08 Sep Company Formation & Residency. The future looks good for the UAE.
Gaining residency in the UAE is an excellent option for many individuals that are considering the likes of Monaco, Lichtenstein, Gibraltar or the Channel Islands as their ordinary residence.
The UAE is certainly the only country from the above list that does NOT demand a mandatory tenancy contract with your application for residence. Come to the UAE and set up a company, and you will attain residence through employment in your company. Your residence is maintained, as long as you’re not absent for more than 180days per year.
However, what if you don’t want or need to have a UAE residence stamp in your passport? Entrepreneurs across the world are still attracted to setting up and running their businesses in the UAE – even those who prefer not to relocate to the Gulf.
And it’s easy to understand the appeal. Just three decades ago the Emirates was one of the least developed countries in the world, but with shrewd management of its natural resources – and liberal, progressive, and aggressive growth policies – the country has leapfrogged the textbook stages of industrialisation to become an agile, powerhouse economy.
It’s a perfectly positioned trading gateway: east to west; north to south. As a market the UAE is moneyed and advanced with smart and switched-on digital and physical infrastructures from the DIFC to ADGM. And there’s barely any tax burden on the entrepreneur. There’s no income or corporation tax, and while 2018 saw the introduction of VAT, at just 5% it will be much lower than most world trading centres.
In its Vision 2021 strategy whitepaper, the UAE stated its desire for foreign direct investment to grow to 5% of GNP. So with favourable terms, processes and ever-evolving business frameworks, the UAE is an ideal place to start up.
Want to be a part of it? Here’s how you can get in on the action remotely, without the disruption and stress of relocating.
1. First, a decision: You want to start up a new company in the UAE but, for whatever good reason you don’t want to relocate.
Assuming you’re not setting up a branch of an existing firm but creating a new venture, your main initial decision will be guided by your reasons for incorporation. Do you need an international holding company? (An IBC, or SPV, as they are known) Or do you need more substance, and require a “local” company with a local trade license? Your new firm will most likely be established as a Limited Liability Company (LLC). So if you know what your LLC will be – and will do – the first major decision is where to register it.
The choices are as follows: register a UAE “offshore” company, or a company in a free zone or indeed register on the mainland. Your decision will set the path and the limits of your company from day one.
2. Offshore vs Free zone vs Mainland?
The UAE provides a very competitive option if you requirement is for an international trading or holding company. The RAK ICC company continues to be enhanced and developed, and is not under the same level of international pressure – if we compare it to it’s Caribbean counterparts. RAK operates a world class Company Registry operating in full compliance with international standards and best practices in the International Business company formation industry.
Registering onshore in a free zone certainly provides some short-term advantages. Each UAE freezone will allow 100% foreign ownership, 100% repatriation of capital & profits, zero income or corporation tax, and will allow a multitude of business activities. Freezone companies will also give the owners the right to issue UAE residence visas. The number of visas that can be issued, relates to the type and size of the company.
The more efficient freezones will allow a new set up to be completed in only 3 to 4 days.
The registration process for free zones doesn’t require a sponsor, as the zone itself takes on those duties. Still it’s not plain sailing: firms in free zones are laden with proprietary rules and requirements over and above the UAE’s federal business laws and those of the local emirate. Critically, some free zone companies can’t do direct business inside the UAE – they can only trade within their zone or beyond the national border.
Registering in a free zone can mean potentially sacrificing a strategic location. And even if you find one in an ideal spot, many of the UAE’s free zones set strict criteria on letting people in.
Mainland-registered companies, on the other hand, can base themselves anywhere in the UAE. They can conduct business inside and outside the country as they wish, with unfettered access to the UAE’s high-calibre market and talent pool.
If you intend on actually trading in mainland Dubai (depending on your company’s activity), the mainland or DED setup may offer more in the long term.
3. How much of my mainland company will I own? There can be confusion here but the short answer is ‘all of it’. A federal policy introduced in 2015 declared that foreign investors cannot own more than 49% of a company in the UAE mainland. And the fact that free zone companies can be 100% foreign-owned is one reason why free zone setup seems appealing.
But in practice the 49% ownership decree isn’t an issue. Having a local sponsor, (individual or corporate) which is a mandatory requirement anyway, means having someone on the ground to represent the 51% ownership – but crucially the local sponsor doesn’t assume actual ownership. Sponsors are remunerated outside of the share structure so ownership isn’t affected and you retain complete control through assignment agreements and affidavits that are prepared beforehand.
This is great to know, because setting up in the mainland is straightforward and highly advantageous for remote entrepreneurs.
4. The process: Still, the right choice of local sponsor is vital. From the outset, it’s their responsibility to nail down the registration process.
Let’s say, for your first step, you’ve chosen to register on the mainland. Step two is selecting a local sponsor and step three is applying for a license. Ahead of step three, you’ll need to keep the communication channels open with your sponsor as you get the paperwork in order. You’ll also need a Memorandum of Association, where company ownership details and sponsorship arrangements are outlined.
An investor visa is not mandatory but in order to start the incorporation process for a company in the UAE mainland you will need a UAE entry stamp on your passport. It stands to reason, then, that you will have visited the country at least once. Ideally, you would also be physically present in front of the notary public to sign the Memorandum of Association, but again this is only needed once. And if that really isn’t physically possible, all is not lost: you can prepare a Power of Attorney (PoA) appointing a person to sign on your behalf. But in this event, if the PoA has been prepared outside the UAE, it needs to be translated into Arabic, legally certified by the UAE embassy in your home country and then attested by the Ministry of Foreign Affairs in the UAE.
Depending on the make-up of your board you may also need to provide additional documentation such as a certificate of incorporation, a copy of the board resolution approving the LLC, and copies of other shareholders’ passports and visas. Your sponsor will guide you on the details of these processes.
While it’s not uncommon for free zones to demand to see a full business plan, the Dubai Department of Economic Development (DED) has made great strides in easing the administrative burden for mainland businesses. This is welcome news if you are – along with a sponsor – negotiating the process largely from overseas.
Securing a license, in Dubai for example, is simply a case of registering online at the DED. It starts with choosing a company name – you’ll have to provide three options – and selecting your business type from a list.
Note that the company name can’t be anything remotely offensive, religious or reminiscent of an existing body or institution. But naming stumbles and paperwork aside, you can expect to be registered with the DED in as little as 90 minutes.
5. Time, cost and next steps: Getting a business license in the UAE involves much less hassle than in some Middle East and North Africa (MENA) countries. Depending on how diligent your sponsor is, the whole process can conclude in a week.
The cost of the license varies, but it will likely land somewhere between USD 1,000 and USD 6,000. The cost will depend on the registered location of your business: Dubai is more expensive than Ajman or Fujairah, for example.
On that, the Dubai DED has – in its quest to lower the bar to entry – removed entrepreneurs’ need to purchase or rent physical office space for the first year of a venture’s life. This used to be a pre-requisite, but it’s another open-access policy that’s perfect for many remote entrepreneurs. It only applies, however, to those licenses which don’t require external approval, such as general trading and other types of trading activities (with the exception of food).
So when your new LLC receives its license, you’re ready to open a corporate bank account and set up anywhere in the UAE mainland. From there, you get immediate access to a lucrative, high-calibre market from the comfort of your home.
6. A professional director: We’ve spoken a lot about the important role a sponsor plays, so choosing the right candidate is vital, especially if you’re to be largely absent from the UAE yourself.
A professional director is like a sponsor, but rather than being a figurehead or an administrative lightning rod, they can bring real operational value and substance to your venture.
Professional directors are provided as a service by many reputable UAE firms. Like a sponsor, a professional director is paid outside the shareholding structure and it’s up to them to absorb administrative duties. But they bring with them local cultural and commercial know-how that you can really use.
As the owner, it’s up to you to determine how much power and authority you give your director. But as your professional ally, with a solid contacts book and encyclopedic knowledge of the local commercial arena, you would be wise to use their skills as fully as you can.
They can help you get the most out of the UAE’s favourable tax system and, as your de facto company leader, they can be a beacon for your business, providing stability and presence to reassure prospects, partners and clients. They can oversee day-to-day operations in your absence and carry out duties as prescribed remotely by you and/or the board.
Professional directors are a valued option for many remote entrepreneurs, and one of the ways you can retain peace of mind from afar that your business is in good hands.
What are you waiting for?
UAE company owners can work from wherever in the world they wish. The country is purpose-built for entrepreneurs of all stripes to set up shop and take advantage of the business opportunities that the Emirates offers, even if full relocation isn’t an option.
The UAE is a friendly and dynamic market. Choose to register your business in the mainland and setup is easy: the potential is unbound. With the right choice of professional in your corner, starting and maintaining a successful UAE enterprise needn’t be a completely hands-on affair.
Contact the team at “firstname.lastname@example.org” for further details on company setup, directorship or corporate sponsor services.