Forming a company in the UAE is quite easy and does not require much time, or any documentation. Requirements for a mainland company, free zone company or an offshore company are quite different.
There are some differences between the mainland and the free zone. The main difference lies in ownership, the scope of responsibility, the participation of UAE nationals as partners or agents, and the nature of trade and economic benefits that can be harvested.
Mainland Company
Usually, you need to contact the Emirate Economic Development Department to seek “preliminary approval” and register the product name. You can do this by visiting their office or through their electronic services. You can continue with other approvals from other administrations only after initial approval, which is required in certain business/transaction activities.
In special cases, such as the establishment of a private joint-stock company (PrJSC), the approval of the Ministry of Economic Affairs is required first.
Where do you start?
If you plan to do business on the mainland, you need to know the following to know where to start.
Cost of setting up a company
Starting a business involves raising capital investment, paying licenses and employee visa fees. The cost of setting up a company depends on:
- The nature of the activity and the required license; whether commercial, industrial or service-oriented
- The legal form of the company; whether it is an institution, a company or a branch of the company.
Capital requirements of mainland companies
The capital requirements of mainland companies vary according to the legal form of the business. The minimum capital of PJSC is Dh30 million. For PrJSC, the full payment should be no less than AED 5 million.
For other types of business, the UAE Business Companies Act does not provide for minimum capital. However, it points to the minimum capital:
- Should be mentioned in the organization memo
- It must be “sufficient capital” to achieve the purpose of company registration.
- For foreign companies wishing to establish a limited liability company (LLC) in the UAE, they should seek guidance on the current practice of the emirate regarding the minimum share capital.
Partner nationality
The nationality of a partner is important to determine what type of business they can build on the mainland. Only UAE nationals can establish the following types of companies:
- Joint liability company (partner must be a UAE national)
- Simple commanded company
- Industrial or commercial type of sole proprietorship
- Home business license
- SME license (in Dubai).
Other nationalities (except those from other countries in the Gulf Cooperation Council) may also engage in other types of business. However, they need to have UAE nationals as sponsors. UAE nationals can be:
- A partner with at least 51% corporate ownership
- Local Service Agent (LSA), the investor owns 100% of the company’s ownership.
Type of company that requires UAE national partners:
- LLC
- Public Joint Stock Company (PJSC) – it must have at least 5 founding members of UAE nationals, with 30% to 70% of the share capital
- Private Joint Stock Company
- Civil engineering company engaged in engineering activities
Type of company that needs LSA:
- Professional sole store
- A civil company without engineering activities
- Foreign company branch
Please note that GCC nationals can be any business partner, with the following exceptions:
- Representative office
- Simple commanded company.
The benefits of opening a company in the mainland
- There are many benefits to establishing a business in the mainland. Some of them are:
- Flexibility in doing business anywhere in the UAE
- Unlimited number of visas
- More business activities that can be used for licensing
- There is no business tax or personal tax.
Free Zone company
If you don’t want to work with UAE nationals or people who don’t know UAE nationals, you can set up a business in the Free Zone. The duty-free zone provides 100% foreign ownership of the company.
What is a free zone?
According to the website of the Dubai Multi-Commodity Centre, the Free Zone, Free Trade Zone or Free Economic Zone is a designated geographical area in which certain taxes or commercial, employment or trade restrictions do not apply to the taxes to which they apply or limit. The country in which the region is located.
In the duty-free zone, goods can be landed, handled, manufactured, reconfigured or re-exported without the intervention of customs authorities. Only when the goods are transferred to consumers in the country where the region is located will they be subject to the current tariffs.
A free zone is usually established around major seaports, international airports, and national borders, which have many geographical advantages in terms of trade.
Benefits of setting up a company in a tax-free zone
Some of the other benefits of setting up a company in a tax-free zone include:
- Free personal income tax
- Import and export tax exemption 100%
- Easy to start and license program
- 100% return of capital and profits
- Free import and export tax
- No company tax
Benefits may vary with their respective duty-free zone authorities. Twofour54 provides 30% cashback for international film and television production expenses.