Company Registration in the United Arab Emirates - Business Starting & Setup

United Arab Emirates is country situated in the Middle East. Total area of the UAE is 83 600 sq. km sq. km. Population of the UAE is 9 771 000 (2019). Ethnic groups include Emirati 19%, other Arab and Iranian 23%, South Asian 50%, other expatriates (includes Westerners and East Asians) 8%. The capital of the UAE is Abu Dhabi. The official language of the UAE is Arabic. The official currency is Emirati dirham (AED). 1 USD is equal to 3,67 AED. The climate of the UAE is desert; cooler in eastern mountains; avg. maximum temperature (August) +43°; avg. minimum temperature (January) +18°. Time difference with Moscow is + 1 hour. Literacy rate is 90%. Calling code of the UAE is +971.

The formation of the Caliphate in the 7th century favored the spread of Islam among local population. Such cities as Dubai, Sharjah, El Fujairah were founded.

The Eastern part of the Arabian Peninsula was part of the state of the Qarmatians and after its collapse it was under the governing of Oman.

The English supremacy under the territory dates back to 1820. Oman was divided into three parts and later it was called Trucial Oman. Even under the protectorate of the British Empire the native people preserved their traditions and religion.

At the beginning of the 20th century the richest oilfields were discovered. It favored the international capital flows and the improvement of living standards.

In 1971 the federation of the United Arab Emirates was formed including six Emirates of the Trucial Oman. The seventh Emirate joined them next year.

The UAE is a federation of hereditary absolute monarchies. It is governed by a Federal Supreme Council made up of the seven emirs of Abu Dhabi, Ajman, Fujairah, Sharjah, Dubai, Ras al-Khaimah and Umm al-Quwain. All responsibilities not granted to the national government are reserved to the emirates.The head of state is the president whose post is held by the emir of Abu Dhabi. As the emirate is an absolute monarchy, the power is essentially hereditary.Executive power is exercised by the Council of Ministers headed by the chairman appointed by the president and approved by the Supreme Council.Legislative power is vested in Federal National Council which consists of representatives from each emirate (40 members).Judiciary power is vested in the Union Supreme Court, which is the highest court in the UAE. Supreme Court regulates relations between emirates, federal and local authorities.

Legal system of the UAE is a mixed legal system which combines:

• Islamic law;
• Civil law.

Codified laws regulating labor relations, maritime law relations, commercial transactions, civil acts, intellectual property, etc. apply in the UAE.

There are two main types of law in the UAE:

• federal law;
• local legislative acts (at the level of emirates).

Federal laws have effect on the whole territory of the UAE and are adopted by the legislative body or ministers.

Local decrees and acts have effect only on the territory of a separate emirate. Local decrees is adopted by the Emir or Hereditary Prince of the emirate; local acts is issued by the member of the royal family of the emirate.

The main characteristics of the United Arab Emirates economy currently are: type of economy: an open economy, which involves active inclusion in international economic relations; high per capita income; about 40% of GDP is based on oil and gas production; The UAE has more than 40 Free Zones (FZs), which helps attract foreign investment. The discovery of oil contributed to a significant increase in living standards in the United Arab Emirates. The UAE is now the third largest Gulf country in terms of oil production, which generates 2,2 million barrels per day on average. Reserves of raw materials in the UAE are: 200 billion barrels of oil; 5 600 billion cum. of natural gas.

On the territory of the United Arab Emirates, several types of companies can be registered that are suitable for various types of activities: Mainland (mainland, local) companies, companies of free economic zones (FEZ, Free Zone) and Offshore (offshore).

Key characteristics of UAE companies:

Companies in the UAE have a number of attractive features that make them profitable for entrepreneurs and investors. Favorable tax policy (corporate tax and VAT exemption is provided in free zones, while tax rates are minimal in mainland companies) and a simple and fast registration procedure allow you to start working in just a few days.

Additionally, you can count on a high level of confidentiality, the absence of currency controls and the free movement of capital. Another important advantage is its strategic location, providing access to the markets of the Middle East, Africa, Europe and Asia.

The registration of a company begins with the choice of an organizational and legal form, as well as determining where exactly it will be registered - on the mainland, in the free economic zone or offshore.

The term Mainland means that the company is registered outside the free economic zones (FEZ), that is, in the main territory of the United Arab Emirates. For such companies, there are no restrictions on the place of business, both on the territory of the state and abroad. There are also no restrictions on counterparties.

Since June 1, 2021, the requirement for 51% participation of a local investor has been lifted (Federal Decree Law No. 26/2020), and now foreigners can own a 100% stake in a mainland company, unless the business is of "strategic importance" and is subject to additional regulation. Simplified account opening procedures have also been established for mainland enterprises. Learn more about the specifics of registering local companies.

The organizational and legal forms of local companies are determined by the Civil Code, as well as the UAE Federal Law on Commercial Companies. The main types are:

• Sole Proprietorship
• Limited Liability Company
• Branch of a foreign company
• Branch of a Free zone company

It is also possible to register a private and public joint stock company, a joint venture, a limited liability partnership or unlimited liability.

An individual private enterprise (Sole Proprietorship) in the UAE is a special form of business in which an entrepreneur acts as an individual, fully controlling his commercial activities and receiving all profits. Unlike legal entities, such a structure is not separated from its owner, which means that the entrepreneur is fully financially and legally responsible for all business obligations. This implies that in the event of debts or lawsuits, creditors can claim not only the assets of the enterprise, but also the personal property of the owner.

The main advantage of this form of business is the opportunity for foreigners to fully own their company without having to involve local partners or agents. This became possible after the abolition of the requirement for a local sponsor in 2021, thanks to Federal Decree No. 26/2020. However, it is important to keep in mind that foreign entrepreneurs can only obtain a professional license that allows them to provide services, but not engage in trading or manufacturing activities. There are no such restrictions for citizens of the UAE and the GCC countries - they can open businesses of any profile.

The process of registering an individual enterprise is relatively simple, since it does not require the preparation of constituent documents or articles of association. However, the entrepreneur needs to rent a physical office and register the lease agreement with the land department of the relevant emirate. This is a mandatory requirement, without which it is impossible to obtain a license. The registration period may be somewhat longer compared to registering a company in a free zone, but an individual enterprise allows you to work throughout the UAE without restrictions.

The tax advantages of this form of business include the absence of corporate taxes and minimum share capital requirements. The business owner pays only income tax (if applicable) and is exempt from complex corporate reporting. At the same time, he has the right to freely dispose of all profits and withdraw funds abroad without additional restrictions.

When choosing this form of business, it is important to carefully assess the potential risks, especially those associated with unlimited liability. To reduce risks, many entrepreneurs prefer to take out insurance or consider alternative options, for example, registration in free economic zones. Nevertheless, for professional practice and consulting services, an individual enterprise remains the optimal choice, combining ease of management with extensive opportunities to work in all emirates.

Types of licenses: production, commercial, trade, professional, for conducting tourism activities. There are no requirements for the minimum amount of the Authorized Capital, as well as for its payment.

A shareholder can only be an individual, a citizen of any state. Previously, a foreigner necessarily needed a Local Service Agent (LSA) to establish an individual private enterprise. Starting from April 1, 2021, in connection with the entry into force of Federal Decree-Law No. 26/2020, article 329 of Federal Law No. (2) of 2015 "On Commercial Companies" was abolished, which required the presence of a local agent.

One manager is required, not necessarily a resident. The brand name must relate to the business operations of the company. An individual private enterprise may have more than one branch, and each may engage in one type or all types of activities included in the basic license.

A limited liability company (LLC) is one of the most popular and flexible forms of doing business in the UAE, combining the features of a classic partnership and corporate structure. This model is particularly in demand among small and medium-sized enterprises due to the relatively simple registration and management requirements. Unlike individual entrepreneurship, LLC provides participants with protection from personal financial liability by limiting their risks to the amount of capital invested.

Scope of activity and limitations

LLC can carry out a wide range of commercial activities, including manufacturing, trade, professional and travel services. However, for some areas, such as banking, insurance, or investment management of third parties, the legislation establishes direct prohibitions. In addition, certain types of businesses require special permits from regulatory authorities. For example, companies working in the field of healthcare, education, or financial consulting must coordinate their activities with the relevant government authorities.

Structure and participants

The founders of an LLC can be from 2 to 50 participants, while the law allows the creation of a company with a sole owner. In the latter case, the name of the organization must contain the wording "sole proprietorship with limited liability", emphasizing the special status of the enterprise. The name of the company should also reflect its main activity or include the names of participants, ending with an indication of limited liability and the amount of the authorized capital.

An important feature of an LLC is the prohibition on attracting financing through an open subscription or the issue of shares. The Company may change its organizational and legal form, with the exception of transformation into a public joint-stock company. All contributions to the authorized capital must be paid in full through a bank registered in the UAE, which ensures transparency of financial transactions.

Registration procedure and requirements

To create an LLC, you must submit an application to the UAE Ministry of Economy, after which the company is entered into the municipal commercial register. You can start your business only after completing all registration procedures. If the number of participants exceeds the established limit of 50 people, the management is obliged to notify the Department of Economic Development within 30 days. The correction of the situation takes 3 months (with the possibility of extending up to six months). In case of failure to comply with this requirement, the company is excluded from the register, and its participants are jointly and severally liable for obligations incurred after the excess. The exception is those who can prove their innocence of the violation.

Branches and additional features

LLC has the right to open branches that can engage in either one or several types of activities provided for by the basic license. This allows the business to expand its presence in the market without creating separate legal entities.

Thus, a limited liability company in the UAE offers entrepreneurs a balanced option with clear rules, asset protection and the ability to adapt to different business models. However, successful registration and further work require strict compliance with legal regulations, including timely registration of licenses and permits for certain types of activities.

Types of licenses: production, commercial, trade, professional, for conducting tourism business. A limited liability company (LLC) is a flexible form of enterprise that combines elements of partnership and corporate structures. An LLC can have 1 to 50 participants, each of whom is responsible only in the amount of his share in the capital. There are no requirements for the minimum amount of the Authorized Capital, as well as for its payment.

The name of the company must indicate the purpose of its creation or consist of the names of one or more participants and end with the phrase "limited liability".

A Limited Liability Company may have more than one branch, and everyone has the right to engage in one type or all types of activities included in the company's basic license.

A branch of a foreign company may carry out specialized activities and certain types of commercial and production operations (they require permission from the Department of Economics).

In addition to a license from the Department, to work in the UAE on a temporary or permanent basis, you must register with the Chamber of Commerce. It is necessary to have an automatically renewable bank guarantee in the amount of 50 000 AED, paid in favor of the Ministry of Economy.

The branch is opened for an unlimited period, and its revenue will be taxed in the jurisdiction of the tax residence of the foreign company as its own income.

The Board of a non-resident company must appoint a manager who will open a branch and represent the interests of the company; there are no requirements for the manager's residency.

In addition, it is possible to open a branch of a company registered in the FEZ, which should conduct the same business activity and have the same name.

Mainland companies in the UAE can operate both in the country and in free economic zones (FEZs). The legislation of the Emirates provides for obtaining three main types of licenses:

1. Professional – for services (consulting, IT, medicine, education, etc.).
2. Trade – for the purchase and sale of goods (wholesale and retail trade).
3. Industrial – for the production and processing of products.

Some business areas require additional permits, such as tourism, consulting, product sales, and other regulated areas. In such cases, coordination with relevant authorities is necessary.

To open a local company, you definitely need a physical office. In this case, you will need

an official lease agreement.The contract must also be registered with the UAE Land Department of the emirate where the office is located.

Registration of the company is impossible without meeting these conditions.

The registration of a company on the UAE mainland is carried out by the Department of Economic Development of the relevant emirate, which also issues a commercial license. The procedure includes the following steps:

• Determining the commercial scope of the future company and selecting the most suitable type of a business, taking into account the nature of operations and commercial objectives;

• Approval of the company's structure (director, shareholders, manager, shareholder/partner);
• Submission of an application to the Department of Economic Development of the relevant region, which verifies and pre-approves the possibility of establishing under the chosen name;
• Preparation and execution of constituent documents, including the charter and the founding agreement;
• The company must have a physical office — registration cannot be carried out without renting premises, it is required to conclude a lease agreement for premises in the relevant region;
• After completing all the formalities and paying state fees, the Department of Economic Development issues an official business license.

The company can open a corporate bank account and, if necessary, issue work visas for employees. After completing these stages, the company begin operating.

There are more than 40 free trade zones in the UAE. The federal laws, local laws and special laws adopted by the zone, regulate activities of the companies registered in a free zone. According to the general rule, local founder is not required.

To carry on international transactions a company is obliged to obtain a related licence which is issued in the process of incorporation. The company may not carry on business outside the free zone. However, international activity is not restricted by the law if it complies with the issued licence.

The law requires to lease a minimum office space in a free zone or a seat in the business center.

Free trade zone companies can be established in the following forms:

• branch or representative office of a foreign company;
• Free Zone Establishment;
• Free Zone Company.

Each free zone has its own requirements of share capital, number of directors, audit of accounts, etc.

Onshore companies:

• may carry on business indicated in licence on the territory of the UAE and free zones
• has resident permit possible (for the founder and employees). Number of staff should be proportional to the occupied office space
• office can only be located in a free zone. Some zones provide a seat in a business center
• 100% foreign ownership is possible

Companies in free zones can be established in the form of:

• A branch or representative office of a foreign company,
• Free Zone Establishment – companiy with limited liability and sole shareholder,
• Free Zone Company– limited liability companies with two (or more) shareholders.

The standard minimum amount of the authorized capital is usually 50 000 AED (the minimum amount will depend on the selected FEZ and on the commercial sphere of the company). It is not possible to issue bearer shares.

In addition, it is necessary to rent a minimum office space in the FEZ or space in the office center. Upon registration, an office lease agreement is drawn up between the company and the FEZ administration: the address of such an office is considered an official legal address.

• The director can only be an individual over the age of 21, not necessarily a resident. The minimum number of directors is one. Information about the directors is not openly disclosed.
• The secretary (if necessary) can be either an individual or a legal entity. Secretaries are not required to be residents. The maximum number is one, and may coincide with the director. Information about the secretary is not disclosed.
• The manager can only be an individual. The residency requirement is set by each FEZ separately. The minimum number of managers is one. May coincide with the director/shareholder. Information about the managers is not disclosed.
• Shareholders can be individuals and legal entities, but there are no residency requirements. The minimum number of shareholders is one, the maximum – depending on the zone, in some up to 7, and in others up to 50. It is not necessary to have a local shareholder in the company structure. Information about shareholders is not disclosed.

Although many jurisdictions are discussing the creation of an open register of beneficiaries, the UAE does not yet have one. This means that there is no open access to information about the beneficial owner. It is stored by the registration agent. Beneficiary information is disclosed only to regulatory authorities (for example, during background checks) or by court order.

The activities of offshore companies, along with federal law and the legislation of the relevant Emirate, are governed by special laws adopted in relation to such offshore jurisdictions.

The establishment of an offshore company does not require the involvement of a local partner as the founder.

Such companies generally do not have the right to conduct activities in the UAE, but are not restricted from conducting foreign trade operations outside the UAE. An offshore company cannot own real estate in the UAE and, unlike a resident company, cannot be used to obtain visas for its employees or directors.

Offshore companies are fully exempt from taxation in the UAE.

Such companies are not required to maintain an office or staff, or audit their annual financial statements.

Offshore companies cannot benefit from double taxation agreements.

Offshore companies:

• may carry on any activity which is not specially regulated outside the UAE only
• do not have a residence permit
• may not have an office in the UAE
• 100% foreign ownership is possible

A director can be an individual or a legal entity (some regions only allow individual directors). The residency requirements are set by the local authorities. In some cases, nominal service is possible (directors, shareholders).

The secretary can be an individual or a company (some regions only allow individuals). May coincide with the director.

The minimum number of participants/shareholders is one, individuals and companies are allowed. There are no residency requirements.

Information about directors, secretary, and shareholders is confidential.

1. Stable banking system, high probability of opening an account with UAE banks.
2. No foreign exchange control.
3. The local currency value is pegged to the dollar.
4. Financial resources and bank instruments are available: letter of credit, credit cards, loans for corporate bodies and natural persons at a law rate, availability to banking products of asset management, attractive interest rates, etc.
5. Convenient and effective access through Internet banking. For natural persons Internet banking is free of charge.
6. Ability to work with USD.
7. UAE is a member of FATF.

• Corporate bodies registered in the UAE: free trade zone companies and offshore companies.
• Corporate bodies registered outside the UAE: offshore companies from different jurisdictions.
• Natural persons – residents of the UAE. Accounts for residents can be opened almost in any bank of the UAE.
• Natural persons – non-residents of the UAE. Local banks open accounts for non-residents who have a real property in the UAE. Local and international banks can also open accounts for non-residents if they keep a specific amount of balance.

1. High degree of confidentiality with respect to company founders. No public register of companies.
2. No tax on dividends, interest, repatriation and other income.
3. No exchange control.
4. Access to double tax agreements with more than 100 countries.
5. The UAE acts as a regional haven for businesses in the Middle East and North Africa, which provides access to the markets of the countries in the region.
6. Access to the country's banking sector with attractive lending conditions and a high level of service.
7. High safety and ease of doing business.
8. Access to major international ports and air carriers. Developed infrastructure.
9. Ability to open production facilities in free zones, which will provide duty-free import, processing and export of raw materials. The UAE is part of the customs space of the Arab monarchies of the Persian Gulf, which allows to sell goods imported into the country without paying duties in other states of the region.
10. Access to low-cost labour and raw materials of the world countries.
11. Low cost of energy.
12. The UAE is one of the fastest growing economies in the world with per capita GDP of USD 38,436.

1. English-speaking environment with a large Russian-speaking community.
2. A high level of comfort of living, access to excellent infrastructure and services.
3. Developed healthcare system.
4. Access to the international education system: educational institutions of English-speaking and other countries of the world have their own schools and universities in the UAE.
5. High level of safety.

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 the ownership of a UAE onshore company;
• by making an employment contract with a UAE onshore company.

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

An investor visa or a work visa are normally issued for 2 years.

Upon expiration, a visa can be renewed.

The procedure of applying for residence visas is as follows (application for a visa can only be made after registration of the company):

• Opening an Establishment Card (the migration file of the company) - 3 - 5 days. This document is necessary for the company to be able to apply for residence visas in the future.
• Submitting documents for a residence visa and obtaining the Entry Permit (permission to enter) - 5 - 7 days. To obtain a residence visa, you must enter the UAE with an Entry Permit.
• 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) and submit biometric data (retina and fingerprints scan).
• After receiving a passport with a residence visa inserted into it, one can leave the country.
• 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.