Aerial View of Ras al Khaimah, UAE

Register a Free-Zone Company in the UAE or Dubai: Establish, Set Up, Open a Startup, SME Enterprise, Holding Firm or Operating Business

We provide competent and practical advice on the establishment of all types of companies in Dubai and the United Arab Emirates in general

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What Are the Rewards of Establishing a UAE Free Zone Company?

What are the advantages of Dubai as a location for young companies?

The United Arab Emirates and Dubai offer favourable business condition for companies across all sectors (here), in particular to global trading and holding companies, but also to smart players in today's digital economy (internet startups, blockchain companies, technology companies, eBusiness, e-commerce) and their new business models (here).

In general, anyone wishing to establish, register and incorporate a company in Dubai, a head office, a branch, a subsidiary or simply set up a start-up enterprise in the UAE benefits from (i) comparatively low corporate taxes - 9% or their total absence (such as in so-called free trade zones) (ii) a low VAT rate - 5% (iii) a significant banking infrastructure: Emirates NBD, Mashreq Bank etc. (iv) the availability of skilled labor at competitive salaries and (v) the UAE's status as a global trading hub: the port of Jebel Ali near Dubai (here) is the largest and busiest seaport in the entire Middle East.

How easy is it really to set up and register a start-up business in the UAE? And at which bank is it best to open a business account?

In reality, the establishment, registration, incorporation, formation and effective launch of a startup company in Dubai is straightforward. In fact, the time required to set up and register any type of business in the UAE is less than 1 week, in all seven emirates. And the presence of the shareholders is not mandatory for the formation of the business.

In which of the more than 45 free-trade zones in the UAE are taxes the lowest?

In the free trade zone of the emirate of Ras al Khaimah (an hour's drive from Dubai), existing and newly established companies enjoy one of the lowest tax rates in the world, as evidenced by our recent comparison of corporate tax worldwide:

Comparison of Worldwide Corporate Tax Rates

(last update January 2023)

What Are the Key Benefits of Doing Business in the UAE?

• Choice of English Common Law over Local Sharia Law: Abu Dhabi Global Market - ADGM (here) is the first territory in the Middle East to directly apply English Common Law, similar to Singapore and Hong Kong. This results in a coherent and predictable legal framework guided by principles of equity and applied by British judges in the Emirates.
• In December 2020, the UAE passed a law eliminating the Emirati shareholder requirement for local companies (here) - a development analysts at Nomura called a "potentially big moment." Previously, regulations had limited foreign ownership of local companies to 49%.
• Dubai International Airport (DXB) is a major hub for international flights and one of the world's busiest airports by passenger volume. In 2019, it handled approximately 88 million passengers.
• With its carefree and lavishly aesthetic lifestyle, world-class infrastructure, increasingly sophisticated healthcare system, luxurious restaurants, and multitude of tourist attractions, Dubai continues to be an attractive playground for aspiring and established entrepreneurs - a motley mix of freelancers, privateers, digital "remote workers," expats, wealthy retirees, and, of course, architects and real estate investors: annual rental income in Dubai is as high as 7%. In 2022, they have increased further due to geopolitical reasons...

What Are the Key Disadvantages of the UAE as a Corporate Jurisdiction?

• In response to the OECD's minimum tax initiative, the UAE announced in 2022 the introduction of a nationwide corporate tax of 9.00%, which became effective in 2023 for corporate income in excess of AED 375,000 ($102,000). Dividends, however, and capital gains earned by an Emirati business from its qualifying investments are exempt from Dubai corporate tax.
• Companies in the various Emirati free zones are also to be subject to the new corporate tax, but "incentives in favor of companies in free zones that meet regulatory requirements and do not conduct business within the UAE" are expected to be preserved. However, all companies in the UAE will be required to register with the tax authorities and file an annual tax return.
• The UAE Ministry of Finance has published a Q&A (here) on the new corporate tax
• In March 2022, the Financial Action Task Force (FATF) - an intergovernmental organization that combats global financial crime (here) - placed Dubai and the UAE on its grey list of countries (here) subject to enhanced monitoring of international payments. De facto, this means that bank payments to and from Dubai currently take several days and go through special approval procedures
  

Which Are the Main Business Entities and Forms of Incorporation in the UAE?

What Is the Difference between an Emirati Company on the Mainland ("UAE Mainland"), in a Free Zone ("UAE Free Zone") or Offshore ("UAE Offshore")?

The UAE is composed of 7 Emirates (here) and each jurisdiction enjoys a significant degree of independence:

• Abu Dhabi | 2.7m inhabitants
• Dubai | 2.2m inhabitants
• Sharjah | 2.3m inhabitants
• Ajman | 500K inhabitants
• Ras al Khaimah | 400K inhabitants
• Fujairah | 150K inhabitants
• Umm al Quwain | 70K inhabitants

In each Emirate - which is basically an independent jurisdiction - a company can in principle be registered in 3 sub-jurisdictions: mainland, free zone, and offshore. Here are the main differences between them:

1. What is a UAE Mainland Company?

Essentially, a mainland company is a UAE company with a licence issued by the Department of Economic Development (DED) (here) of the respective Emirate. A mainland company in the United Arab Emirates allows an enterprise to conduct its business locally (that is, within the boundaries of the respective Emirate) and globally without any restrictions, at least from a UAE perspective.

2. What is a UAE Free Zone Company?

Free-trade zones are areas in the United Arab Emirates that have a special tax, customs and import regime and are governed by their own legal framework (with the exception of UAE criminal law).

UAE free trade zone businesses are regulated by the respective free-zone authority (FZA) in which they are set up. Additional rules may apply.

In Dubai and across the UAE, there exist over 45 free trade zones (FTZs) (here) with important benefits for startup companies.

Here are the main features of free trade zones in the United Arab Emirates:

• Useful networking communities for like-minded entrepreneurs
• Possibility of repatriation of capital and profits
• Exemption from corporate income tax
• Exemption from customs duty
• Fast and easy procedures for incorporating businesses

3. What is a UAE Offshore Company?

There are 3 offshore jurisdictions in the United Arab Emirates:

• Dubai (Jebel Ali Offshore Company)
• Ras al Khaimah
• Ajman

As their name indicates, UAE offshore companies can only operate outside the United Arab Emirates. However, they offer benefits to global digital entrepreneurs and remote workers, in particular due to the absence of corporate tax, the possibility of international invoicing, no tax information exchange agreements, and the opportunity to open multi-currency business accounts with a UAE bank.

On the flip side, some larger UAE banks, such as Emirates NBD, don't open corporate accounts for offshore companies as a matter of principle.

What Are the Bookkeeping, Accounting and Audit Requirements for Companies in the UAE?

In essence, all UAE companies must (i) keep accounting records for at least 5 years and (ii) submit every year the to general meeting financial statements and an audit report prepared by an accredited UAE auditor. In practice, however, some UAE jurisdictions are not systematically enforcing the submission of audit reports to the respective authorities, although the existence of such reports technically remains a requirement.

Business Regulations Applying to UAE Mainland Companies

The Federal Decree-Law no. (32) of 2021 applicable to Commercial Companies in United Arab Emirates (here) provides as follows:

Article 26 - Accounting Registers in the UAE

(1) Every Company shall keep accounting registers showing its transactions so as to accurately reveal at any time its financial position and enable the partners or shareholders to make sure that the Company’s accounts are kept in accordance with the provisions of this Decree-Law. (2) Every Company shall keep its accounting registers in its head office for a period of at least (5) five years from the end of the fiscal year of the Company. (3) The Company may keep an electronic copy of the original of the documents and registers [...].

Article 27 - Accounts of the Company in the UAE

(1) Every Joint Stock Company or Limited Liability Company shall have one or more auditors to audit the accounts of the Company on a yearly basis. The remaining forms of companies may appoint an auditor in accordance with the provisions of this Decree-Law. (2) The Company shall prepare annual financial accounts including the balance sheet and the profit and loss account. (3) The Company shall apply the International Accounting Standards and Practices upon preparing its periodical and annual accounts, to give a clear and accurate idea of the profits and losses thereof.

List of UAE Free Zones: A Comparison of their Main Features and Audit Requirements

(last update January 2023)

How to Register a Company in the UAE?

Here are the 9 most important steps to establish a company in Dubai:

1. Select type of government trade licence - in the UAE, there exist 6 main types of business activities: professional, industrial, tourism, agricultural, commercial, occupational (over 2,000 sub-types)
2. Select type of legal entity to incorporate: FZ LLC (Free Zone Limited Liability Company), FZ Co. (Free Zone Company), FZE (Free Zone Establishment)
3. Select legal form: (i) sole establishment (ii) LLC (iii) holding company (iv) branch (v) representative office (vi) public / private joint stock company
4. Select company name and have it checked
5. Apply for an Initial Approval
6. Draft Memorandum of Association (MOA) or Local Service Agreement (LSA)
7. Select appropriate office space and sign a tenancy lease contract
8. Apply for additional government approvals (if required)
9. Submit all documents with the registrar and pay government incorporation fee (one time) and trade licence fee (yearly fee)
   

How Much Times Is Needed to Establish a UAE Company?

What Are the Registration and Running Costs for a UAE Company?

> In our experience, additional administration and corporate work in the UAE typically includes:

• Interaction with the local registrar: renewal of trade licence, changes in shareholder structure, changes in management, modification of articles, etc.
• Contact with the local bank: management and documentation of payment traffic, upkeep of KYC profile
• UAE and international corporate and accounting law: drafting of contracts and internal documents
• Shareholder activity: strategic tax, regulatory, and reputation advice
• C-Level staffing: CEO, CFO, CRO, CTO, affiliation with trade associations and contact with regulator
• Marketing: website design, upkeep of social media presence (Crunchbase, Linkedin, Google My Business)
• Setup and upkeep of IT infrastructure: webhosting, e-mail addresses, cybersecurity
  

Start company registration process in the United Arab Emirates

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References

Mohammed Al Fahim (1995) From Rags to Riches. A Story of Abu Dhabi (Independent) (here)

Don Tapscott (1994) The Digital Economy: Promise and Peril in the Age of Networked Intelligence (McGraw Hill) (here)

Deepak Unnikrishnan (2017) Temporary People (Restless Books) (here)

Rachael A. Woldoff, Robert C. Litchfield (2020) Digital Nomads: In Search of Freedom, Community, and Meaningful Work in the New Economy (Oxford University Press) (here)