Find out about the changes in business ownership laws
The UAE has introduced several new legislations to attract foreign investment and fuel entrepreneurship and the most notable is 100 per cent ownership by foreign nationals of companies licensed and registered in the UAE. The government has created a “Positive List” of business activities where foreign investors can own up to 100 per cent of the shares in an onshore company. The “Positive List” focuses on three key areas — manufacturing, services and agriculture — where the government wants to see more businesses committing investments.
100 per cent ownership is subject to additional conditions. These include minimum capital, implementation of latest technology and contribution to research and development, as well as satisfying the requirement of the licencing authority at the emirate level.
“100 per cent ownership is subject to additional conditions,” says Syam Panayickal Prabhu, Founder and Managing Director, Aurion. “These include minimum capital, implementation of latest technology and contribution to research and development, as well as satisfying the requirement of the licencing authority at the emirate level.”
Decide on the jurisdictions
In the UAE, an investor can set up a company in mainland, free zones or offshore jurisdictions. “For a company planning to do business exclusively in the UAE or GCC with an office or a factory facility, it is always advisable to set up in mainland. If the company is intending to do import, re-export and B2B with mainland companies, it’s a good idea to get a free zone licence, where 100 per cent expatriate shareholding is possible for all activities,” explains Prabhu.
“If the intention is to set up a company for international business, offshore International Business Company (IBC) is the best option. Offshore IBCs are considered to be a resident outside of the UAE and they can neither have offices in the UAE nor conduct business within the country.”
Applicability of VAT
“It’s critical to know about the Value Added Tax (VAT) law that stipulates all products and services are subject to 5 per cent VAT if the annual turnover of a company exceeds Dh375,000 and the company’s modus operandi comes under the purview of VAT law, unless it is under the exempted category or the zero-rated category,” says Prabhu.
Understand the laws and regulations of company formation
Prabhu from Aurion lists a number of laws and regulations that an entrepreneur needs to be aware of before setting up a company in the UAE.
Federal law No. 2 of 2015 on commercial companies and the amended law No. 26 of 2020 apply to any entity involved in commercial, financial, industrial, agricultural, real estate or other kinds of economic activities in the mainland.
Find out about the UAE labour law which explains the rights, duties, contracts and remedies of employees and employers.
Learn about the common customs law of GCC as well as custom policies of the emirate in which the company is established.
You also need to find out about free zone regulations – each free zone has its own rules and regulations developed within the general framework of business and commercial laws of land.
Economic Substance Regulations (ESR) require the companies in the UAE carrying out “relevant activities” listed in regulation to maintain adequate “economic substance” in the UAE.
Law of bankruptcy provides a legal framework to address distressed companies in the UAE, while helping them avoid bankruptcy and liquidation through various mechanisms like financial restructuring.
Why you need to hire a business set-up consultant
Entrepreneurship presents many challenges but, with the right support, it is easier and faster to start a business than handling the entire process on your own.
Business set-up consultants will first help you filter all the options available and select the most viable one based on your specific requirements.
A business set-up consultant will help you in various aspects of establishing a company in the UAE. “They will first help you filter all the options available and select the most viable one based on your specific requirements,” says Oliver Brinsley, Senior Business Setup Consultant & Sales Manager, Trade License Zone. “They also take care of the processing on your behalf. Business set-up is a process that requires accuracy as errors may cause lengthy delays and can be costly to rectify.”
A business set-up consultant should be able to fully understand your operations and vision so that you are better equipped not just with the correct licence to start your business but also to plan the scalability of your growth.
How to select a business set-up consultant
There is a myriad of business set-up consultants in the market offering the same services and products. “The key differences will be on the level of service, market knowledge, and industry experience,” says Levi Joshua, Business Set Up Manager, Ezone. “They should be able to fully understand your operations and vision so that you are better equipped not just with the correct licence to start your business but also to plan the scalability of your growth.”