Dubai’s Business-Friendly Policies and Regulations
The United Arab Emirates (UAE) has become an increasingly vital hub for businesses locally and globally. Recent legislative changes such as relaxed foreign ownership laws, economic substance regulations, and the newly implemented corporate tax demonstrate the UAE’s efforts to align itself with international best practices. Following updates to the UAE Commercial Companies Law in 2022, free trade zones in the UAE have also modernized their laws to stay competitive. When starting or growing a business in the UAE, companies must consider these new laws alongside other key factors like employment visas, accounting standards, and taxes. With its strategic location and pro-business policies, the UAE remains an appealing destination for organizations worldwide.
Offshore companies in the UAE, like those in Jebel Ali Free Zone and Ras Al Khaimah International Corporate Centre, offer distinct advantages for holding structures. They allow for no foreign ownership restrictions or residency requirements for shareholders/directors. However, offshore entities cannot conduct business onshore or in free zones, limiting their ability to open local bank accounts or trade within the country. Despite these constraints, they serve specific holding company roles and provide opportunities for asset holding and property ownership under certain free zone offshore regulations.
Local entity
When looking to establish a presence in the UAE, foreign investors generally have two main options: registering on the mainland or in one of the country’s free zones. The optimal choice between the mainland and the free zone depends on the locations of target customers and the planned business activities. Offshore company registration is also available but does not permit commercial operations within the UAE itself.
Overall, foreign companies need to evaluate whether the flexibility of establishing onshore or the expedited process of free zones better aligns with their objectives in the Emirati market. However, the key determination falls to where a business intends to operate and what type of entity best suits those aims. By weighing all factors, foreign investors can determine the ideal local entity structure and registration path when entering the UAE.
Overview of Corporate Governance
Various regulations in the UAE establish corporate governance requirements. The Commercial Companies Law (CCL) and free zone regulations focus on essentials like board size, conflicts of interest, and board meeting frequency. The Emirates Securities & Commodities Authority (SCA) Chairman’s Resolution No. 7 R.M of 2016 (CG Rules) offers a comprehensive overview, with amendments made in subsequent decisions. While the CG Rules primarily target public joint stock companies listed on local exchanges, they serve as best practices for other entities. Additionally, companies in the DIFC and ADGM, subject to NASDAQ and financial services regulations, adhere to specific rulebooks outlining governance norms.
Business risks
The section of the Resolution on the “Use and confidentiality of the CbCR information” states that the Competent Authority in the UAE can utilize the CbCR data for these aims:
- Evaluating transfer pricing risks for “high-risk” transactions;
- Evaluating other dangers linked to base erosion profit shifting; and
- Evaluating the risks of non-compliance by the MNE’s affiliates with the relevant transfer pricing rules.
Furthermore, the Resolution clarifies that the Competent Authority cannot use the CbCR information to make transfer pricing adjustments.
United Arab Emirates Company Law
- The UAE Commercial Companies Law governs most economic activities taking place on the mainland. Foreign companies looking to operate onshore typically register as a limited liability company or a branch/representative office, though joint stock companies and sole establishments are also permitted.
- Various regulations in the UAE, including the Commercial Companies Law (CCL) and free zone regulations, establish corporate governance requirements such as board size and meeting frequency. The Emirates Securities & Commodities Authority (SCA) Chairman’s Resolution No. 7 R.M of 2016 (CG Rules) provides comprehensive guidelines, with subsequent amendments. While primarily targeting public joint stock companies listed on local exchanges, these rules serve as best practices for all entities. Companies in the DIFC and ADGM adhere to specific rulebooks, aligning with NASDAQ and financial services regulations.
Offshore companies in the UAE, such as those in Jebel Ali Free Zone and Ras Al Khaimah International Corporate Centre, offer unique advantages for holding structures. While they allow for no foreign ownership restrictions and no residency requirements for shareholders/directors, they cannot conduct business onshore or in free zones. Offshore entities serve specific holding company roles, lacking the ability to open local bank accounts or trade within the country. Despite limitations, they provide opportunities for holding assets and property ownership under certain free zone offshore regulations.
Business environment
The United Arab Emirates (UAE) has a business-friendly climate with top-notch infrastructure, skilled professionals, and customized services that give it an advantage over other nations. In 2020, the UAE ranked 16th worldwide on the World Bank’s Ease of Doing Business list. It is the 25th most competitive economy globally per the 2019 Global Competitiveness Report. The UAE’s robust economy is defined by its strategic site, ample financial reserves, sizable sovereign wealth funds, strong global ties, steady state spending on infrastructure, digital change, and innovation. The nation has a forward-thinking policy of economic diversity and growing foreign direct investments (FDIs).
United Arab Emirates PWC
PwC Middle East is part of PricewaterhouseCoopers (PwC), a global professional services network. PwC Middle East provides a broad range of services including audit, assurance, business advisory, tax, and legal services. They have had a presence in the United Arab Emirates (UAE) for over 25 years with offices in Abu Dhabi, Dubai, and Sharjah. PwC Middle East is dedicated to building trust in society and addressing significant problems. They offer perspectives on topics such as sustainable finance, core banking transformation, and AI’s impact on the future of work. If you want to join PwC Middle East, they have career opportunities for both graduates and seasoned professionals.
United Arab Emirates Deloitte
With its strategic location connecting Asia, Europe, and Africa, the United Arab Emirates (UAE) is the top destination for foreign direct investment in the Middle East and Africa. For new readers of Deloitte Middle East’s Doing Business guides, this document serves as a helpful companion and supportive guide throughout your journey into the UAE’s business landscape.
For those who have followed our reports previously, you will appreciate the updates highlighting the most important changes, presented in a familiar format.
This Taxation and Investment guide is a first stop for investors looking to gain a working perspective on the operating environment and investment climate. The areas covered in this guide include:
Overview of the United Arab Emirates
LEGAL AND REGULATORY FRAMEWORK
– Market entry options
– Mainland and Free Zone establishments
– High-level comparison of entity setup in mainland vs. Free Zones
– Offshore establishments and formation procedures and registration
TAXATION IN THE UNITED ARAB EMIRATES
– Introduction of Corporate Income Tax
– Taxation of oil, gas, and foreign bank branches
– Withholding taxes
– Capital gains and incentives
– Transfer pricing and country-by-country reporting
– Stamp duty, real estate fees, and municipal charges
– Economic substance rules
– Value Added Tax and Excise Tax
– Customs duty
– Personal taxation
IMMIGRATION AND LABOR LANDSCAPE
– Work authorizations and exit requirements
– Work permit processing challenges
– Inter-emirate assignments and employer compliance
– Emiratization
– Business visitors
– Virtual work program and labor laws
We are happy to talk with you more about your particular requirements and offer clarification on the topics covered here. Feel free to reach out to us at info@setupbussinessone.com if you have any additional questions.
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