GSL / Offshore and International Law / Offshore zones / Middle East / United Arab Emirates

General information

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.

State Structure

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

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.

Economics

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.

History

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.

Free trade zones in the UAE

There are more than 40 free trade zones in the UAE.

Some Free Zones are designed around one or more business industry categories, e.g. Internet City, Media City, Healthcare City, Dubai International Financial Center, etc.), others have genera l specialization.

Free Zones of the UAE:

Dubai Internet City - For the companies engaged in technologies. Here you can find the offices of such transnational corporations as Fortune 500, Facebook and LinkedIn, as well as many other small and medium businesses.
Dubai Media City - For the companies engaged in media business. Here you can find the offices of such transnational corporations as CNN, Forbes, MBC, Reuters, Showtime, Sony and many others.
Dubai International Financial Center - The largest companies in financial and insurance markets use this jurisdictions enter the market of the UAE and other markets of the Middle East and Northern Africa.
Dubai Multi Commodities Centre - Specialized on the companies engaged in trade on commodity markets (gold, diamonds, pearls, tea), and companies providing related services. The free zone plays a role of an international center of raw material in the region.
Dubai World Central - Allows to establish companies specializing in production, trade and service in various fields of economy. The Free zone is located on the territory of the largest international airport Al Maktoum International Airport, what gives great opportunities for logistic companies and companies connected with international air carriage.
RAK Investment Authority Free Zone - Allows to establish companies specializing in production, trade and service in various fields of economy.
Fujairah Free Zone (FFZ) - Allows to establish companies focused on trade, industry and service.
Jebel Ali Free Zone - One of the largest free zones in the UAE, developed on the territory of the biggest port of the Middle East. It is a perfect choice for companies specializing in export and import operations.
Ajman Free Zone - Allows to establish companies specializing in production, trade and service in various fields of economy.
and others.

Types of Entity

Companies registered in the UAE can be divided into 3 categories:

  • Onshore companies: companies registered in free zones.
  • Offshore companies.
  • Mainland companies: types of such companies are regulated by the Civil Code of the UAE as well as federal Commercial Companies Act.

Besides, commercial activities can be established through Sole Establishment (sole trader). Foreign companies can also establish a branch or a representative office in the UAE or free trade zone.

At present all UAE companies (except companies of some sectors) are exempt from corporate tax, repatriation, royalties and other taxes and duties. 5% VAT was introduced in 2018.

Bank account

  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 US dollars.
  7. UAE is a member of FATF.

Who Can Open an Account

  • 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.

Types of companies in the UAE

Mainland Companies

According to the UAE Commercial Companies Act, the following business forma can be established in the UAE:

  • Sole Proprietorship;
  • Limited Liability Companies;
  • Private Joint Stock Companies;
  • Public Joint Stock Companies;
  • Joint Participation Ventures (or Private Unlimited Companies);
  • Limited Partnerships (or Simple Commandite Companies);
  • Partnership Limited with Shares (or Share Commandite Companies);
  • General Partnerships (or Joint Liability Companies);
  • Branch of a foreign company;
  • Branch of a free zone company.

According to the Civil Code civil companies can be established in the UAE. Types of activities of such companies are restricted – they can carry on professional activities in technologies, law, medicine, etc. The local shareholder is not required.

Mainland 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
  • registered office in the UAE is compulsory
  • foreigners can own 100% of a local company, unless such a local company is carrying out activities of "strategic importance"

Free Trade Zone Companies

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

Offshore Companies

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

Getting visa in the UAE

Benefits for Business

  1. High degree of confidentiality with respect to company founders. No public register of companies.
  2. No tax on profit, 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.

Benefits for Life

  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.

How to Get a Visa?

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 - investor visa;
  • by making an employment contract with a UAE onshore company - work visa.

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

An investor visa is normally issued for 3 years, a work visa - 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) - 10 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) - 1-2 weeks. 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.
IMPORTANT
One is not required to reside in the UAE permanently, but a residence visa will be canceled if one stays outside the UAE for more than 6 months.
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