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The United Arab Emirates (UAE) has a unique and important position not only in the Middle East but in the global business environment as well. The world renowned United Arab Emirates is a federation of seven emirates namely Dubai, Abu Dhabi, Sharjah, Ras Al Khamiah, Ajman, Fujairah and Umm al-Quwain. The most famous emirate amongst the seven is Dubai which is a popular tourism destination and business hub of the middle east.
The beauty of the UAE jurisdiction is that it offers investors great opportunities to invest in the country and carry out business with an ease and enjoy a taxfree environment. Generally, in the UAE, there are two types of companies that are incorporated to reap the maximum benefits of UAE’s strategic location and tax free regime.
Firstly, an investor can set up a Free Zone Company which is generally incorporated in designated areas where the companies are guaranteed 100% tax free status, that means there is no tax on income, dividend or even capital & profit repatriation. All the employees of Free Zone companies also enjoy tax-free remuneration and there are no taxes of any kind on individual’s income. Most of the free zone companies can be 100% owned by foreign nationals without any requirement of local UAE National’s shareholding.
A Free Zone Company can freely conduct its business globally and locally with certain restrictions. These companies can also serve the purpose of a holding company in such a manner that most of the income from international and local business can be accumulated and parked here in UAE and this can be further invested in other projects or business ventures across the globe without any taxation.
An investor may also choose to open up a Limited Liability Company (LLC) that allows businesses to carry out business operations anywhere in the UAE. In this type of company structure, 51% of the shares are held by a UAE National (commonly known as ‘Sponsor’) and 49% of the shares can be owned by any foreign national or a corporate shareholder. This kind of arrangement is very common in the UAE and any profit that is generated by LLC Company is also 100% tax free.
Therefore, we can say that both Free Zone Companies and LLC Companies have limited liabilities and are incorporated in different areas of operations for various purposes but both enjoy same tax free status.
The companies registered in the UAE enjoy a unique advantage as the investors can have residence visas not just for themselves but for their families as well. Their employees who fall into a certain salary bracket may also sponsor their families which makes this a very unique position in this country which is constantly working to upgrade and expand its world class infrastructure. Accessibility wise, UAE is well within reach of the Far Eastern, European, African and American countries and travelers from all the continents can easily reach here by a single connecting flight and UAE is considered one of the busiest and paramount central business hub of the Middle East.
Since the UAE does not have any taxes, the UAE government has signed Double Taxation Avoidance Agreements with more than 55 countries aimed at making UAE a more attractive territory. So having these agreements in place the investors can get a residence tax certificate of the UAE and protect themselves from any double taxation.
The only tax applicable in UAE is the import duty wherein any product imported for sales & distribution into the UAE attracts a maximum of 5% of the import duty which varies from product to product. However, on the other hand, all exports from the UAE are duty free and exempted from any kind of tax. The local revenue generated by the authorities generally comes from the licensing fees applicable every year as well as luxury tax on hotels, toll tax, tax on real estate transactions and other similar government fees.
The UAE’s thriving economy indeed offers an outstanding opportunity to international businesses.
