Continuation of a Cyprus Company in Dubai Multi Commodities Centre (DMCC), Dubai, UAE: procedure of jurisdiction change. Service offer

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.

Dubai Multi Commodities Centre (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 this company’s shareholders/employees, as well as their families, which is an indisputable advantage.

• Stable banking system;
• Ability to work with US dollars;
• Quick company registration;
• Ability to create substance in the country of registration;
• Ability to obtain residence visas for the company’s shareholders and employees.

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

1. The company’s intended business 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 minimum share capital requirements may vary according to the business activity). The issued share capital with which the company proposes to be registered must be in UAE Dirhams (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. The company cannot reduce the total share capital value or change the shareholding structure in the course of its redomiciliation to DMCC.
5. The company’s Memorandum and Articles of Association, and other internal regulatory 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 the following types of licence:

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

Examples of service licences: business consulting, marketing consulting, project consulting, IT consulting, etc.

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

Examples of trading licences: general trading, e-commerce, trading in certain types of goods: 3 to 5 types.

• 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.

Examples of industrial licences: processing licence, assembly licence, packaging licence, production licence.

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

DMCC has the following requirements for the structure of companies:

The director can be an individual over 21 years of age. There are no requirements as to the residence of the director. A corporate director can only be appointed subject to the Registrar’s approval.

The minimum number of directors is 1, the maximum number is not limited.

The details of directors are not accessible to public.

The secretary can be either an individual (over 21 years of age) or a legal entity. There are no requirements as to the residence of the secretary.

The maximum number is 1 and it can be the same person as director.

The details of the secretary are not accessible to public.

The manager can only be an individual over 21 years of age. There are no requirements as to the residence of the manager. It can be the same person as director/shareholder.

The details of managers are not accessible to public.

Both individuals and legal entities can be shareholders. There are no residence requirements.

DMCC does not require a company to necessarily have a local shareholder in its structure.

The details of shareholders are not accessible to public.

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.

Upon incorporation, 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.

Before initiating the redomiciliation of a Cyprus company, it is first necessary to make sure that the company’s Articles of Association allow it to be redomiciled. It is also crucial that all issues with the company’s financial statements and taxes in Cyprus be resolved:

• preparation and submission of Annual Financial Statements for all ended years and obtaining of tax clearance certificates from the tax department (the average time for the Cyprus tax department to check a company file before closing it ranges from 3 to 6 months);
• preparation of Interim Financial Statements up to the date of the company’s migration from Cyprus (prior to the date of submission of the application to the Registrar).

The company will also need to publish notices of its redomiciliation in 2 daily newspapers of wide circulation in the Republic of Cyprus. The relevant confirmation will need to be sent to the Registrar after 3 months from the date of the last publication. Consequently, the creditors of the company may file with the Registrar an objection against the company’s redomiciliation within 3 months of the publication date.

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 Cyprus a set of company documents required for the change of jurisdiction:

• Submitting to the Cyprus Registrar the following documents:
  • Form ME2;
  • Confirmation by director(s) of the fact that the company does not have unfulfilled obligations (outstanding fees, charges, taxes, etc.) and also that the director(s) is (are) not aware of any circumstances that may adversely affect the company’s solvency in the next 3 years;
  • Resolution of shareholders’ meeting to redomicile the company to DMCC, UAE and to approve the Interim Financial Statements;
  • Annual and Interim Financial Statements / Annual Returns*;
  • Income Tax and VAT clearance certificates*;
  • Copies of publications in 2 Cyprus newspapers of notices of the company’s intention to redomicile from Cyprus

*Not included in the total cost and are payable additionally.

• If the company’s creditors did not file their claims within 3 months of the date of publication of notices in the newspapers, and the Registrar has been provided with all required documents, the Registrar consents to the company’s redomiciliation (the company must later provide the Registrar with confirmation from the target jurisdiction – Certificate of Continuation/Continuance).

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 regulator in the jurisdiction where the non-DMCC company was incorporated for the delivery of the company’s original official 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 Cyprus Registrar either an original Certificate of Continuance or its certified copy (apostilled / legalized).

5. Obtaining from the Cyprus Registrar a Certificate of Strike Off.

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 the 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.

It is possible to initiate a voluntary registration after exceeding the threshold of taxable transactions in the amount of AED 187 500 (~ USD 50 000).

Registration with the UAE Federal Tax Administration and allocation of the company’s Tax Reference Number (TRN) takes 20 business days, on average.

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’s renewal date is the anniversary of the issue of the licence. To avoid penalties, payment must be made 2 weeks before the renewal date. In the case of late payment, the Free Zone authority reserves the right to charge fines, as well as suspend the licence.

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.

A residence visa can be obtained on the following grounds:

• 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 (the company’s migration file) – 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.

The fee for obtaining a residence visa in DMCC is USD 4 200. Please contact your consultant for more details on the application.

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

[1] The fees are valid as at July 2024.

[2] 5% VAT may be added to the fees for services provided in the UAE.

[3] The fee does not include the preparation of Annual and Interim Financial Statements / Annual Returns or obtaining of Income Tax and VAT clearance certificates; these costs are payable additionally.

[4] The invoice will include 19% Cyprus VAT on the services rendered.

The fee is indicative. The final cost of company redomiciliation to DMCC, UAE, and preparation of the necessary set of documents depends on the policies and requirements of the registered agent (service provider) that administers the company in Cyprus.

[5] 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).

[6] 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 2 200 – fees for audited financial statements with a minimum number of transactions.