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Damalion United Arab Emirates (UAE) desk

Doing business in United Arab Emirates (UAE)

Located in the Arabian Peninsula in the Middle East, the United Arab Emirates (UAE) is a highly developed country with a diversified economy, known for its stable political and economic environment. 

The UAE has a highly favorable business environment that is supported by the government’s pro-business policies, with a transparent and efficient legal system. 

The country’s economy is largely driven by the oil and gas industry, but there has been a significant shift toward diversification in recent years. 

The country’s regulatory framework is also conducive to business, and the UAE is ranked highly in the World Bank’s Ease of Doing Business index. 

Overall, the UAE is a highly attractive destination for investors and businesses. With its favorable business environment, tax incentives, and diverse economy, the UAE offers businesses numerous opportunities for growth and expansion. 

The main Advantages of Doing Business in the UAE 

  • The UAE is politically stable and has a strong legal system that provides a secure environment for businesses to operate in. 
  • The UAE has a business-friendly environment with low tax rates, streamlined business registration procedures, and minimal bureaucratic red tape. 
  • The UAE has a highly skilled and educated workforce, with a mix of local and international talent. 
  • The UAE has several free zones that offer a range of benefits to businesses, including 100% foreign ownership, tax exemptions, and streamlined business registration procedures. 
  • The UAE has no personal income tax, corporate tax, or value-added tax (VAT), making it an attractive destination for investors looking to reduce their tax burden. 
  • The UAE has world-class infrastructure, including modern airports, seaports, and transportation networks, making it easy to do business and access markets in the region. 
  • The UAE government offers a range of investment incentives, including tax exemptions, subsidies, and other financial incentives to attract foreign investment. 
  • The UAE has also actively pursued Public-Private Partnerships (PPPs) to develop infrastructure projects in the country, such as airports, ports, and roads, providing opportunities for investors to participate in these projects. 
LEGAL SYSTEM

The UAE’s legal system is a mix of civil law and Sharia law. The UAE has a robust legal framework, and its legal system is considered to be one of the most stable in the region. The legal system is composed of several components, including Federal Courts, Shari’a Courts, and Dubai International Financial Centre (DIFC) Courts. 

The UAE has also established free zones, which are governed by its laws and regulations. These free zones offer tax incentives and allow 100% foreign ownership. 

Foreign Investment 

The UAE is welcoming of direct foreign investments and has taken several steps to attract and facilitate foreign investment in the country. The UAE government has implemented several measures to encourage foreign investment, including Favorable Business Environment, Investment Incentives, Free Zones, Public-Private Partnerships (PPPs), and FDI Law. 

A foreign entity can establish its presence in the UAE by establishing a branch or forming a corporation but certain industries, such as banking, insurance, and investment, are subject to regulation. 

Overall, the UAE has established itself as a leading destination for foreign investment, attracting investment from a wide range of sectors. 

Business Entities in UAE 

 

The United Arab Emirates (UAE) offers a variety of company structures that are designed to meet the needs of businesses of all sizes and types. Each company structure in the UAE has its unique features and benefits. 

The following are the most popular types of company forms available in the UAE: 

Sole Proprietorship 

A sole proprietorship is a company owned and operated by a single individual. 

Features 

  • It’s the Simplest form of company structure in the UAE 
  • It is owned and operated by a single individual 
  • It requires a local service agent 
  • The liability of the owner is unlimited 

Limited Liability Company (LLC) 

This is a popular form of company structure in the UAE in which the liability of shareholders is limited to the amount of capital they have invested in the company. 

Features 

  • It requires at least two shareholders 
  • It allows for 100% foreign ownership 
  • The liability of its shareholders is limited to the amount of capital they have invested 
  • It has a flexible management structure 
  • It can conduct business activities within the UAE 

Partnership 

This is a company structure in which two or more individuals share ownership and management responsibilities. 

Features 

  • There are two types of partnerships available in the UAE: general partnership and limited partnership. 
  • Two or more individuals share ownership and management responsibilities 
  • General partnership: all partners share equal liability 
  • Limited partnership: one or more partners have limited liability 
  • Requires a local service agent 

Public Joint Stock Company (PJSC) 

A PJSC is a company structure that is allowed to issue public shares. 

Features 

  • It requires a minimum of 10 founders 
  • It allows for public share offerings 
  • Board of directors manages the company 

Free Zone Company 

A free zone company is established in one of the many free zones in the UAE. 

Features 

  • These free zones offer 100% foreign ownership 
  • It offers tax exemptions and other incentives to encourage foreign investment 
  • No requirement for a local sponsor or service agent 
  • it has an easy registration process 
  • It can conduct business activities within the free zone and outside of the UAE 

Branch Office 

A branch office is an extension of a foreign company in the UAE. 

Features 

  • It’s an extension of a foreign company in the UAE 
  • It requires a local sponsor or service agent 
  • It is subject to the regulations of the UAE Ministry of Economy and Commerce. 
  • It allows for 100% foreign ownership 
  • It can conduct business activities within the UAE 

Representative Office 

A representative office is similar to a branch office, but it is not allowed to conduct commercial activities in the UAE. 

Features 

  • Its purpose is to provide support to the parent company. 
  • It requires a local sponsor or service agent 

When planning on establishing a company in the UAE, it is advisable to seek professional advice before choosing a company structure. Contact your Damalion expert now and let’s help.

BANKING

Banking in the UAE is an essential part of the economy, with a robust banking system that offers a wide range of services to individuals and corporations. 

UAE banks have high credit ratings, reflecting the strength and stability of the banking sector. The country’s sovereign credit rating is also high, implying a stable and strong economy. 

Some important aspects of banking in the UAE include: 

Central Bank 

The Central Bank of the United Arab Emirates (UAE) is the regulatory body that governs the banking industry in the country. It is responsible for setting monetary policy, ensuring financial stability, and regulating banks and other financial institutions. 

Banking Services 

There are several local and international banks operating in the UAE, and these banks offer a wide range of banking services, including current and savings accounts, credit cards, loans, mortgages, and wealth management services. 

Islamic Banking 

Islamic banking is also a popular option in the UAE, with several banks offering Sharia-compliant financial products and services. Islamic banking follows the principles of Islamic law and prohibits interest-based transactions. 

Opening a Bank Account in UAE 

Depending on your requirements, you can open a personal or business bank account in UAE. 

To open a corporate bank account in Dubai, a business setup will be required. And personal account can be opened under a personal name of an individual. 

To open a personal account, a residency visa and Emirates ID card is essential documents you need to begin this process. 

For a UAE business account, the necessary documents comprise, among others, a valid trade license, share certificates, company memorandum, certificate of incorporation, articles of association, and shareholders’ signatures. 

Extra documents may also be required depending on the bank. 

Non-residents can also open bank accounts, but the requirements may vary. 

Banking in the UAE is a secure and convenient option for individuals and businesses, with a wide range of services and options to choose from.

IMMIGRATION

Thanks to its tax-free status, high quality of life, excellent opportunities for business development, and economic and political stability. The United Arab Emirates is one of the most desirable countries in the world for residency. To get UAE residency, foreign nationals must apply for a resident Visa. 

UAE residence visa 

A UAE residence visa is a permit that enables a foreign national to live in the UAE for a long period. 

There are several types of residence Visas in the UAE, and these include: 

  • Employment Visa: one of the most common ways to obtain residency in the UAE is through employment. Individuals who are offered a job by a company in the UAE can apply for an employment visa, which will allow them to reside and work in the country. The employment visa is typically issued for a period of two or three years and can be renewed. 
  • Investor Visa: individuals who invest a significant amount of money in a UAE company or real estate can apply for an investor visa. The amount required for an investor visa varies depending on the emirate.
  • Property Visa: individuals who own property in the UAE can apply for a property visa, which will allow them to reside in the country. The property must be worth at least AED 1 million, and the visa is typically valid for three years. 
  • Family Visa: individuals who have a family member who is a UAE resident or citizen can apply for a family visa, which will allow them to reside in the country. The family member who is a resident or citizen must act as a sponsor for the visa applicant. 
  • Retirement Visa: the UAE offers a retirement visa for individuals who are over the age of 55 and meet certain financial criteria. The visa requires applicants to have a monthly income of at least AED 20,000, or savings of at least AED 1 million. 

The process of obtaining residency in the UAE can be complex and time-consuming, so it’s recommended to seek the assistance of a professional to help navigate the process. Contact your Damalion expert now and let us help.

TAX REGIME

The UAE has a unique tax regime that differs from most other countries and is designed to be business-friendly and to attract foreign investment. 

There is no federal income tax or corporate tax in the UAE. But, some emirates may impose specific taxes on certain types of businesses, such as Dubai’s “Tourism Dirham Tax” on hotel stays. Additionally, some oil and gas companies and foreign banks operating in the UAE may be subject to corporate tax. 

The lack of income and corporate tax, combined with the introduction of VAT and excise tax, means that the government can generate revenue while still maintaining a competitive and attractive business environment. 

The main types of taxes in the UAE 

Value-Added Tax (VAT) 

This applies to most goods and services, including food and beverages, electronics, clothing, and entertainment. Some goods and services are exempt from VAT, such as healthcare, education, and residential properties. The current rate of VAT is 5%. 

Excise Tax 

This is a tax on certain goods that are deemed harmful to public health or the environment. The current rate of the excise tax is 50% on tobacco products and 100% on energy drinks and carbonated beverages. 

Customs Duties 

The UAE levies customs duties on goods imported into the country. The rates of customs duties vary depending on the type of goods and the country of origin. 

Tax treaties 

The UAE has signed several double taxation agreements with other countries, which are designed to prevent individuals and companies from being taxed twice on the same income. These agreements provide tax relief and help to promote investment and trade between the UAE and other countries. 

Some important aspects of UAE tax treaties include: 

  • Coverage: UAE tax treaties typically cover taxes on income, including corporate tax, individual income tax, and withholding tax on dividends, interest, and royalties. 
  • Tax Relief: UAE tax treaties provide tax relief in the form of reduced withholding tax rates or exemption from withholding tax on dividends, interest, and royalties paid to residents of the other treaty country. 
  • Mutual Agreement Procedure (MAP): UAE tax treaties include a mutual agreement procedure (MAP) to resolve disputes between the tax authorities of the contracting states. 
  • Tax Residency: UAE tax treaties typically include provisions for determining the tax residency of individuals and companies. 

The UAE has signed tax treaties with over 100 countries, including Albania, Armenia, Andorra, Austria, Azerbaijan, Belarus, Bangladesh, Benin, Belize, Bermuda, Bosnia and Herzegovina, Belgium, Mauritius, Bulgaria, China, Cyprus, Canada, the Czech Republic, Estonia, Egypt, Ethiopia, Finland, Fiji, New Guinea, Georgia, Gambia, Greece, Germany, Hong Kong, India, Indonesia, Ireland, Japan, Kyrgystan, Kazakhstan, Kenya, Lebanon, New Zealand, Luxembourg, Lithuania, Malaysia, Malta, Mongolia, Montenegro, Morocco, Mozambique, Mauritius, Mauritania, Mexico, the Netherlands, Nigeria, New Zealand, Pakistan, Philippines, Palestine, Poland, Portugal, Panama, Russia, Romania, Seychelles, Switzerland, Spain, Singapore, Senegal, Serbia, Sri Lanka, Slovenia, Slovakia, South Korea, Sudan, South Africa, Syria, Tajikistan, Thailand, Turkey, Turkmenistan, Tunisia, Uruguay, Ukraine, Uzbekistan, Uganda, Vietnam, and Yemen. 

These tax treaties provide an important framework for promoting cross-border investment and trade, and for avoiding double taxation of income. 

INTELLECTUAL PROPERTY

Intellectual property (IP) protection is a significant aspect of doing business in the UAE. In respect of this UAE has made significant progress in improving its legal framework for IP protection. And this has made the UAE an attractive destination for businesses seeking to protect their IP rights in the region. 

The UAE has a legal system that provides for the protection of various types of IP, including patents, trademarks, copyrights, and trade secrets. 

The UAE is also a signatory to various international treaties related to IP protection, including the Paris Convention for the Protection of Industrial Property, and the Berne Convention for the Protection of Literary and Artistic Works. 

There are several types of intellectual property (IP) protections available in the UAE. The main types of IP protections in the UAE are: 

Patents 

  • A patent is a legal protection for an invention that provides the inventor with exclusive rights to use, sell, and license the invention for an exclusive period. 
  • A patent can be granted to new inventions that are either formulated from a creative idea or creative enhancement, or form an inventive step. 
  • In the UAE, patents are granted by the UAE Patent Office, which governs the protection of patents and is regulated by the Ministry of Economy. 
  • A patent is valid for 20 years from the date of the filing application in the UAE. 

Trademarks 

  • A trademark is a symbol, word, or design that identifies and distinguishes a product or service from those of others. 
  • To be registrable, a trademark must be different and not yet registered by another person. 
  • In the UAE, trademarks are registered with the UAE Ministry of Economy. 
  • Trademark registration in the UAE is valid for ten years from the date of applying and can be renewed. 

Copyrights 

  • A copyright is a legal protection for original creative works, such as literary, artistic, and musical works. 
  • Copyright can subsist in a vast variety of media, including but not limited to, written media, verbal media, photographic media, and musical recordings. 
  • In the UAE, copyrights are protected by the UAE Copyright Law. 
  • Copyrights protection ensues automatically on the author’s creation of the work, so registration is not imposed. But, a copyright can be registered with the Ministry of Economy to establish priority. 
  • In UAE, copyright is protected for the duration of the author’s life plus 50 years. 

Industrial Designs 

  • An industrial design refers to the aesthetic features of a product, such as its shape, configuration, pattern, or ornamentation. 
  • In the UAE, industrial designs are protected by the UAE Patent Office and are administered by the Ministry of Economy. 
  • The unauthorised use of a registered industrial design is punishable under UAE law. 
  • The protection term for a registered design is 20 years in UAE. 

Trade Secrets 

  • A trade secret is any confidential information that gives a company a competitive advantage. 
  • In the UAE, trade secrets are protected under the UAE Commercial Law. 

Enforcement and Registration 

The UAE has strict laws in place to enforce IP rights and prevent infringement. If your IP rights are infringed upon, you can take legal action to protect your rights and seek compensation for damages. 

It is also important for individuals and companies to protect their IP in the UAE, as an infringement of IP rights can result in significant financial and reputational damage. To obtain legal protection for your IP in the UAE, you must register your rights with the relevant authorities. 

LABOR AND EMPLOYMENT

Labor and employment regulations in the UAE are governed by the UAE Labor Law, which outlines the rights and obligations of both employers and employees. 

This law is loosely established on the International Labour Organisation‘s criterion and applies in all of the Emirates. The law governs most aspects of employer and employee relations, including hours of work, facilities, leave, and termination rights. 

Employment Contracts in the UAE 

Employment contracts in the UAE must be in writing and include details such as job description, salary, and benefits. The contract must also state the duration of employment, which can be either a fixed term or indefinite. 

There are two main types of employment contracts in the UAE: 

  • Fixed-term contracts: a fixed-term contract is a contract with a specific end date. It is often used for short-term or project-based employment. These contracts are renewable upon mutual agreement between the employer and the employee. 
  • Unlimited contracts: this is a contract with no end date. These contracts are common for long-term employment and offer more job security for employees. Under an unlimited contract, either party can terminate the contract with notice, which varies depending on the length of service of the employee. 

Both types of contracts must be in writing and include details such as job description, salary, and benefits. 

Similarly, employees should carefully review their employment contracts and understand their rights and obligations under the contract and the law. 

Employment compensation, entitlements, and benefits in the UAE

Employment benefits in the UAE vary depending on the type of employment contract, industry, and employer. Here are some of the common employment benefits offered by employers in the UAE: 

  • Working Hours: the UAE Labor Law stipulates that the maximum working hours per week are 48 hours for adults and 30 hours for minors. During Ramadan, working hours are reduced to six hours per day. 
  • Annual Leave: employees in the UAE are entitled to a certain number of paid annual leave days, depending on their length of service. Typically, employees are entitled to 30 days of annual leave per year. 
  • Sick Leave: employees in the UAE are entitled to a certain number of paid sick leave days per year. The number of sick leave days depends on the length of service of the employee. 
  • Maternity Leave: female employees in the UAE are entitled to 45 days of paid maternity leave, which can be extended by an additional 10 days in certain circumstances. 
  • Gratuity: under the UAE Labor Law, employees are entitled to an end-of-service gratuity payment, which is calculated based on the length of service and the employee’s final salary. 
  • Health Insurance: many employers in the UAE offer health insurance benefits to their employees, which may cover medical expenses, hospitalization, and other health-related costs. 
  • Housing: some employers provide their employees with housing or housing allowances to help cover the cost of accommodation in the UAE. 

Termination of Employment 

In the UAE, an employer can terminate an employee’s contract for a valid reason, such as misconduct or poor performance. However, the employer must provide the employee with notice and compensation, which is determined by the length of service of the employee. 

In UAE, employers need to ensure that they provide fair and competitive employment benefits to attract and retain talented employees.

So, are you thinking of entering the UAE market?

Damalion assists foreign legal entities in setting up a business in the UAE. We have the expertise and experience that allows us to guide clients during the activity of establishing a company in the UAE. Our Damalion experts also provide various integral business solutions, including compliance, entity management, accounting, taxation, payroll support, and many more across the United Arab Emirates. 

Contact us now to register your company in the UAE.

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