Business in UAE: Best Tax Opportunities And Pros And Cons



The United Arab Emirates is a highly popular country among freelancers, entrepreneurs and investors.

The government of the country directs all its efforts to create an inviting and comfortable business climate in order to attract investors from abroad. Therefore, foreigners wishing to do business in the UAE have all the necessary legal tools for quick company registration and numerous opportunities for gaining profit.

Dubai, UAE

How To Start A Company In UAE
In the United Arab Emirates, it is possible to start a business by registering a company online. Moreover, the country has the second largest economy in the Arab world, and its business infrastructure is the most developed in the Middle East.

The UAE has steadily demonstrated sustainable economic growth and is ranked 9th in the ranking of global competitiveness by the Institute of Management Development in 2021.

The country was also ranked 16th in the world for ease of doing business by the World Bank in 2020.

Foreigners doing business in the Emirates enjoy the following advantages:

  1. no taxes on income and growth of capital;
  2. 5% VAT rate in the UAE domestic market;
  3. developed business infrastructure (stock exchanges, banks, shopping centers, etc.);
  4. simplified system of financial reporting and absence of the annual audit requirement for the majority of emirates;
  5. the opportunity to enter the international market;
  6. the simple process of hiring foreign employees and favorable labor laws;
  7. the possibility of obtaining a multi-year resident visa when registering a company.
Must Open Onshore Company?
In order to operate in the domestic market of the UAE, an entrepreneur needs to open an onshore company.

This company shall be a legal entity, registered in the name of one or more owners. Until recently, foreigners were allowed to own no more than 49% of the onshore company, with at least 51% of the business had to be owned by a citizen of the Arab Emirates.

All appeals to state authorities on behalf of a company with foreign capital had to be made by a national agent, holding a UAE passport.

Business men shake hands


Law Now Allows Foreigners To Own 100% Of Local Companies
On June 1, 2021, a law came into force that allows foreigners to own 100% of local companies and abolishes the requirement for the mandatory appointment of a licensed agent.

Companies of strategic importance to the country, such as those in the fields of oil exploration, production and refining, national security, telecommunications services, and air transport, are an exception.

UAE Free Zones
There are so-called Free Zones in the UAE, that is, areas where foreigners have originally been allowed to own 100% of the companies.

Establishing a company in the Free Zones does not require the participation of a local partner or local agent, however, it is obligatory to rent an office or a workplace.

When opening their own firms in the UAE FEZ, foreign nationals are entitled to resident visas, the number of which depends on the size of the rented office.

Initially, it was supposed that in a particular FEZ conditions would be created for a specific type of activity, but later it was decided not to limit entrepreneurs.

Nowadays, high economic activity is concentrated in the Free Zones, with the largest stores, clinics, beauty salons and business centers in the UAE located there.

However, this does not mean that any type of activity is allowed in all FEZs. An entrepreneur, registering a new enterprise, should check with the authorized body whether their business idea is in line with the rules of a particular jurisdiction.

UAE

Legal forms of business in the UAE, their possibilities and advantages
Until June 1, 2021, the main reason for foreigners to register companies in Free Zones was to be able to incorporate a business entirely as their own.

Once the law was issued, allowing citizens of other states to own 100% of onshore firms and abolishing the requirement to engage a local agent, it was expected that the popularity of FEZs would diminish. However, this did not happen, as free zones have a number of advantages:

  1. flexible business regulation procedures;
  2. no tax liability for entrepreneurs for 50 years;
  3. affordable real estate prices;
  4. the possibility to register a company in some jurisdictions without any investment in the share capital.
Owners of companies in FEZs have the opportunity to conduct business within their zone or outside the country.

Incorporation of companies in free zones or the establishment of onshore firms by foreigners is the basis for obtaining a resident visa.

Read more about the possibilities and options for obtaining UAE resident status in the article by international expert Alexey Nosovsky from iWorld.com.

Minimize Organizational Costs
The registration of your own company in the UAE gives entrepreneurs from other countries the opportunity to actively develop their business, both within the country and in the international market.

In order to choose the right legal form of the company, the founder must decide where they plan to do business. The absence of taxes and favorable legislation in the UAE are important factors that help to minimize organizational costs and increase profits.