Company registration in the UAE: What type of company to choose?
The United Arab Emirates is a country with attractive investment climate. Its stable political and economic situation, as well as tax-free regime for business, makes the UAE one of the most appealing countries for investment. There are many ways for the entrepreneur to be supported when opening a new business here.
As the UAE provides extensive opportunities for opening and running a business, it often raises multiple questions from customers. For example, many cannot understand where they should register their company, if they need a local partner, what the difference is between an offshore company and a free zone, and if there is truly no tax in the country.
Therefore, for the company that you register to fully meet your requirements, you should answer a few questions before the procedure, that is location and form of registration.
Will the company work with other companies registered in the UAE? If the company does not plan to operate in the UAE and work with other companies registered in the free zones, but only as a shell in the chain, or as an account holder in the bank of the UAE, then it makes sense to register an offshore company (in the UAE there are 3 offshore zones which are the following: the emirate of Dubai, the emirate of Ajman and the emirate of Ras Al Khaimah (RAK). If the company still works in the market of the Emirates, it is important to remember that by law the company registered in the free zone has the right to work only in the territory of this free zone. If it comes to the provision of consulting services, for example, this is not a problem as, in theory, all consultations are in the territory of the free zone. The same is the case with trade.
– The company can sell goods from the territory of the free zone via local “agent.” However, if, for example, we are talking about the provision of cleaning services, then legally these services can be provided only in the free zone, which will significantly reduce the number of customers. Moreover, not all activities are allowed in free zones, therefore, before registering a company, you should familiarize with the list of permitted activities (or clarify the availability of the desired activity in a particular area from the consultant). No Objection Certificate is often used for activities demanding specialized education or skills (e.g. financial consulting.
– No Objection Certificate is a letter on the absence of objections to the registration of the company from a special regulatory body in this field. In this case, you need to make sure that the agency issues such a letter to the company, which will be registered in a particular free zone (sometimes the activity is listed, but the regulatory body does not issue NOC). If the company will be working in the UAE outside the free zone, then it is necessary to register a local company with a pre-eminent “locale” whose corporative rights for administration and reception of of profit is limited by a specific agreement.
What is your preference emirate to register?
In each emirate there are free zones; and in 3 of 7 emirates there are offshore zones. Thus, it is necessary to understand whether the emirate is important, or the type of activity in the charter / license is important. If, for example, a company is really engaged in the supply of goods and actively uses the port – you should take a closer look at the free zone JAFZA, which is located directly in the port of Dubai. If you just need a trade license, and the port (its availability and distance) does not play a role, then from the point of view of costs it will be more logical to create a company in Ajman. And vice versa: if a company is needed only in the emirate of Dubai, then one should proceed from the list of free zones in this emirate. Similarly, with offshore companies: if you just need “offshore in the UAE”, then there is no point in spending on offshore in JAFZA. If “you need an offshore company in Ajman”, then there is no choice – you will have to do it in Ajman.
What are your office requirements?
The address of offshore company is the address of its registration agent, i.e, even if the company is registered within RAK Offshore in the emirate of RAK, but the agent is in Dubai the address of the company will be Dubai. If you only need a virtual office, you should pay attention to the zones where it is allowed (DMCC, AFZA, Creative City, etc.). If you need a real office, you consider the areas with an office base and good location (DMCC, JAFZA etc.). By law, a company registered in the free zone is entitled to rent space only within this free zone. At the same time, many business centers that offer rent of serviced offices in different places, rent out offices without regard to the place of registration of the company.
Do I need a resident visa?
Offshore companies do not have the right to obtain resident visa. At the same time, almost all companies in free zones have the right to apply for several resident visas. The number of visas is usually directly proportional to the size of the rented office (decision on the number of allowed visas is often based on the fact that for a single visa (that is, one employee of the company), 9 m square of the office space is needed). Nevertheless, in some free zones companies with “virtual” offices are not eligible for visas.
How many shareholders are allowed?
Mostly, up to 5 shareholders are allowed in free zones. However, in some free zones up to 50 shareholders in one company are allowed.
Is auditing necessary?
In free zones there is no requirement to file financial statements. However, in many areas there is a requirement for a mandatory annual audit, the conclusion of which should be given to the registrar. Such auditing can be to conducted only by auditors from among those who are accredited in this free zone.
What about share capital?
In offshore companies the share capital is not paid. In some free zones it is also allowed to declare the authorized capital without compulsory payment. In others, payment of the statutory is a prerequisite for the issuance of a license. Some activities require the declaration and payment of a significant share capital (for example, the General Trading license in DMCC requires payment of the registered capital of AED 1,000,000 (USD 274,000).
This is a preliminary list of questions to ask yourself before registration, so that the company could work in accordance with your plan and within the framework of the law. If you have an understanding of how your company will operate but you’re still not sure what choice to make, please, contact our consultants who will be happy to help you choose and register your company in the way that is most suitable for you.
We offer you to establish a company in the following free zones:
Ajman – AFZA:
Ras Al Khaimah emirate:
Umm Al Quwain emirate: