Dubai Company Formation -Company Formation United Arab Emirates (UAE)- Free Trade Zone Company UAE

Company Formation Dubai -Company Formation UAE

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Company Formation Dubai -Company Formation United Arab Emirates (UAE)

Company formation Dubai /UAE- Introduction/summary

Dubai has a unique set of selling propositions, namely:

No corporate tax
No income tax
No capital gains tax
No property tax
No wealth tax
Low property transaction cost
Ease of access to home finance

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.

General information on company formation in a free-trade-zone of UAE

Video Free Trade Zone RAK:

https://youtube.com/watch?v=NMZ3CHpBivo

Shares of companies within one of the free-trade-zones of the UAE (RAK, Jebel Ali, Sarah) may be owned by foreigners in whole. These companies are allowed to do their business within the FTZ or abroad UAE only. Business wthin the UAE can only be made via a representative.

Foreign investors must fulfil the following requirements to their companies:

The following steps have to be realized in any case:

Incorporation
Visa for Management, shareholders and resident employees
Office (UAE does not allow a sole registered office or a virtual office; affordable office space is available e.g. in RAK)
Licence (approval to run a certain business. For each business a license is required and only after obtaining the license may the appropriate action be taken.)

If the only business of an enterprise is in the UAE, please notice chapter 5 of the DTA:

Double Taxation Agreements, Definition of Permanent Establishment (Article of the DTA)

For the purposes of this Convention, the term „permanent establishment“ means a fixed place of business through which the business of an enterprise is wholly or partly carried on.
The term „permanent establishment“ includes especially:
1. a place of management ;
2. a branch ;
3. an office ;
4. a factory ;
5. a workshop ; and
6. a mine, quarry or any other place of extraction of natural resources.
A building site or construction or installation project constitutes a permanent establishment only if it lasts more than nine months.
Notwithstanding the preceding provisions of this Article, the term „permanent establishment“ shall be deemed not to include :
1. the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise ;
2. the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery ;
3. the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of processing by another enterprise ;
4. the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise, or of collecting information, for the enterprise ;
5. the maintenance of a fixed place of business solely for the purpose of carrying on, for the enterprise, any other activity of a preparatory or auxiliary character ;
6. the maintenance of a fixed place of business solely for any combination of activities mentioned in sub-paragraphs (a) to (e) of this paragraph, provided that the overall activity of the fixed place of business resulting from this combination is of a preparatory or auxiliary character.
Notwithstanding the provisions of paragraphs (1) and (2) of this Article, where a person – other than an agent of an independent status to whom paragraph (6) of this Article applies – is acting on behalf of an enterprise and has, and habitually exercises, in a Contracting State an authority to conclude contracts on behalf of the enterprise, that enterprise shall be deemed to have a permanent establishment in that State in respect of any activities which that person undertakes for the enterprise, unless the activities of such person are limited to those mentioned in paragraph (4) of this Article which, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of that paragraph.
An enterprise shall not be deemed to have a permanent establishment in a Contracting State merely because it carries on business in that State through a broker, general commission agent or any other agent of an independent status, provided that such persons are acting in the ordinary course of their business.
The fact that a company which is a resident of a Contracting State controls or is controlled by a company which is a resident of the other Contracting State, or which carries on business in that other State (whether through a permanent establishment or otherwise), shall not of itself constitute either company a permanent establishment of the other.

If there is no factory, workshop, mine, quarry or any other place of extraction of natural resources or a building site or construction or installation that lasts more than nine months, a resident of the UAE has to manage the operations of the business, to located the permanent establishment in the UAE. Besides this, a non-resident director can bring the proof that he is present to fulfill his management duties (place of management).

We cannot provide a trustee director in the UAE.

Companies in the FTZ are tax free

The initial capital is very different and we have to refer to our survey on our Internet sites.

Fees for an incorporation in the FTZ vary by services of ETC and governmental fees.

Governmental fees are available on our Internet site. Our fees are between € 2,900.00 and € 4,900.00, depending on the service.

Notwithstanding this, it is possible to incorporate an Offshore Company (Exempted Company). An UAE Offshore Company may only do business outside the UAE, does not need any intial capital and can be owned by foreigners at 100% also. A trustee director can be provided.

We are an English tax and law office within the network of international tax consultants and lawyers (LowTax Network International), focussing, in particular, on „international tax planning for natural and legal persons“. Company Formation UAE: Dubai LLC, Free Trade Zone Companies.