People in business from all over the world, choosing a place to register a company, prefer to choose the FTZs / FEZs in the UAE, and there are some clear reasons for that. Firstly, there are many free economic zones in the country offering very favorable tax and customs conditions for legal entities registered here; secondly, the developed infrastructure promotes the growth and development of companies, and thirdly, bureaucratic procedures are minimized here.
So, you have decided to register an import-export company in the United Arab emirates. What do you need to know and take into account, opening a company in the UAE for international trade?
As for the transport, logistics, and infrastructure, the UAE is best suited for trading with all countries in Europe, Asia, and Africa, being at the heart of numerous trade routes. Even a flight from here to America and Australia will take no more than 8 hours. The cities of Dubai and Abu Dhabi are among the top busiest transport hubs in the world. The billion-dollar turnover, which grows from year to year, is the result of an effective policy for the business environment development in the country. Given all the advantages above, many entrepreneurs decide to open a trading company in this country.
However, if your trading activity does not involve the transport of goods through the territory of the UAE, this country is still ideal for company registration for international export-import activities. There are many reasons for this, while the most important are the favorable taxation regime for profits from trading and other business activities (0% tax rate), as well as the availability of reliable banks that are well aware of the specifics of all the trading operations and offer the complete package of necessary services. It is important to note that when registering a company and if the transport of goods through the territory of the UAE is not expected, you can choose two possible options for company registration - onshore or offshore company. Both companies can conduct international trading activities and open accounts in the UAE. At the same time, offshore company expenses are lower. But the offshore company is restricted to all activities inside the country, only operations outside the UAE are allowed, besides its shareholders cannot obtain resident status in the UAE for this type of company.
It is not surprising that most of the companies established in FTZs (free economic zone) both onshore and offshore are import-export companies. Also, trade licenses issued by FTZ / FEZ authorities in Dubai and other Emirates for onshore companies are in most cases quite flexible, that is, the categories of goods that can be imported/exported from here are very broad. Having a single trade license, you can sell, for example, building materials and cosmetics, and special licenses are needed only for certain groups of goods – alcohol and tobacco, for example. And as for offshore restrictions, there are even less of them.
It should also be noted that the trade license does not limit the freedom of import and export operations, for example, it is possible to organize your regional warehouse here, import goods in bulk to sell to distributors in the local market, or to set over Internet commerce.
Trading company registration in FTZ – key issues
As for the company opening procedure in one of the UAE's free zones (there are about four dozens of such in different parts of the country), it is quite simple and takes only from a couple of days. It should be noted that the conditions in these free zones are different and not all of them are well suited for international import-export companies – there are only a few suitable FTZs for such type of company. This must be taken into account when choosing the place for registration in the UAE.
At the same time, the need adjacent infrastructure is also important when choosing the place of your export-import company registration in the UAE. For example, if you need your own warehouse located close to the port – then the choice of FTZ / FEZ is limited to those where there is a port. And if you do not need your warehouse and will use the services of a logistics company, then the location of company registration is not so important.
As it is already noted, the process of trading company formation does not require much money and time. If you plan to wholesale business with the use of own storage facilities – there are good offers for renting warehouse space. If your own warehouse is not needed – there are all the necessary services from the logistic companies. It should also be noted that in many free zones, advance payment of share capital is not required.
Conducting trade operations directly in the UAE via an intermediary
If the main purpose of trading company registration in Dubai, UAE is to work in international markets, you need no intermediary, but if you are going to import goods into the local market, you will need either a partner with onshore registration or you can use one of the following solutions.
- Establishment of an additional trading company on the main territory. The share of local partners in such a company is to be at least of 51%. At the same time, it is possible to obtain a document from your local partner about limiting his/her rights and protecting your interests. Also, such a company will, in fact, be your distributor and all the main volumes of goods will be stored in your warehouse in the FTZ on behalf of your main import-export company in the FTZ / FEZ, where all rights are exclusively yours.
- Work with an existing independent company on the territory of the UAE, with which you can conclude a contract, according to which this company will act as your representative and/or distributor.
- Do not deal with distribution issues on the territory of the UAE and simply sell goods to the main territory of the country to other independent companies. In this case, the issues of preparing the documents for goods import to the main territory and the execution of customs clearance are handled by logistics company who is involved in executing these tasks.
The choice of the best option (with or without opening of your own local company) depends on your goals and objectives. You can either find a partner in the main territory of the UAE in order not to be distracted by the issues of logistics and setting up inside the country, or to establish your own company for this purpose, but not in a free zone, and thus build your own distribution network.
Issues with customs at trading company registration in the UAE.
A trading company that deals with import and export, regardless of the place of registration in the UAE, will face some customs issues (in case the goods pass directly through the territory of the UAE). In case of product import, its corresponding code will be required for import into the Emirates. Having the appropriate document, the company can import its goods from any port and air terminal. If some goods enter one of the FTZs / FEZs and then go to the main territory of the country, they are subject to an import duty of 5% (for most types of goods).
Imported goods that enter the free zone are exempted from duty and can be stored in this free zone for as long as your trade license is valid. (The license is valid for one year, followed by an annual renewal.) From the UAE, this product can be freely moved to other countries and regions of the world, or to the local market.
When opening an international trading company in the UAE and obtaining a trade license for an onshore company, you can apply for a resident visa for shareholders and employees of the company. The possibility of obtaining such a visa depends on the specific type of company being registered and on the zone in which it is opened (each free trade zone has its own rules for this). For example, opening a small company in the free zone of Hamriyah, you can count on three resident visas. In case, you need more, their number depends on the size of your office in FEZ, usually for every 10 sq. m. of its space you get the right to issue 1 resident visa.
If you are a company owner in the UAE, you can apply for a resident visa not only for yourself and your employees, but also for your family members with following registration of the status of being tax resident in the UAE.
Usually, the number of shareholders of an export-import company can be from 1 to 10, and shareholders can be both individuals and legal entities.
In order to register a company in the FTZ / FEZ, you will also need to open a corporate account in some bank. The account can be opened in one of the local banks which are well aware of all aspects of import-export activities and are very comfortable for this type of business activity.
Prospects for the development of export-import companies in the UAE.
A large number of different goods – jewelry, computer equipment, cars, metals, petroleum products, etc. pass through the free zones of the UAE, and the sales volume grows every year. The country is the full member of the WTO. Here, the authorities have created the favorable conditions for the development of fair competition.
Each of the Emirates has its own airport (some of them have even more that one), the largest ones are in Dubai and Abu Dhabi. Also, there are seaports, a developed network of highways, and good communication.
There are onshore and offshore trading companies to choose from to conduct international trading activities. All this makes the country extremely attractive for investors and entrepreneurs from all over the world.