The United Arab Emirates (UAE) is a federal state in southwestern Asia in the eastern part of the Arabian Peninsula. It includes seven emirates - absolute monarchies: Abu Dhabi, Sharjah, Ajman, Dubai, Ras al-Khaimah, Fujairah, Umm al-Quwain.
The UAE is the 8th wonder of the world, a powerful financial center with an actively growing and strong economy. The internal policy of the government of the state is aimed at attracting foreign capital, therefore, the conditions for doing business in the emirates are as favorable as possible. Free economic zones are widely developed in the country.
The jurisdiction offers the formation of both offshore and onshore companies, so sometimes the concept of an offshore of the UAE or offshore of the Arab Emirates is encountered.
The formation of offshore companies, the opening of firms in the UAE is governed by the regulations provided for in a particular emirate:
The formation of onshore companies in the FEZ is regulated by special acts in force in each specific Free Economic Zone (FEZ).
1. An offshore company can be registered in the following emirates:
Ajman - company limited by shares;
Ras Al Khaimah (RAKICC):
- company limited by shares;
- restricted purpose company;
- unlimited company that is authorized to issue shares.
Offshore companies are not allowed to conduct business in the UAE.
2. An onshore company in a free economic zone (FEZ) can operate both in the UAE and outside, after obtaining the appropriate license.
An onshore company can be registered in the following free economic zones (there are more than 20):
- Dubai (Dubai Multi Commodities Center, DMCC);
- Al Hamriyah, Sharjah (Hamriyah);
- Jebel Ali (JAFZA);
- Ras al-Khaimah (Rakez);
- Umm al-Quwain (UAQFTZ).
3. An onshore local (local) company is a company in which the maximum share of foreign capital is 49% (the remaining 51% is owned by a UAE citizen). Local companies are allowed to operate in the UAE.
An onshore local company can be registered in the form of:
- a professional company (provides professional services: law firms, consulting and accounting firms, travel agencies, event agencies, universities, schools, IT, etc.);
- limited liability company (LLC) - an analog of a limited liability company.
Types of licenses in FEZ Jafza:
Types of licenses in FEZ DMCC:
Types of licenses in FEZ AJMAN:
Types of licenses in the Hamriyah FEZ:
Types of licenses in FEZ RAKEZ:
It is possible to obtain several licenses for one company.
Types of licenses in FEZ UAQFTZ:
Since June 2023, the UAE has introduced a corporate tax regime, which provides for the following rates:
- 0% from income up to 375 000 AED/year;
- 9% on income over 375 000 AED/year.
This tax applies to both resident and non-resident companies that have local income or their representative offices in the UAE. In particular, corporate tax will be paid by all resident individuals who conduct a “business” or “business activity” in the UAE and have a turnover of more than 1 million AED/year.
For companies that are incorporated in FEZs, there are special tax rules that provide for exemption from 9% corporate tax if the company:
- did not choose the general system of taxation;
- generates qualified income;
- has adequate substance in the UAE;
- complies with transfer pricing requirements
- audits financial statements.
Qualified income is:
- Income received from companies in FEZs (other than income from excluded activities)
- income from qualified activities received from persons outside the FEZ
- any other income (within the minimum threshold)
- additional income in the FEZ or from qualified activities.
Qualified activities include: logistics, trade in goods or resale in FEZs, aircraft leasing, ship operation, reinsurance services, fund management, capital management, financial services, securities holding, commodity production and headquarters services.
Importantly, for a FEZ company that qualifies for tax exemption, only up to 5% of non-qualified income of the company's total income or AED 5,000,000 per year, whichever is the lower amount, is allowed. If this indicator is exceeded, a company from the free zone loses all benefits and is taxed according to the general system.
If any of the above conditions is not met, the person ceases to be qualified in the free zone during the relevant tax period and the subsequent four tax periods.
Also exempt from taxation are state-owned companies and organizations, extractive businesses, public organizations, investment funds, pension and social insurance funds, etc.
Corporate tax does not apply to income such as:
Value added tax (VAT) has been introduced in the Emirates:
- the standard tax rate of 5% is levied on the import and export of goods/services when they are sold on the territory of the UAE to residents of the UAE;
- 0% rate is applied when importing and exporting goods/services on the territory of the UAE FEZ, outside the member countries of the Cooperation Council for the Arab States of the Gulf (Bahrain, Qatar, Oman, UAE, Saudi Arabia, Kuwait), for international transportation and other services, prescribed in the Law;
- tax exemption is provided for certain financial services, life insurance, non-income-generating residential real estate, local passenger transport, etc.
Mandatory registration as a VAT payer is required for:
- UAE onshore companies (local and registered in the FEZ) that supply goods or provide services to individuals and legal entities in the Emirates, as well as member countries of the Cooperation Council for the Arab States of the Gulf, or that export and import goods/services to/from the UAE;
- if the annual turnover of the onshore company exceeds 375,000 AED (100,000 USD).
You can also register as a VAT payer on a voluntary basis if the company's annual turnover exceeds 187,500 AED (50,000 USD).
Not required to register as VAT payers:
- non-resident enterprises registered in other jurisdictions and having a tax number there;
- offshore companies in the UAE, since they are prohibited from supplying goods and providing services to residents of the Emirates;
- companies in the UAE FEZ that do not export or import goods/services to/from the UAE. Such firms must documently confirmed that the goods are purchased and sold in other countries.
Firms registered as VAT payers are required to maintain accounting and tax records, submit tax returns. The reporting (tax) period is established by the tax department for each company separately (quarterly or monthly). The deadline for filing declarations and paying VAT is the 28th day of the month following the reporting period.
The UAE has signed agreements on the avoidance of double taxation with many countries (over 90 countries), including Ukraine.
If you want to buy a company in the UAE (offshore or onshore) or open an offshore company in the Emirates, particularly in Dubai, please contact our lawyers for advice:
+38 (098) 737-88-88
We will help you register a company in the Emirates or any other jurisdiction of your choice. The cost of registering a company in the UAE is formed individually for each client and depends on many factors such as location, company form, necessary licenses, office rent, so get the final price in our commercial offer prepared specifically for your goals after consulting with a lawyer.