Continuation of a British Virgin Islands (BVI) Company in Dubai Multi Commodities Centre (DMCC), Dubai, UAE. Procedure of jurisdiction change

The Emirate of Dubai is located on the Arabian Peninsula, in the south of the Persian Gulf. Among the seven emirates that make up the UAE, it is the most populated one and second largest after Abu Dhabi. Dubai has more than 20 free zones.

DMCC Free Zone offers the possibility of registering Dubai onshore (free zone) companies that can operate both within and outside the UAE. Such companies are granted a licence (special authorization from the Emirate’s Authority) according to the type of activity that they will be engaged in. Establishing a free zone company implies the possibility of obtaining residence visas for shareholders/employees, as well as their families, which is an indisputable advantage.

A company can redomicile to DMCC subject to the following conditions:

1. The company’s intended business activity (or activities) must fall within DMCC’s Approved List of Activities.
2. The company’s shares must only be of one class, in accordance with the DMCC Regulations. Different classes of shares are not permitted.
3. The company’s share capital must adhere to DMCC’s share capital requirements as prescribed in the Regulations. DMCC companies are required to have a minimum share capital of AED 50 000. The issued share capital with which the company proposes to be registered must be in AED and be divided into a fixed number of shares.
4. The minimum value of shares should be 1 000 or multiples of 1 000. During the redomiciliation, the company can neither reduce the total share capital value nor change the shareholding structure. The minimum share capital requirements may vary according to the business activity.
5. The company’s Memorandum and Articles of Association, and other constitutive documents must not conflict with the DMCC Regulations. In cases of conflict, the DMCC Regulations will prevail and the company will be required to make necessary amendments to its corporate documents.
6. Redomiciliation to DMCC is not generally permitted for offshore companies. However, offshore companies which have been operational for more than 2 years and can submit audited financial statements are allowed to redomicile to DMCC.

DMCC has 3 types of licence:

Service licence – allows the holder to provide the type of services specified in the licence.

Trading licence – allows the holder to import, export, sell, distribute and store goods specified in the licence.

Industrial licence – allows the holder to import raw materials for production, processing and/or assembly of specified products. Finished products can be exported outside the UAE.

Some licences require approval from the relevant regulator: for example, a number of production licences require approval by the UAE Environment and Protected Areas Authority or a specific ministry.

DMCC has the following requirements for the structure of companies:

The standard minimum share capital of a DMCC company is AED 50 000; however, some types of licences may require a higher share capital.

The share capital must be paid into the company’s bank account in the UAE within 3 weeks of issue of the company’s licence. It can be subsequently withdrawn at any time.

Bearer shares are not permitted.

The capital can be denominated in UAE Dirhams (AED) only.

The company and the Free Zone authority make an office lease agreement; the address of such office is considered the official registered office address of the company.

DMCC offers various office packages depending on the needs of clients in terms of type and number of licences, number of visas, the need for substance and placement in the Free Zone: from flexi desk (a separate room or workstation in first-class business centres) to warehouses.

1. Obtaining pre-approval from DMCC for the possible redomiciliation of a company

Pre-approval can take approximately from 5 to 10 working days to get and is valid for 90 days from the date of issue

2. Preparing in the BVI a set of company documents required for the change of jurisdiction:

• Shareholders Resolution to redomicile the company;
• Letter of instruction from the ultimate beneficial owner;
• Letters of notification to the creditors and members of the intention to redomicile the company;
• Publication in the Gazette (local official newspaper) of notice of intent to redomicile the company;
• Filing of a notice with the BVI Registrar that the publication has been made and all necessary notifications have been sent out;
• Certificate of Incorporation issued in the BVI (notarized duplicate[1]);
• Memorandum and Articles of Association filed with the BVI Registrar (notarized duplicate[2]);
• Certificate of Good Standing issued in the BVI, not older than 3 months (original);
• Certificate of Incumbency issued in the BVI, not older than 3 months (original);
• Special Certificate to notify the BVI Registrar.

3. Preparing and filing a set of documents in the UAE:

It will also be necessary to sign a number of internal forms and declarations for the Free Zone.

Obtaining a licence can take approximately from 3 to 5 working days. Upon completion, DMCC will issue:

• Certificate of Continuance;
• Personnel Secondment Agreement;
• Trade licence;
• Share certificate;
• Online announcement of the transfer of the company to the DMCC Free Zone;
• Letter of request to the regulating authority in the jurisdiction where the non-DMCC company was incorporated for the delivery of the company’s original legal documents to DMCC within 30 days.

After obtaining a licence and signing an office lease agreement, the company must submit the following documents to the Free Zone (within 90 days):

4. For the completion of redomiciliation (“discontinuation”), it is necessary to submit to the BVI Registrar copies of documents certified by the UAE registered agent.

5. Obtaining from the BVI Registrar a Certificate of Discontinuance that confirms the striking off of the company from the BVI Register. The Registrar also publishes the striking off of the company in the Gazette (local official newspaper) to notify third parties that the company has ceased to exist in the BVI Register.

IMPORTANT: companies registered in UAE free zones are exempt from capital gains tax, property tax and other taxes, except corporate tax and VAT.

From 1 June 2023, the UAE introduced a federal corporate tax. Free zone companies may be subject to both the standard rate of corporate tax (9%) and a zero rate. The application of a particular rate depends on a number of factors such as the company’s income, the types of its activities (whether they are excluded or qualifying, or not), counterparties, whether the company maintains adequate economic substance in the UAE, and other aspects.

From 1 January 2018, the UAE introduced a Value Added Tax.

VAT as a general consumption tax applies to all transactions with goods and services unless such transaction is exempted or taxed at 0% rate.

The standard VAT rate in the UAE is 5%.

There is no obligation to register for VAT unless sales turnover within the country exceeds the registration threshold, which is AED 375 000 (~ USD 100 000) in the UAE.

Registration as a VAT taxpayer is required in the following cases:

• there is reason to believe that the taxable turnover in the next 30 days will exceed the registration threshold (for example, a contract has been made);
• at the end of the month, the taxable turnover for the previous 12 months actually exceeded the registration threshold;
• the company receives services to be included in the return using the reverse charge method, in excess of the registration threshold.

Upon registration with the Federal Tax Administration and allocation of the VAT number, a company must quarterly (or monthly in the case of annual turnover exceeding AED 150 000 000 (~ USD 40 830 900)) prepare and file a VAT return, and pay the resulting VAT within 28 days of the VAT period end.

Every company registered in DMCC Free Zone must keep accounting records sufficient to confirm its financial position and reflecting up-to-date information about the assets and liabilities of the company.

It is also necessary to prepare annual financial statements of the company and have them audited.

The company’s first accounting period begins on the date of incorporation and lasts at least 6 months but not more than 18 months. Every subsequent accounting period lasts exactly 12 months from the end-date of the previous period.

At each reporting date, company directors must prepare financial statements of the company, including auditor’s report, and present them to the annual general meeting within three months of the financial year-end.

A company must annually renew its licence, by paying a relevant fee, and its lease agreement.

The company renewal costs include renewal of the office lease agreement and of the licence. Upon renewal, an updated licence is issued.

The UAE does not have such concept as a residence permit. The UAE migration rules require the issuance of residence visas which in practice are similar to a residence permit.

The main ways to obtain residence visas are:

• based on owning a UAE onshore company – investor visa;
• by making an employment contract with a UAE onshore company – work visa;
• by investing in real estate in the UAE.

The number of residence visas depends on the business package chosen during the registration or redomiciliation of a company.

The application for residence visas includes the following steps (a visa can only be applied for after the registration / completion of redomiciliation of a company):

1. Opening an Establishment Card – 3 - 5 days. This document is necessary for the company to be able to apply for residence visas in the future.
2. Submitting documents for a residence visa and obtaining an Entry Permit (permission to enter the country) – 5 - 7 days. To obtain a residence visa, an individual must enter the UAE with an Entry Permit. Once the Entry Permit has been received (it is sent by email), one can plan their trip to the UAE. The Entry Permit is valid for 60 days. If at the time of issuing of Entry Permit the applicant is already in the UAE, then in order to complete the issuance of a residence visa without leaving and re-entering the country, it is necessary to change the status of the visa. The service of changing the status of a visa is provided upon request and is subject to additional charges.
3. Visiting the UAE to obtain a residence visa – in most cases, a visa can be obtained within 5 working days. The applicant needs to: undergo a medical examination (blood test and chest X-ray); submit biometric data (retina and fingerprints scan). After receiving a passport with a residence visa inserted into it, one can leave the country.
4. Obtaining a resident’s ID card - ID Emirates. The card is issued a few days after the issuance of a visa. Personal presence is not required to receive it.

* In the case of applying for or renewing 2 or more visas, please check the fee with a GSL consultant.

[1] For a company administered by GSL Law & Consulting, a copy can be certified by the registered agent.

[2] For a company administered by GSL Law & Consulting, a copy can be certified by the registered agent.

[3] The fees are valid as at January 2024.

[4] 5% VAT may be added to the fees for services provided in the UAE.

[5] The fee is indicative. The final cost of company redomiciliation to DMCC, UAE, and preparation of the necessary set of documents depend on the policies and requirements of the registered agent that administers the company in the country of incorporation.

[6] The cost of the package may vary depending on the number of shareholders, type of licence, and size of office (office size dictates how many residence visas a company can have).

[7] The fees for preparing financial statements and conducting an audit are charged based on the time spent at hourly rates ranging from USD 100 to USD 400 (depending on the type of work and qualification of a specialist involved), but are not less than USD 1 900 – fees for audited financial statements with a minimum number of transactions.