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Setting up shop in the UAE: Deciding on business jurisdiction

Explore attractive licence options for unmatched global success.

Ease of doing business, stra­tegic location, superb infra­structure, socio-political stability, and a visionary, proactive and business-friendly government are some of the many reasons why the UAE, the second-largest econ­omy in the region with one of the highest per capita incomes in the world, is such an attractive invest­ment destination.

Consider some of the facts and figures: zero corporate income tax, and one of the lowest VAT rates anywhere; 100 per cent capital and profit repatriation, and 100 per cent FDI ownership in many sectors; 16th rank out of 190 in World Bank's Doing Business 2020 report; 25th rank in the World Economic Forum's Global Competitiveness Index and 12th on infrastructure, etc.

The list goes on, with clear rea­sons on why you as an investor or entrepreneur should invest in the UAE. There are three different ju­risdictions to consider:

Mainland

A Mainland company is an on­shore company with a licence is issued by the Department of Eco­nomic Development of the respec­tive emirate. Companies can oper­ate anywhere in the UAE and worldwide; perfect for investors who aim to maintain a long-term presence in the UAE.

There are four types of business licences here: Commercial, Profes­sional, Industrial and Tourism. At least 51 per cent of the capital of a company must be owned by a UAE national or a company that is wholly owned by UAE nationals. Other GCC nationals are the only foreign­ers allowed to own 100 per cent of a Mainland company. Non-UAE-na­tionals can wholly own a company for certain professional licence businesses by appointing a UAE na­tional as a local service agent with­out civil or financial liabilities.

Free Trade Zone

The UAE has over 40 Free Trade Zones across all seven emirates and two Financial Free Zones in Dubai and Abu Dhabi. Here, com­panies can be fully owned by non-UAE nationals. Other incentives include 100 per cent foreign own­ership, exemption from VAT, 100 per cent customs tax exemptions and 100 per cent repatriation of capital and profit. A free zone enti­ty generally takes one of three forms: a branch of a foreign com­pany, a free zone company, or a free zone establishment.

Dual Licensing is the latest ini­tiative offered by many free zones in the UAE, enabling the free zone companies to extend its business jurisdiction to mainland without opening an office there.

Offshore

An Offshore company is a legal business entity set up to operate outside its registered jurisdiction and/or the location of its ultimate ownership. Offshore is an espe­cially popular mode of company registration in the UAE for doing business in the wider Middle East. There are three Offshore jurisdic­tions in the UAE - Jebel Ali Off­shore Company, RAK ICC and Ajman Offshore. An investor can register the company with the as­sistance of a Registered Agent of the offshore jurisdiction.

Foreign Direct Investment

On November 23, 2020, amend­ing the provisions of the UAE Fed­eral Law No. 2 of 2015 and super­seding the UAE Federal Law No. 19 of 2018 on Foreign Direct In­vestment, The President, His High­ness Sheikh Khalifa bin Zayed Al Nahyan issued a decree allowing foreign nationals to own 100 per cent share of companies within the onshore jurisdiction of the UAE.

This momentous decree is en­tirely in line with the UAE econo­my's forward-looking ethos of continuous improvement, especially for investors.

For questions or clarifications, contact MBG Corporate Services on uae@mbgcorp.com

Chandy Joseph is the Director - Company Formation and PRO Services.