The UAE company incorporation process:
Licensing requirements:
Subject to the type of business, companies incorporated in the UAE are required to obtain a licence falling under one of the following licensing groups:
- commercial companies with diverse trading operations;
- professional companies and partnerships providing services according to their main profile;
- industrial companies operating in the industrial or manufacturing sectors.
The above categories of company must obtain the relevant licence for their operations in the emirate where operations will be conducted because each emirate applies its own licensing procedures.
With licences issued in a FEZ, companies are authorised to do business only within the area of that FEZ or outside of the UAE. Registration of a branch is required to enter and operate on the internal local market.
Types of incorporated companies:
Limited Liability Company (LLC):
It is required that 51% of an LLC belongs to citizens of the UAE or to a local company fully owned by citizens of the UAE and is incorporated outside of a FEZ. The minimum number of members is 2 and the maximum is 50. The minimum share capital is AED300,000 ($81,745).
A company branch in a FEZ:
The branch can be registered without the participation of a citizen of the UAE and can operate only within a FEZ. The company is required to maintain an office in the UAE and work permits for employees must be issued (the number of work permits is linked to the size of the office). Financial reporting and auditing is required.
Branches of foreign companies:
A branch of a foreign company must be registered as a subsidiary or a representative office and subject to the engagement of a local agent. The branch undertakes representative functions in the UAE and is not a separate legal entity (fully-fledged operations are possible subject to the issue of a special permit by the UAE Chamber of Commerce).
A professional company:
The main objective of this type of company is to provide professional services, it is not a comprehensive legal entity and a local agent is required.
It should be noted that some emirates operating Free Economic Zones provide registered companies with attractive business conditions and an incentive tax regime.
For example, in one of the most popular jurisdictions, the emirate of Ras al-Khaimah (RAK), the government has established an offshore sector composed of 2 FEZs (RAK FTZ and RAKIA) with an option to set up two different types of offshore company with very little distinction:
- RAKIA companies add the word “offshore” to their incorporation documents;
- RAK FTZ companies add the word “international” to their name (IBC).
Hence, subject to business objectives and a rational approach to the development of a company, potential owners of a UAE corporation have 3 options:
- an offshore company within a FEZ;
- an onshore company within a FEZ (so called “Free Zone Companies”);
- an onshore company outside of a FEZ (LLC).
If the priority of the investor is to do business within a FEZ and there is no objective to operate in the rest of the UAE or take advantage of Double Tax Treaties, the most suitable option would be a FEZ offshore company. Such company will not have resident status in the UAE but will be tax exempt.
However if the investor is looking for resident status because the business is not limited to a FEZ but extends throughout the country and application of Double Tax Treaties will help minimise the tax burden, the most desired option would be an onshore FEZ company that is exempt from tax on profits. It should be noted that registration and maintenance of an onshore company incurs higher costs vis-a-vis offshore and licensing and auditing will be required.
The offshore/onshore status of FEZ companies effects the sole proprietorship of a company by a foreign investor. Onshore companies outside of a FEZ have the right to operate throughout the UAE and do business with any corporate entity. However, at least 51% of the company must belong to a UAE citizen, which downgrades its attractiveness and use as a legal structure for a business in the UAE.
Structure and incorporation:
Onshore FEZ companies:
Director:
A director can be a private individual or a corporate entity and there are no residency qualifications.
Secretary:
A secretary is mandatory. It may be a natural person or a corporate entity and there are no residency qualifications.
Shareholders:
The amount of shareholders required is between 2 and 5 and there are no residency qualifications.
Share capital:
Minimum share capital depends on the type and area of operations. Recommended share capital is AED10,000 ($2,725). Registered and bearer shares may be issued but bearer shares must be deposited with the custodian. The company must have a fully-fledged office and resident status in the UAE. It can obtain work permits and recruit local staff and benefit from Double Tax Treaties. The company must obtain a licence and audit its financial statements.
Ras al-Khaimah offshore companies:
Director/Shareholder:
One or more are required and they may be natural or legal persons. There are no residency qualifications.
Secretary:
A secretary is mandatory. It can be a private individual or a corporate entity and there are no residency qualifications.
Share capital:
There is no requirement for minimum share capital and its payment. The capital must be denominated in Dirhams with a nominal value of AED1,000 per share. Registered and bearer shares may be issued but bearer shares must be deposited with the custodian.
The business of offshore companies is not subject to licensing and is exempt of taxation. There is no requirement for auditing and shareholders may select applicable law. Offshore companies incorporated in the Ras al-Khaimah FEZ are authorised to do business in any place of the world except the UAE. The winding up of an offshore company is straightforward and has no consequences for the owners. Such companies are not allowed to maintain an office or apply for UAE work permits for staff.
Registered office:
Companies incorporated in a FEZ are required to have their registered office and registered agents in the FEZ or within the UAE.
Registration period:
7 days. Shelf companies are available.
Legalisation of documents:
The UAE is not a signatory to the Hague Convention so all documents issued in other countries must be submitted for consular legalisation in the country of origin and certification in the UAE.
Accounting and auditing:
Onshore FEZ companies:
Accounting and annual financial statements and auditing are mandatory.
If the company is dormant, simplified reports must be prepared and submitted.
Offshore FEZ companies:
Accounting is mandatory but the submitting of financial statements to government authorities and auditing is not required.
Financial documents and accounts must be kept for at least 5 years.
Offshore Ras al-Khaimah companies:
Accounting is mandatory but the submitting of financial statements to government authorities and auditing is not required.
Financial documentation and accounts must be kept for at least 7 years.
Company directors can choose the place of keeping of the financial documents.
Public information in the Registers:
Each emirate and every FEZ maintain their own Company Registers. Information on nominee directors and shareholders is publicly accessible.
Ras al-Khaimah Register is closed to public inspection and information on directors and shareholders is not disclosed.