted.
6. Establishing a Sole Proprietorship by a Foreign Company
In the case of a foreign company establishing a sole proprietorship, the foreign company has 100% ownership. Currently Sole Proprietorship does not require the intervention of a local service agent or partner.
7. Navigating Economic Substance Regulations
UAE’s economic substance regulations, implemented in April 2019, mandate an adequate “economic presence” for entities conducting “Relevant Activity.” Entities must assess their activities’ scope and ensure compliance, involving operational, financial, tax, legal, and governance considerations. Exempt entities are required to file a Notification and provide supporting evidence.
Relevant Activities Include:
- Banking
- Insurance
- Fund management
- Financing or leasing
- Headquarters activities
- Shipping
- Holding companies
- Intellectual property (“IP”) holding or exploitation
- Distribution of goods purchased from foreign-connected persons
- Provision of services to foreign-connected persons
8. Avoid Double Taxation as an Expat in UAE
Tax Residency Certificate or Tax Domicile Certificate, UAE, is a handy legal document that confirms a company or individual’s tax residency in the UAE. This certificate allows you to benefit from double taxation agreements between the UAE and other countries, so you don’t end up paying taxes twice on the same income. To get a TRC, you need to meet certain eligibility criteria, like staying in the UAE for a minimum period. The UAE Ministry of Finance is in charge of issuing these certificates, which are super helpful for businesses and individuals looking to reduce their tax burdens while working across different countries
9. Understand regulations related to VAT, EXCISE and Corporate Tax UAE 2023
VAT was introduced in the UAE on January 1, 2018, at a standard rate of 5%. It’s an indirect tax applied to most goods and services. As a business owner, you’ll need to register for VAT if your taxable supplies and imports exceed AED 375,000 per annum. Once registered, you’ll be required to charge VAT on your goods and services, file regular VAT returns, and pay the collected tax to the Federal Tax Authority (FTA).
VAT-exempt items
Some goods and services, like basic food items, healthcare, and education, are exempt from VAT or subject to a zero rate. Make sure to familiarise yourself with the list of exempt items to charge VAT accurately.
Excise Tax
Excise Tax was implemented in the UAE in 2017. It’s a tax levied on specific goods considered harmful to human health or the environment, such as tobacco products, energy drinks, and carbonated drinks. The rates vary depending on the product. If your business deals with any of these products, you’ll need to register for Excise Tax, maintain proper records, and pay the tax to the FTA.
Compliance
It’s crucial to ensure your business complies with VAT and Excise Tax regulations to avoid penalties or fines. You may want to consider seeking professional assistance from tax consultants or accountants to help you with tax registration, filing, and payments.
There’s more about corporate tax implementation 2023 in UAE. You can read all about it here in our comprehensive guide.
Being well-informed about the tax regulations in the UAE will help you operate your business smoothly and avoid any potential legal issues.
Benefits of Setting up a Business in UAE Free Trade Zones
Foreign firms can establish a permanent presence in the UAE by launching a limited liability company, a sole proprietorship, or setting up a branch office in a UAE Free Trade Zone. The benefits of opening a branch office in a Free Trade Zone include:
- No personal income taxes
- Corporate tax exemption for 15 years, renewable
- 100% tax exemptions for import and export
- 100% repatriation of capital and profits
- Support for sponsorship and housing
- Support for employee appointment
Achieving Success with Horizon Biz Consultancy
While Dubai is known for enabling foreign companies to do business with ease, it is essential to familiarize yourself with the region’s business laws to ensure success.
Expert guidance from Horizon Biz Consultancy can help you navigate the complexities of Company Setup UAE and confidently establish your presence in Dubai’s dynamic business landscape.
Get in touch with our experienced legal, tax and business setup consultants UAE at Horizon Biz Consultancy, Dubai today for a free consultation. Call +9715 010 42665 now.
