Important Facts about Setting-up a Business in the UAE

Published on June 12, 2021

 
 

Important Facts about Setting-up a Business in the UAE

The United Arab Emirates (UAE) is a federation of the 7 emirates of Dubai, Abu Dhabi, Sharjah, Ras al-Khaimah, Ajman, Fujairah, and Umm al-Quwain. In the Gulf Cooperation Council (GCC), the economy of the UAE is the most diversified.

UAE is one of the biggest business hubs in the world, with its most populous city Dubai acting as a premier global city and a preferred destination for entrepreneurs, investors and tourists alike.  All this has been possible as a result of the market-friendly economic policies of the UAE government over the last 3 decades, fostering foreign investment, sustainable development, innovation, and research.

Why Set-up your Business in UAE

UAE is a developed economy that offers a favorable business environment, world-class infrastructure, nifty amenities, flexible government norms and efficient quality services to all incoming businesses, irrespective of their country of origin.  Business setup in UAE is a futuristic and insightful business decision for the following reasons:

  • The UAE is a growing and diversified market with high global demand for imports and exports, and vast opportunities for suppliers.
  • The country bears a strategic geographic location in a resource-rich region.
  • The UAE has easy access and global connectivity with over 90 airlines and 170 shipping lines.
  • Above all, the commerce in the UAE is based on free trade barriers (no quotas or exchange controls).
  • The country levies no tax on personal, capital or corporate income, and allows 100% repatriation of capital and profits.
  • The real estate and freight charges are competitive.
  • There are no currency restrictions on the exchange of money.
  • The energy supply is abundant and low-priced.
  • The populace in the country is educated and skilled, so the place is favorable from the standpoint of hiring workforce – not that there are any restrictions on hiring foreign nationals.
  • The transportation system throughout the UAE is well developed.
  • There is top-notch accommodation for residential and office purposes, with cutting-edge venues for exhibitions and conferences.
  • The financial and services sector in the UAE is remarkably developed, especially suited to complement the business milieu in the region.
  • The nation has a cosmopolitan lifestyle with first-rate educational institutions, medical facilities, hotels, and shopping complexes.

Advantages of Setting up a Free zone Company in the UAE

  • 100% exemption from all taxes.
  • High degree of privacy of corporate information and business operations.
  • No public access to the Companies Registry.
  • Can be 100% foreign owned. Stable currency pegged to the USD (3,67 AED for 1 USD).
  • Non-residents of the UAE may act as directors and shareholders (corporate or natural persons).
  • Minimum 1 shareholder and Minimum 1 director, can be act both as one person.
  • Can have bank accounts in the UAE and abroad.
  • If bank account in the UAE, one personal visit by the signatory is required.
  • Investors can apply for residence visas.
  • Can own investments, assets and real estate inside and outside the UAE.
  • Quick set up, inexpensive, no need for a physical visit during incorporation.
  • No requirement of financial reporting and annual audit for some free zones.

VAT Obligations of a UAE Company

  • VAT was introduced across the UAE on 1 January 2018 at a standard rate of 5%. VAT will provide our country with a new source of income which will contribute to the continued provision of high-quality public services into the future. Every taxable person resident of a member state whose value of annual supplies in the member state (GCC country) exceeds or is expected to exceed the mandatory registration threshold.
  • Mandatory registration threshold: AED 375000
  • Voluntary registration threshold: At least AED 187500
  • The VAT return submission is on quarterly basis.
  • Therefore, a business must register for VAT if their taxable supplies and imports in the UAE and GCC countries exceed the mandatory registration threshold of AED 375,000.
  •  A business may choose to register for VAT voluntarily if their supplies and imports are below the mandatory registration threshold but exceed the voluntary registration threshold of AED 187,500.
  • Similarly, a business may register voluntarily if their expenses exceed the voluntary registration threshold.
 

CRS Reporting for UAE Companies

For any entity incorporated in the UAE has CRS reporting but not automatic or at the end of financial year. Therefore, bank only do CRS reports when it receives court order from the government official or financial institution from the client’s home country though bank holds all the rights for CRS reporting.

Economic Substance Regulation (ESR) Obligation 

  • VAT was introduced across the UAE on 1 January 2018 at a standard rate of 5%. VAT will provide our country with a new source of income which will contribute to the continued provision of high-quality public services into the future. Every taxable person resident of a member state whose value of annual supplies in the member state (GCC country) exceeds or is expected to exceed the mandatory registration threshold.
  • Mandatory registration threshold: AED 375000
  • Voluntary registration threshold: At least AED 187500
  • The VAT return submission is on quarterly basis.
  • Therefore, a business must register for VAT if their taxable supplies and imports in the UAE and GCC countries exceed the mandatory registration threshold of AED 375,000.
  •  A business may choose to register for VAT voluntarily if their supplies and imports are below the mandatory registration threshold but exceed the voluntary registration threshold of AED 187,500.
  • Similarly, a business may register voluntarily if their expenses exceed the voluntary registration threshold.

Relevant Activities:
Banking Business
Insurance Business
Investment Fund management Business
Lease – Finance Business
Headquarters Business​​
Shipping Business
Holding Company Business
Intellectual property Business (“IP”)
Distribution and Service Centre Business​

For more information please visit the link below:
https://www.mof.gov.ae/en/strategicpartnerships/pages/esr.aspx 

 

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