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Incorporation of a limited liability company in Jebel Ali Free Zone (JAFZA), Dubai. Service offer

The Emirate of Dubai is located in the Arabian Peninsula, in the south of the Persian Gulf. Among the seven Emirates comprising the UAE, it is the most populated one and the second largest in area after Abu Dhabi. There are over 20 free zones in the territory of Dubai. Jebel Ali Free Zone (JAFZA) is located in the Emirate of Dubai and is the oldest free zone of the UAE (active since 1985). JAFZA has a strategic location. It is in close proximity to the world’s largest port, which annually receives 15 million containers and services over 170 shipping lines. Jebel Ali Free Zone is situated a few minutes from the eighth largest cargo airport, Dubai International Airport and the new airport Al Maktoum International. Over 7,000 companies are connected to the world of opportunities having strategically placed their business in Jebel Ali.

Main advantages of doing business in the UAE:

  • No corporate tax;
  • Stable banking system;
  • Ability to work with US dollars;
  • Quick company incorporation;
  • Ability to create substance in the country of incorporation;
  • Ability to obtain a resident visa for company’s shareholders and employees.

Budget for the setting up business in JAFZA:

Service
Cost (USD)
Incorporation of a company in JAFZA, including a license, smart desk office lease, company incorporation services and e-channel registration[1].

The cost of services is stated for:
- the single shareholder;
- type of license – service;
- office.

Other options are available upon request

32,000 USD
Obtaining a resident visa
the expenses are stated for one visa, including:
- payment of all government fees (Entry Permit, Medical Fitness Report & Emirates ID, Visa Stamping on the Passport);
- services for the execution of necessary documents;
- support services and transport costs (a trip to the clinic and migration service)
4,200 USD
Assistance in opening bank accounts (irrespective of the outcome of application).
Corporate account/Personal account
2,500 USD
Total:
38,700 USD

FORMS OF INCORPORATION

There are 4 forms of company incorporation in JAFZA:

  1. Free Zone Establishment (FZE) – company with one shareholder;
  2. Free Zone Company (FZCO) – company with several shareholders;
  3. Public Listed Company (PLC) – company listed on a stock exchange;
  4. Branch – branch of a local or foreign company.

COMPANY INCORPORATION

The procedure of incorporation of a company in JAFZA:

1) The following has to be determined:

1. Name of the company to be checked for uniqueness (at least three options):

  • the name must be approved by the registration authority;
  • it must not be identical or similar to the name of an existing company;
  • characters of the Latin alphabet may be used;
  • it must end with an indication of the form of incorporation (“FZE”/”FZCO”).

2. Structure of the company (director, shareholders, manager, secretary);

3. Kind and size of premises necessary for the proposed activity;

4. Amount of the authorized capital;

5. Kind of license:

JAFZA issues licenses to conduct business in the following sectors:

  • Trading license allows the holder to trade in goods, including import, storage, warehousing, supply and export of permitted goods of different categories. A license may be issued to trade a maximum of 7 products from one group of goods and a trading license to trade a maximum of 12 products from 2 groups of goods;
  • General trading license grants the holder access to a wider range of activities and goods stated in the license;
  • Service license allows the holder to provide the type of service stated in the license (for example, business consulting, marketing consulting, insurance and others);
  • Industrial license allows the holder to conduct goods production business, including raw material import, processing, production, assembly, packing and export of finished goods. A license may be issued to manufacture a maximum of 7 products from one group of goods and a license to manufacture a maximum of 12 products from 2 groups of goods;
  • National industrial license is issued to manufacturing companies that are at least 51% owned by the Gulf Co-operation Council (GCC);
  • Logistics license allows companies to be engaged in freight transportation (sea, land and air), warehousing, packing, transportation and distribution;
  • E-commerce license: companies providing individual services and goods to third persons through electronic media, such as a search engine, portal, website, social media, etc. for the purpose of facilitating trading business.
  • Innovation license allows the holder to develop new products or services.

2) Payment for services

3) Have to be provided

the following directors’/managers’/secretaries’/shareholders’ documents (originals or notarized copies, at least 6 months until the passport expires):

  • colour copy of internal passport;
  • colour copy of international passport;
  • copy of an international passport page with UAE entry stamp;
  • proof of address (unless the internal passport contains an address stamp);
  • CV;
  • legalized power of attorney if the company is being incorporated by a representative.

All shareholders will have to sign a Client’s Questionnaire Form in order to undergo the compliance procedure as well as a Service Agreement.

Preparation and submission of a set of documents for the incorporation of a company:

The following documents are prepared for the submission to the registration authority:

  • Company incorporation Application Form (signed by shareholder);
  • Environment, Health and Safety Form (JAFZA EHS Form);
  • Copies of passports / Emirates IDs of all shareholders, directors, manager and secretary;
  • Project summary (business plan);
  • No Objection Certificate (No Objection Letter by the sponsor) if there is a valid UAE visa issued by another company;
  • Memorandum and articles of association for the purpose of registration authority’s approval;
  • Application for lease of premises necessary to conduct the company’s business.

Before the incorporation of a company, the administration of the free zone checks the company’s shareholders and directors (security check); additional documents may be requested at this stage, for example, a no criminal record certificate.

Such a check normally takes 2 to 4 workdays.

After the check is done, company incorporation takes place. Upon completion of the incorporation, the administration of the free zone issues the following documents:

  • Certificate of incorporation containing the registration number and date, type of license, information on the shareholder and share capital of the company;
  • License for the proposed activity of the company (license is issued for 1 year);
  • Office lease contract (for 1 year);
  • Share certificate;
  • Memorandum and articles of association.

The company seal is also issued.

In total, the incorporation of a company in JAFZA in average takes 2 to 4 weeks.

After the company has been incorporated, one can proceed to obtaining visas and opening an account with a bank. A settlement account for the company may be opened with a UAE bank or with a foreign bank – for further information contact your consultant at GSL.

IMPORTANT: Since the UAE is not a party to the Hague Convention of 5 October 1961 that abolishes the requirement for legalization of foreign official documents and does not apostille documents, in order to use documents of a local company in another country it is necessary to submit such documents for legalization to the consulate of a country where they will be issued.

The cost of translation of documents, notarization, legalization and apostille shall be paid separately.

VISA APPLICATION

The UAE does not have such concept as a residence permit. 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.

However, there is no such category as investor’s visa in JAFZA. Only work visas may be obtained.

The number of resident visas depends on the business package chosen during the incorporation of the company.

Resident visa is issued for 3 years.

Upon expiration, a visa may be renewed.

Application for residence visas includes the following steps (a visa can only be applied for after registration of the company):

  1. Opening an Establishment Card (the migration file of the company) – 5-10 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. 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 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.

IMPORTANT: One is not required to reside in the UAE permanently, but a residence visa will be cancelled if one stays outside the UAE for more than 6 months.

The fees for obtaining a residence visa in JAFZA start from USD 4200.

Please contact your consultant for more details on the application.

COMPANY STRUCTURE REQUIREMENTS

DIRECTORS

minimum number:
one
individual / legal entity:
individuals only
residency:
no requirement

Additional requirements based on which a person may NOT hold office:

  • under 21 years;
  • criminal record related to fraud or immoral behavior for the last 10 years;
  • have been found guilty of trading in insider information;
  • have been removed from director’s office by court decision;
  • do not meet criteria stated in the founding documents;
  • are an undischarged bankrupt.

SHAREHOLDERS

minimum number:
1 (for FZE), 2 (for FZCO)
maximum number:
50 (for FZCO)
individual / legal entity:
individual / legal entity or both
residency:
no requirement
JAFZA does not require a company to have a local shareholder

MANAGER

number:
only one, it may be one of directors or shareholders or be the same person as secretary
individual / legal entity:
individual
residency:
no requirement

Additional requirements based on which a person may NOT hold office:

  • under 21 years;
  • have been found guilty of trading in insider information;
  • have been removed from director’s office by court decision;
  • do not meet criteria stated in the founding documents.
Information on manager is contained in the register of companies and in licenses issued to FZE/FZCO

SECRETARY

An FZE/FZCO must have a secretary.

Authorized share capital

The authorized capital may only be denominated in UAE Dirhams. In accordance with the Regulations, the minimum amount of the authorized capital is not set for an FZE or FZCO. However, there is a requirement for a company to have authorized capital sufficient for the activity for which it obtained the license.

Different classes of shares

As a result of changes made to the legislation on 23 May 2016, issue of shares of different classes has become available to companies incorporated in JAFZA.

According to the regulations of JAFZA, an FZCO may issue different classes of shares with the approval of the registration authority. The rights on shares may be changed by making amendments to the memorandum and articles of association of the company if such a change is approved by a resolution of more than 75% of votes of shareholders or resolution of all shareholders holding shares of the same category. A PLC may also have different classes of shares if it is provided for in its memorandum and articles of association.

PLCs may also issue shares of different classes if it is provided for in the company’s founding documents.

Bearer shares or partially paid shares may not be issued.

REGISTERED OFFICE

At incorporation an office lease contract is entered into between the company and the administration of the free zone; the address of such office is considered the official registered address of the company.

JAFZA offers various office packages depending on the needs of clients in term of type and number of licenses, number of visas, need for substance and location in the free zone: office, plots of land, warehouses, showrooms, business parks, retail outlets. Minimum office area is 26 m2.

SUBSEQUENT ADMINISTRATION OF THE COMPANY

Corporate Tax

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

VAT

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.

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.

Before incorporating a company we recommend receiving consultation from a specialist of the non-resident audit department and tax consultant to assess the company’s tax burden and discuss subsequent administration of the company.

Financial Statements an Audit

Every company incorporated in JAFZA 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 annually prepare the company’s financial statements and undergo audit. A fine of 5,000 AED will be imposed on the company in the case of failure to comply with these requirements.

The first reporting period of a company starts at its incorporation and lasts 6 to 18 months. Each subsequent reporting period lasts exactly 12 months from the date of the end of the previous reporting period.

By each reporting date, directors of the company must prepare financial statements of the company, including an auditor’s report. According to the current requirement, a copy of the signed financial statements along with the auditor’s report must be filed with the administration of the free zone within 90 days of the end of the company’s financial year.

Before incorporating a company we recommend receiving consultation from a specialist of the non-resident audit department and tax consultant to assess the company’s tax burden and discuss subsequent administration of the company.

Renewal

A company must annually renew its license, by paying the relevant fee, and lease contract.

The company’s renewal date is the date of issue of the license. In the case of late payment for renewal, the administration of the free zone reserves the right to impose a fine and suspend the license.

The cost of renewal of a company includes renewal of the office lease contract, renewal of the license and renewal of the P.O. Box. Upon renewal a renewed license is issued.

Fees[2]

Service
Cost(USD)
Incorporation of a company in JAFZA, including a license, smart desk office lease and company incorporation services.

The cost of the package may vary depending on the number of shareholders, kind of license and size of the office (the size of the office defines the number of resident visas).

The cost of services is stated for the sole shareholder and possibility to obtain 1 resident visa (minimum package).

Other options are available on request

32,000
Annual renewal of the company, including licence, rent of Flexi Desk office, P.O. Box, and company renewal services.

This fee is applicable in the case of company with a single shareholder and eligible for 1 residence visa (minimum package).

Other options – upon request

31,000
Obtaining a resident visa.
The expenses are stated for one visa, including:
- payment of all government fees (Entry Permit, Medical Fitness Report & Emirates ID, Visa Stamping on the Passport);
- services for the execution of necessary documents;
- support services and transport costs (a trip to the clinic and migration service)
4,200
Renewal of a resident visa (the expenses are stated for one visa).

Renewal of a resident visa (a visa is issued for 3 years) implies the same actions and expenses as the initial obtaining thereof

4,200
Assistance in opening bank accounts (irrespective of the result).
Corporate account/Personal account

2,500/2,500

Compliance fee
250
Keeping company’s accounting records.
Maintaining a systematic archive of company documents and providing them to the client upon request
200 / hour[3]
Preparing financial statements, conducting audit and submitting financial statements to the Free Zone authorities
400 / hour
Tax advice on VAT and other issues
300 / hour
VAT registration
1,200
Preparing and submitting VAT returns
200 / hour

[1] The cost of the package may vary depending on the number of shareholders, kind of license and size of the office (the size of the office defines the number of resident visas).

[2] The cost of services is effective as of January 2022.

[3] The fees for preparing financial statements and conducting audit are charged based on the time spent at hourly rates ranging from USD 100 to 400, depending on the type of work and qualification of a specialist involved, but not less than USD 1900 – fees for audited financial statements with a minimum number of transactions.

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