Company incorporation in the United Arab Emirates

The United Arab Emirates (UAE) is one of the most dynamic and attractive business destinations in the Middle East. With a strategic location between Europe, Asia, and Africa, along with a business-friendly environment, the UAE is a key hub for international trade, finance, and commerce.

Most Common Business Forms for Foreign Companies

The most common business structure for foreign companies in the UAE is the Limited Liability Company (LLC).

• A Limited Liability Company (LLC) is a popular choice for foreign businesses looking to operate in the UAE. An LLC offers limited liability protection, meaning the shareholders are only liable for the amount of capital invested in the business.
• Foreign ownership in an LLC is typically restricted to 49%, with the remaining 51% required to be owned by a UAE national or a UAE-based company. However, certain sectors and free zones may offer 100% foreign ownership.
• LLCs must have at least two shareholders and at least one local sponsor (UAE national). This structure is often used by foreign investors who are looking to establish a presence in the mainland UAE.

An alternative to the LLC structure is the Free Zone Company. This option allows 100% foreign ownership and is ideal for businesses focused on international trade or services. Free zones are special economic areas that offer a range of tax exemptions, flexible regulatory frameworks, and simplified processes for business incorporation.

Setting Up a Company in the UAE

Setting up a company in the UAE typically involves several key steps, depending on whether you are setting up in the mainland or a free zone:

1. Choosing a company name and ensuring it complies with UAE naming regulations.
2. Selecting a legal structure, such as an LLC or free zone company, and determining whether the business will be established in the mainland or a free zone.
3. Obtaining an initial approval from the Department of Economic Development (DED) or the relevant free zone authority.
4. Preparing and filing the required documents, including the company’s Articles of Association (AoA), passport copies of the shareholders and directors, and proof of business address.
5. Appointing a local sponsor (if applicable) in the case of mainland LLCs. For free zone companies, no local sponsor is required.
6. Opening a corporate bank account in the UAE and making the required capital deposit, if applicable.
7. Completing the licensing process with the relevant authorities, including obtaining the UAE Commercial License and VAT registration if required.

The process of incorporating a business in the UAE can take anywhere from a few days to a few weeks, depending on the business structure and location. Many companies opt for professional services to guide them through the process and ensure compliance with local regulations.

Taxation and Withholding Taxes

The UAE offers a very favorable tax environment, with no federal income tax on businesses and individuals, which makes it an attractive destination for foreign investment.

However, some specific taxes apply:

• While there is no income tax, the UAE introduced a 5% VAT on most goods and services in 2019, which applies to companies with annual revenues exceeding AED 375,000 (approximately USD 100,000).
• The UAE also has a corporate tax rate of 9% for businesses with profits exceeding AED 375,000, effective from June 2023, though this rate remains low compared to many other countries.
• Dividend distribution is generally not subject to withholding tax in the UAE, making it an attractive location for repatriating profits.

Service Providers for Company Incorporation

• Business Setup
• FZ Setup
• Corporate Business Setup
• ProConsult
• Shuraa Business Setup

These service providers specialize in company formation, legal compliance, tax registration, and business setup in the UAE, helping foreign businesses navigate the incorporation process and establish a successful operation.