The United Arab Emirates (UAE) ranked as one of the top 20 best places in the world to do business, offers distinct business opportunities for international companies and individuals.
The Emirate of Dubai, which is one of the seven Emirates in the UAE, has in the last 30 years transformed itself from an oil rich state to being the most preferred commercial and business destination for global companies.
There are many options open to foreign companies and individuals who seek to establish a business presence in Dubai ranging from a Company under the Commercial Companies Law (CCL) to a variety of Free Zones.
Municipal Dubai OR Onshore Dubai
The Department of Economic Development (DED) is the licensing authority which issues licenses to businesses entities in Municipal Dubai. It is imperative that the entity has the correct “business activity” to do business in Dubai.
The basic requirement for all business activities is to have one of the following licenses:
- Commercial license – carry out trading activities like Import / Export, Wholesale & Retail
- Professional license – carry out professions, services etc
- Industrial license – carry out industrial or manufacturing activity
There are more than 2,000 business activities available for businesses, which fall into different classes and groups. Some business activities require special licensing approvals by different government departments.
The most preferred types of “legal forms” by International companies and individuals are:
- Limited Liability Company (LLC)
An LLC is the most common type of business entity currently formed in the UAE. An LLC can be formed by a minimum of 2 and a maximum of 50 persons whose liability is limited to their shares in the company’s capital. The CCL stipulates that any LLC established in the State shall have one or more UAE partners holding at least 51% of the share capital of the company. The foreign partner is permitted to operate and manage the LLC without any restrictions. - Branch/Representative office of a Foreign Company
Foreign Companies also have the option to register a Branch or a Representative office in UAE. The terms “Representative Office” or “Branch” indicate the permissible scope of the foreign representation. While the representative office is only allowed to represent, coordinate and promote business, a branch office is a full-fledged business, permitted to conduct all the activities of the Foreign Company, except trading.
Branch and Representative Offices of Foreign Companies are required to register in the Foreign Companies Register with the UAE Federal Ministry of Economy.
To register a Branch or Representative Office, the foreign company must appoint a “Service Agent”. The Agent of a Foreign Company may be a UAE National or a UAE Company wholly owned by UAE Nationals. The Agent is paid an annual fee for acting in that capacity and has no responsibility or financial obligations towards the Foreign Company. - Civil Company
A Civil Company is a business partnership of professionals to carry out an activity involving the use of an individual’s physical or intellectual powers and effort and/or using tools/instruments with a limited capital. The partners in a civil business company do not have limitation of liability. A Civil Company is required to either have a Local Service Agent (LSA) if there is no UAE-National partner in the business. The LSA is a UAE National who assists with licensing requirements and other government-related matters for the business, in return for an annual fee. The LSA has no responsibility or financial commitment to the business or its activities.
Free Zones
While the CCL requires UAE local majority for entities registered Onshore Dubai, this is not required in the Free Zones. There are many Free Zones in UAE which are by and large classified on the basis of the activities they permit.
A Company licensed in a Free Zone cannot trade outside the zone. This has to be done only through licensed commercial agents or logistics companies after paying the relevant customs duties applicable.
Some advantages of being in a Free Zone are:
- 100% foreign ownership
- Tax free period of up to 50 years
- High quality standards and flexibility required by foreign companies
- A One stop shop for free zone companies with a wide range of licensing and other administrative services provided under one roof
- No recruitment restrictions
This is a general guide on the subject matter and should not be construed as specific legal advice.
Senior Legal Consultant, Corporate & Commercial