The United Arab Emirates have in total more than 30 Free Trade Zones, where an onshore free zone company of almost any type and matching any requirement can be incorporated. At the same time each of the Free Trade Zones has its specifics, for example, Dubai Media City is the best suitable for media companies whereby the companies acting in the area of cargo ships management are often registered in Jebel Ali Free Zone.
The Free Trade Zones in Dubai and the UAE were established in order to attract foreign investors to the country and to develop the business relationships of United Arab Emirates with other countries.
Owing to stable legislation basis, highly developed infrastructure, beneficial geographic location of Dubai and absence of corporate taxes for most of the business activities, Free Trade Zones of Dubai and other Emirates have received extremely fast development and international recognition. Nowadays, thousands of companies of all possible types of business activities represented by investors from nearly all counties successfully operate their business in the UAE.
Thanks to active business development in Free Trade Zones resulted by specially developed legislation for Free Trade Zones, advanced infrastructure, cheaper workforce and absence of taxes Dubai became practically independent from its oil industry. The same strategy is actively followed by other Emirates including the most oil-rich Emirate of Abu Dhabi.
Onshore companies registered in Free Trade Zones of the UAE of Dubai and the UAE are not subject to taxation, there is no VAT, almost no deductions or taxes related to wages payments. The only exceptions are, for example, the companies doing business in oil industry and tourism. The UAE, as a tax-free country, does not fall into the category of “tax heaven” and never was in the row of “black listed” countries.
Main advantages of the UAE Free Trade Zone company:
- 100% company ownership by foreign shareholders / investors;
- Absence of corporate tax for import and export of goods and services;
- Absence of any restrictions related to capital and profits repatriation;
- Absence of income tax;
- Inexpensive energy resources;
- Stable legislation;
- Stable political and economic situation.
There is no limitation on residency or citizenship of Free Zone company directors and shareholders / investors. Shareholders can be either physical or legal entity.
Along with the above-mentioned, the company registered in Free Trade Zones gives company shareholders, managers and personnel the possibility to receive residence visas.
The United Arab Emirates, as a tax-free jurisdiction, have signed a broad net of Double Tax Treaties – in total with more than 50 countries. That gives the companies, registered in the UAE Free Trade Zones, clear advantages.
The unique characteristics of the onshore companies registered in the Free Trade Zones are that the companies, taxed at 0% corporate tax rate, have the possibility to have real office and be managed from the territory of the country of its incorporation.
Classic offshore companies often cannot be managed from the territory of its registration (otherwise, in many cases they will be taxed in the country of its incorporation). This is the reason why classic offshore companies are often at risk to be taxed according to the principle of country, where the company is actually managed from and not by the principle of the country of incorporation. This approach can often result in noticeable risks in relationships with tax authorities of different countries. In case of the UAE Free Trade Zone these risks do not exist for a company that is effectively managed from the UAE. When a company has its business processes and flows properly structured, it can prove its tax residency in the UAE without any risks of being taxed in this country.
The matter of company tax residency lately becomes more and more vital. Business relationships with offshore companies become, if not absolutely impossible, but very complicated. This situation gets more and more complicated yearly. The Free Trade Zone companies of Dubai and other Emirates of the UAE are the effective solution the matters of this kind.
Companies in Free Trade Zones of Dubai and the UAE are more expensive in terms of incorporation and administration in comparison with classic offshore companies. However the absence of tax, stability and acceptance of this jurisdiction, effective banking services and availability of wide range of Double Tax Treaties noticeably prevail over the costs difference factor.
In fact an onshore company, registered in Free Trade Zone of Dubai and the UAE is a full residential company, but not a subject to corporate taxation (with exception of taxes on some industries like oil industry and tourism). At the same time, in distinction to the classic offshore companies, which result in additional attention of different authorities, such companies do not call any such increased attention.
In addition to the above:
- Presence in the UAE can open for the business new opportunities when working with the markets of this region;
- Possibility to transfer part of the production cycle in Free Trade Zones with the absence of corporate taxes and cheaper workforce;
- Perfectly developed logistics infrastructure which can be effectively utilized when working with international markets.
Companies in the UAE FTZ (Free Trade Zones of the United Arab Emirates) can be registered as either independent companies or as a branch establishments or representative offices of local and international companies.
The required share capital of onshore companies depends on the chosen Free Trade Zone, the type of the company’s activity and the number of partners in the company. The share capital starts from USD 14.000, for example, for trading or consulting companies up to USD 300.000 and more, for instance, for really functioning universities or large production companies. Once the company is incorporated there are no requirements for the share capital reservation. Thus it can be freely used for the business operations. There are also the FTZ companies which do not require any share capital at all to be paid at the time of the company incorporation.
Companies registered as onshore companies in Free Trade Zones of the UAE are considered as resident companies and must receive the license for the chosen activity. The requirements for receiving a license can be from formal ones, for example, if you register a trading or holding company, to quite detailed and complex ones, for example, opening a fully functioning commercial hospital or university.
Main types of Free Trade Zone licenses:
- Commercial Trade License – for trading companies;
- Service license – for provision of different services, for example, consulting;
- Manufacturing / industrial license – for production facilities.
The following documents are required from the shareholders (physical persons) for incorporation of a Free Trade Zone company of this type:
- Passport copies of shareholders and directors;
- Bank recommendation letter;
- Confirmation on the residential address (utility bill, bank statement, etc.) of the company shareholder / investor;
- Information on manager education and experience. The extent of required documents depends on the type of the planned business activity of the company.
If the shareholder is a legal entity, the following documents are required:
- The set of the company incorporation documents;
- Directors’ resolution of the founding company to set a daughter company.
The documents of the holding company must be legalized in the embassy of the UAE in the country of its incorporation and then – in the Ministry of Foreign Affairs of the UAE.
Companies registered in FTZ as branches do not have the right for full scale business operations on the territory of the UAE. The share capital payment for such companies is not required.
To register a branch of a foreign company in Dubai and the UAE Free Trade Zone the incorporation documents of the mother company are required. These documents are to be legalized in the UAE embassy in the country of its incorporation and then – in the Ministry of Foreign Affairs of the UAE.
Our advisors will help you to choose the right form of the FTZ company, which suits best to your requirements and objectives; prepare and legalize all necessary documents required for the company incorporation.
In order to get the initial advice on companies’ incorporation please send us your request.
