Company Formation United Arab Emirates (UAE)
Company Formation United Arab Emirates (UAE):
Offshore Company RAS AL KHAIMAH (R.A.K. INTERNATIONAL COMPANY)
- Index Company Formation Dubai-UAE
- Tax planning via a network of international tax advisers and attorneys
- Why form a company in a foreign country with a tax accountant specialized in international tax law?
- Basic Considerations regarding the Formation of Companies in „Zero-Tax Havens“ i.e. in countries that have not entered into Double Taxation Agreements with other countries
- Offshore Company Formation: Tax haven rankings
- Examples for the legal reduction of corporate taxes
- DTA permanent establishment concept – Our services and fees
- Parent companies and their subsidiaries in the European Union
- Beware of cheap founders!
- Free Zone Company RAK
- Dubai/VAE Free Zone
- Free Zone Sarah
- Free Zone Jebel Ali
- Company formation VAE: Abu Dhabi
- Dubai E-commerce law
- Dubai Forms of Offshore Operation
Offshore Company formation UAE-Dubai: RAS AL KHAIMAH (R.A.K.) INTERNATIONAL COMPANY
In September 2006, Ras Al Khaimah Government launched an offshore facility, the second in the UAE, which is regulated by the Ras Al Khaimah Free Trade Zone Authority International Companies Regulations 2006.
100% foreign ownership.
-Although all UAE companies follow UAE law RAKFTZ have allowed the International Company to decide which favored jurisdiction it wants applied for inheritance, disputes or any other matters. The law must be cited in the Memorandum & Articles of Association.
-The International Company can own real estate properties on Palm Islands, or any properties owned by Nakheel Company LLC, EMAAR, or any other real estate properties approved by the RAKFTZ Authorities.
-Despite a general prohibition on International Companies to conduct business with persons resident in UAE, the Authorities frequently allow offshore companies to hold shares in both offshore and onshore UAE companies (i.e. local LLC companies).
-The International Company can hold a bank account in the UAE for the purpose of conducting routine operational transactions and can also maintain professional relations with legal consultants, accountants and management companies or other similar persons carrying out business within UAE.
-Incorporation documents can be signed at the offices of Jitendra Chartered Accountants without having to visit RAKFTZ.
-The Company will not be allowed to carry on business with people who are resident in the UAE or carry out any trade in the free zone or in the UAE, unless they have first obtained the appropriate license from the relevant competent authority.
Characteristics of an offshore company registered in the RAKFTZ are as follows:
|SHARE HOLDERS||A minimum of one shareholder is required. Corporate shareholders are permitted. Shareholders will decide capital structure of the Company. Whilst there are no minimum share capital requirements please note that par value of each share must be AED 1,000. Bearer shares are permitted. Different classes of shares are permitted and shares have to be fully paid when allotted. Every company shall maintain minutes of all proceedings at general meetings. The Register of Members shall be open for inspection by any member of the offshore company and any other person. It is an offence to refuse inspection.|
|DIRECTORS||A minimum of one director is required and corporate directors are permitted. Details of directors are not available for public inspection.|
|SECRETARY||Every company must have a secretary.|
|ANNUAL REPORTING||Every company must keep accounting records, which must be kept for 7 years from the date on which they were prepared. Accounts must be approved by the directors and signed by one of them. The accounts do not need to be filed with RAKFTZ Authorities|
|TIMESCALE||Registration of the company in the Free Zone will take 3 working days.|
|RESTRICTIONS ON NAME AND ACTIVITY||Names must end with Limited or Incorporated.|
The following words, and their associated activities, cannot be used: Assurance, Bank, Building Society, Chamber of Commerce, Chartered, Co-operative, Fund, Imperial, Insurance, Municipal, Mutual Fund, Royal and Trust.
|LOCAL REQUIREMENTS||As a matter of local company law the company MUST maintain a registered office address within the Free Zone and appoint an approved registered agent . A registered agent’s office in the UAE or in the Free Zone can also be used as the registered office.|
1. Formation of Offshore Company in RAK Offshore.
SCOPE OF WORK:
The following documents shall be arranged upon incorporating the company.
- Memorandum of Association or Article of Association
- Certificate of Incorporation
- Resolutions or POA
- Share Certificate
- Rubber Stamp
DOCUMENTS/INFORMATION REQUIRED FOR COMPANY INCORPORATION:
For Individual Applicant:
- Document showing the appointment of agent. (Will be provided by us)
- Application form. (Will be provided by us)
- Applicant personal profile (Short/brief resume/CV)
- Certified Passport copy with UAE entry stamped page.
- Original Bank reference letter (Certified by the Banker)
- Proof of residence by the shareholder (Not later than 3 months-These can be in the form of different utility bills (gas/electricity/water not mobile phone bills), different bank statements or a combination of the two.
- Power of Attorney (Notarized and Attested) if POA holder represents the applicant.
- Few trade names.
- Details of Directors/Share holders with individual addresses and percentage of share holding of each shareholder.
DOCUMENTS/INFORMATION REQUIRED FOR BANK ACCOUNT OPENING:
- Latest 2 months personal Bank Statement.
- Latest proof of Resident (Utility Bill and Telephone bill with proper name of Shareholder.
- Personal profile of the shareholders
- Current Business activity of the share holders (Name of the company, Nature of
- Business, number of employees, location)
- Name and Locations (Countries) of Suppliers and Customers.
- Expected activity in the Bank Account (Number of transactions per month, approximate value of these transactions, countries from where funds are expected and where the funds will be remitted to.
- Will there be any cash transaction in the account
- Initial funding amount and source of funds, i.e. Name of the party from where the funds are expected and the approximate amount.
FOR REGISTRATION 1ST YEAR
|1||Registration charges (payable to RAKFTZ)||1,600|
|2||Registered Agent and Secretarial fee||1,900|
|1||Registration charges (payable to RAKFTZ)||408|
|2||Registered Agent and Secretarial fee||1,400|
|Drafting Resolution for amendments in MOA or Shareholdings||500/-|
|Opening of bank account||2,000/-|
|Attestation of MOA & AOA / COI / Resolution / Any Other Document (per document)||250/-|
|Nominee Shareholder / Director||3,800/-|
|Notarization and attestation of Nominee Shareholder/Director up to MOFA||1,200/-|
|Refundable Security Deposit for Nominee Shareholder/Director||3,000/-|
|Re-Mailing Services (Letter Forwarding)||750 / Year, first Year 1.500|
|Audit Fees (Annual Account report)||2,000/- Onwards|
Exchange Rate: 1USD = AED 3.68
- Our Fees doesn’t include fees payable to Free Zone. i.e. All Government fees (License expenses & Visa cost payable to Free Zone) will be borne by you.
- All our fees are non-refundable.
- Shareholder must consult legal and tax advice from their consultant wherever they are tax residents.
- The above quoted charges are valid only within 30 days, after which they may be subject to change.
Role of Nominee Director
Our Nominee Director will not have any role in the company except to satisfy the statutory requirements of local authorities. The Nominee is a Director of a company in name only and has no other powers or responsibilities.
Terms for providing Nominee Director Services
- We would need to be satisfied with the creditability of company beneficiaries and may require additional information on a case-by-case basis.
- Execute our Nominee Director indemnify letter
Fee for attestations, notarization and legalization from the respective consulates will be charged against actual.
MODE OF PAYMENT:
Fee for the offshore company formation shall be payable 100% in advance at the time of confirmation.
Free Zone Company –RAS AL Khaimah
Any company that wishes to operate at the RAK FTZ should register as a legal entity at the RAK FTZ (company registration), open a bank account, acquire a valid permit to undertake approved activities (business license) and sign a lease contract for using the selected facility at the RAK FTZ.
Once all of these procedures have been completed successfully, the company will be entitled to activate a P.O. Box, a bank account, apply for the approved number of visas (UAE residence permits) and to start the business activities in the RAK FTZ.
A company or individual wishing to operate a business at the RAK FTZ can be registered at the zone in one of the following four legal forms:
A branch of an existing company
- Foreign Branch
- Local Branch
A new establishment
- Free Zone Company
- Free Zone Establishment
Every company operating within the RAK FTZ is required to obtain a business license. A business license is a time-limited permit granted to a company to undertake commercial, consulting, service or industrial activities within the RAK FTZ. It does not, however, authorise the holder to do business in the UAE – a special agent has to be appointed for trading activities in the UAE market.
Each license is valid for one year starting from the date of issue and must be renewed annually.
Four types of business licenses:
- Commercial license
- Consultancy license
- General trading license
- Industrial license
Business Center Services
The RAK Innovation and Promotion Centre is a free zone facility which gives investors an opportunity to start business with minimum hassles. Some of the key features of the RAK Innovation and Promotion Centre are the serviced, fully-functional and ready-to-use offices, flexi-offices and flexi-desks, plus a wide variety of services. All of these are offered at highly cost-effective rates.
The RAK FTZ Business Centre is designed to be one-stop shop. The RAK FTZ BC will meet all the clients’ needs.
The client can choose of these solutions according to their needs and requirements:
EXECUTIVE OFFICE (14-28 square m)
The Executive Offices are serviced, fully-functional and enclosed offices. The standard offices range from 14 to 28 square m, expandable as per client requirements.
- Fully furnished
- Cisco phones
- Dedicated fax number
- Private e-mail address
- Shared printer (optional)
- Shared post box (optional)
FLEXI-OFFICE (18 square m)
The Flexi-Office is a shared, networked and modern office with its own phone, computer, network, and Internet access. Regular users of Flexi-Office are people normally working from home or traveling, but nevertheless, want to benefit from having a professional base with access to a team for call handling, secretarial services and all other advantages of being in the office, without the expense of setting up a full-fledged office. Clients can log in and use the Flexi-Office to create and print documents, access the Internet to check e-mail or conduct research, or just make some calls.
- Furnished and enclosed office
- Shared fax services
- Has two executive desks and chairs per office
- Shared workspace environment
- Two personal computers in each Flexi-Office
- Direct incoming/outgoing telephone (Telephone devices are shared, but specific numbers will be assigned to clients)
- Five hours of free usage per week for each client
- Shared Post Box number
- Private e-mail address
The Flexi-Desk is a shared and networked desk designed for single-person users such as professionals, self-employed businessmen or establishments.
- Furnished and semi-enclosed office
- Shared workspace environment
- One executive desk and chair
- Private email address
- Allocation of five hours of free usage per week
- Direct incoming/outgoing telephone (Telephone devices are shared, but specific numbers will be assigned to clients)
- One personal computer in each Flexi-Desk
- Shared Post Box number
- Shared fax services
REMOTE ACCESS DESK
The Remote Access Desk will enable you to operate with all the advantages of a multinational corporation. You will be registered with RAK Free Zone, but you will have the flexibility and mobility for your company operations.
Contact Centre Services – Your calls will be answered by a receptionist in your company name and forwarded to your office, home, mobile or voicemail.
Front Desk Services
- CD Burning
- Faxes Handling
- Contact Centre
The Contact Centre will enable you to receive your calls even when you are not in the office or site. The Contact Centre Operator will receive and answer the call on your company’s behalf.
- Available (at cost) to clients leasing the Executive Offices, Flexi-Offices and Flexi-Desks.
- Part of the package for the Remote Access Desk clients.
- Personalized and company-specific answering service
- Interactive Voice Response (IVR) System-Capable
- Call Forwarding and Intra-office forwarding
- Message Processing (Receiving & Forwarding) Costs AED 350 per month
- Business Catering Arrangements
- Private Secretarial Services
- Hotel Booking Arrangements
- Car Rental Arrangements
- Accommodation Arrangement
- Media Services
- Logo Design
- Letter head
- Advertisement Design
- Brochure Design
- Poster Design
- Health Club
- Business Lobby
- Training Centre
- Conference Rooms
- Internet Connection
- Audio Conferencing
- Video Conferencing
- LCD Projector
- Business Catering Arrangement
Introduction / summary
Dubai/UAE has double taxation agreements = DTA with most other countries. EU freedom of establishment is not applicable. For approval of the permanent establishment according to tax laws, a commercially equipped business operation must be installed in Dubai/UAE, and active business must be transacted in UAE/Dubai.
Since only oil companies and banks are subject to taxation in the UAE/Dubai, and any other companies do not pay any taxes, this results in interesting opportunities for investment in Dubai/UAE. In order to be able to use the tax advantages, a permanent establishment according to DTA must be installed in Dubai. On the one hand, a Dubai company is no offshore company in this sense, since the UAE/Dubai also maintain double taxation agreements with many countries – including Sweden and Denmark – but on the other hand, the EU freedom of establishment is not applicable. Therefore, the following prerequisites for approval of a permanent establishment according to tax laws in Dubai must be met:
- Place of management: A manager resident in the UAE/Dubai according to tax laws must – at least on the outside – control the company’s businesses.
- There must be a commercially equipped business operation, i.e. at least one office and one employee.
- It must be demonstrated that the Dubai company does actively transact business in the UAE.
Under the stated conditions, for example the Swedish could be a majority shareholder of the Dubai company, but nevertheless Dubai/UAE has the sole right of taxation, provided that the Articles of Association state that all relevant decisions are made at the shareholders’ meetings, which exclusively take place in Dubai, at which the Swedish shareholder must be present. However, the UAE company law stipulates that 51% of the company shares must be held by persons resident in Dubai. As a rule, the founder will use a “sponsor”. This requirement may be omitted in case of company formations in the free zones. In the free zones, 100 % of the shareholders may be foreigners.
The basic requirement for all business activity in Dubai is one of the following three categories of licence:
- Commercial licences covering all kinds of trading activity;
- Professional licences covering professions, services, craftsmen and artisans;
- Industrial licences for establishing industrial or manufacturing activity.
These licences are all issued by the Dubai Economic Department. However, licences for some categories of business require approval from certain ministries and other authorities: for example, banks and financial institutions from the Central Bank of the UAE; insurance companies and related agencies from the Ministry of Economy and Commerce; manufacturing from the Ministry of Finance and Industry; and pharmaceutical and medical products from the Ministry of Health.
More detailed procedures apply to businesses engaged in oil or gas production and related industries.
Practising some trade activities (e.g. jewellery and insurance) requires the submission of a financial guarantee issued by a bank operating in Dubai.
In general, all commercial and industrial businesses in Dubai should be registered with the Dubai Chamber of Commerce and Industry.
Fifty-one per cent participation by UAE nationals is the general requirement for all Dubai-established companies except:
- Where the law requires 100% local ownership;
- In the Jebel Ali Free Zone, Dubai Internet City, or the Dubai International Financial Centre;
- In activities open to 100% AGCC (Gulf Cooperation Council) ownership;
- Where wholly owned AGCC companies enter into partnership with UAE nationals;
- In respect of foreign companies registering branches or a representative office in Dubai;
- In professional or artisan companies where 100% foreign ownership is permitted.
In the past, each emirate followed its own procedures governing the operations of foreign business interests. In practice, however, Dubai and the other emirates followed the same general system, whereby foreign companies operated in one of three ways: with a local sponsor, through a partnership with a UAE national or company, or through a private limited company or public shareholding company incorporated by Ruler’s decree.
Since 1984, steps have been taken to introduce a codified companies law applicable throughout the UAE. Federal Law No. 8 of 1984, as amended by Federal Law No. 13 of 1988 – the “Commercial Companies Law” – and its by-laws have been issued. In broad terms the provisions of the Law are as follows:
The Federal Law stipulates a total local equity of not less than 51% in any commercial company and defines seven categories of business organisation which can be established in the UAE. It sets out the requirements in terms of shareholders, directors, minimum capital levels and incorporation procedures. It further lays down provisions governing conversion, merger and dissolution of companies.
The seven categories of business organisation defined by the law are:
- General partnership company
- Joint venture company
- Public shareholding company
- Private shareholding company
- Limited liability company
- Share partnership company
Partnership companies are limited to UAE nationals only. The Dubai government does not presently encourage the establishment of partnerships-en-commandite or share partnership companies.
Joint Venture Company
A joint venture is a contractual agreement between a foreign party and a local party licensed to engage in the desired activity. The local equity participation in the joint venture must be at least 51%, but the profit and loss distribution can be prescribed. There is no need to license the joint venture or publish the agreement. The foreign partner deals with third parties under the name of the local partner who – unless the agreement is publicised – bears all liability.
In practice, joint ventures are seen as offering a suitable structure for companies working together on specific projects.
Public and Private Shareholding companies
The law stipulates that companies engaging in banking, insurance, or financial activities should be run as public shareholding companies. Foreign banks, insurance and financial companies, however, can establish a presence in Dubai by opening a branch or representative office.
Shareholding companies are suitable primarily for large projects or operations, since the minimum capital required is Dh. 10 million (US$ 2.725 million) for a public company, and Dh. 2 million (US$ 0.545 million) for a private shareholding company. The chairman and a majority of directors must be UAE nationals and there is less flexibility of profit distribution than is permissible in the case of limited liability companies.
Limited Liability Company
A limited liability company can be formed by a minimum of two and a maximum of 50 persons whose liability is limited to their shares in the company’s capital. Such companies are recognised as offering a suitable structure for organisations interested in developing a long term relationship in the local market.
In Dubai, the minimum capital is currently Dh. 300,000 (US$ 82,000), contributed in cash or in kind. While foreign equity in the company may not exceed 49%, profit and loss distribution can be prescribed. Responsibility for the management of a limited liability company can be vested in the foreign or national partners or a third party.
The following steps are required in establishing a limited liability company in Dubai:
- Select a commercial name for the company and have it approved by the Licensing Department of the Economic Department;
- Draw up the company’s Memorandum of Association and have it notarised by a Notary Public in the Dubai Courts;
- Seek approval from the Economic Department and apply for entry in the Commercial Register;
- Once approval is granted, the company will be entered in the Commercial Register and have its Memorandum of Association published in the Ministry of Economy and Commerce’s Bulletin;
- The licence will then be issued by the Economic Department;
- The company should then be registered with the Dubai Chamber of Commerce and Industry.
Branches and Representative Offices
The Commercial Companies Law also covers the formation and regulation of branches and representative offices of foreign companies in the UAE and stipulates that they may be 100% foreign owned, provided a local agent is appointed.
Only UAE nationals or companies 100% owned by UAE nationals may be appointed as local agents (which should not be confused with the term “commercial agent”). Local agents — also sometimes referred to as sponsors — are not involved in the operations of the company but assist in obtaining visas, labour cards, etc and are paid a lump sum and/or a percentage of profits or turnover. In general, branches and offices of foreign commercial companies are not licensed to engage in importing activity except for re-export or in the case of products of a highly technical nature.
To establish a branch or representative office in Dubai, a foreign commercial company should proceed as follows:
- Apply for a licence from the Ministry of Economy and Commerce, submitting an agency agreement with a UAE national or 100% UAE owned company.
- Before issuing the licence, the Ministry will forward the application to the Economic Department to obtain the approval of the Dubai government and will forward the application specifying the activity that the office or branch will be authorised to undertake in the UAE, to the Federal Foreign Companies Committee for approval;
- Once this has been done, the Ministry of Economy and Commerce will issue the required Ministerial licence specifying the activity to be practised by the foreign company;
- The branch or office should be entered in the Economic Department’s Commercial Register, and the required licence will be issued;
- The branch or office should also be entered in the Foreign Companies Register of the Ministry of Economy and Commerce;
- Finally the branch or office should be registered with the Dubai Chamber of Commerce and Industry.
Branches and Representative Offices of Foreign Professional Companies
Branches and representative offices of foreign professional firms may be 100% foreign owned provided UAE nationals or 100% UAE owned companies are appointed as local agents. Such agents are not involved in the operations of the firm but assist in obtaining visas, labour cards etc and are paid a lump sum as remuneration. The Economic Department is the authority in charge of licensing such branches or representational offices.
In setting up a professional firm, 100% foreign ownership, sole proprietorships or civil companies are permitted. Such firms may engage in professional or artisan activities but the number of staff members that may be employed is limited. A UAE national must be appointed as local service agent, but he has no direct involvement in the business and is paid a lump sum and/or percentage of profits or turnover. The role of the local service agent is to assist in obtaining licences, visas, labour cards, etc.
Offshore-Companies in the United Arab Emirates
Since the year 2003 the United Arab Emirates allow the formation of offshore companies in the Jebel Ali Freezone in Dubai. With this step Dubai is positioning itself as a regional alternative among the worldwide network of offshore locations such as Liechtenstein, Madeira, Malta and the Canal Islands.
The advantages of establishing an offshore company in the United Arab Emirates are obvious: there are no corporate or individual taxes existing in the Emirates as well as no value added tax, inheritance tax or tax on assets. In addition to the tax free environment there is a double taxation treaty existing since 1995 between Germany and the Emirates, which exempts German producers located in the Emirates from taxation according to the German tax law.
Substantial legal regulations for forming and operating an offshore company can be found in the „Jebel Ali Free Zone Authority Offshore Companies Regulations“ (consists of 126 paragraphs). Concerning the activity of the offshore business there is no limitation except for banking or insurance businesses. The offshore company does not require its own personnel or maintain office space in the Emirates. In every case the company has to appoint a local representative (so called registered agent), who acts as the contact person for authorities in the United Arab Emirates.
Due to the low magisterial requirements the formation of an offshore company in the Jebel Ali Freezone offers an interesting alternative for foreign companies.