The UAE is one of the most advantageous places to establish a company. In addition, the nation continues attempting to simplify the Business Setup in Dubai for foreign investors. Before launching a company in Dubai, you need to gather reliable information. Here are 7 questions that most investors ask before a company formation in Dubai.
In the UAE, what distinguishes a company based on the mainland from one in a free zone?
Yes, both the jurisdictions have some advantages and disadvantages for Business Setup in Dubai:
Mainland Company:
The onshore company gets authorization from the Department of Economic Development (DED) of the relevant emirate. The mainland company can conduct business in the local market and outside UAE with 100% ownership. Hence, it is entirely acceptable for an onshore firm to engage in a commercial activity. This holds not only in the UAE’s domestic market but also in markets outside the country. Get in touch with Business Setup Consultants in Dubai for more information regarding the same.
Free Zone Company:
A Free Zone company cannot operate lawfully in jurisdictions not explicitly recognized by the Free Zone company. Thus, a firm can use inside a Free Zone if it is within the defined territory of an emirate. Free zone owners can do business either within the same Free Zone or outside of the UAE.
A Free Zone corporation is not permitted to conduct local mainland UAE business directly to obtain commercial trade licenses. To trade with the mainland of the UAE, Freezone enterprises need to do so via a mainland distributor or agent. Also, they must pay an import tax of 5% on their local bills.
Is it possible for a non-citizen to own the whole of a business in the UAE?
Yes. As per provisions of Federal Decree-Law No. 26 of 2020, it is legal to have 100% ownership. Hence, all mainland and free zone businesses can have 100% ownership. For Free zone company formation in Dubai, there are limitations on the parties to enter into contractual relationships.
You can achieve it as an individual through a 100% owned establishment. Also, it can be accomplished as a company by way of a 100% owned Foreign Branch. The ability to wholly own businesses is available across the mainland of the UAE. Hence, foreign nationals, as well as companies, can do so. It is against the law to use a corporation wholly owned by a foreign entity to do business inside the UAE mainland.
How much does it cost to establish a corporation on the mainland in the UAE?
The expenses will change based on the location you choose to establish your license. Establishing your company in a Free Zone comes with several significant benefits. It includes complete repatriation of profits, freedom from personal and corporate taxation, and import duties. Protection of confidential information and control over your assets, amongst other benefits.
Businesses on the mainland must have a local sponsor who will hold 51% of the company’s shares. The international partner will own the remaining 49% of the claims. A Limited Liability Company (LLC) needs a minimum of 2 shareholders. The liability is limited to the share capital of the company shares, which is the most prevalent form of a mainland business.
The liability of the shareholders is limited to the company’s share capital. As with Free Zone enterprises, the cost of establishing a company on the mainland is contingent upon various criteria. This includes the nature of the business, the number of workers, and the amount of commercial space required.
How do I obtain a CICPA Pass for Vehicles?
If your job in a CICPA zone needs vehicles for transit or work, you need to get a CICPA permit for such vehicles.
You can acquire a CICPA pass for a vehicle in the same manner as a CICPA pass for a human. Here are the following fundamental steps:
- A Letter of Authorization (LOA) from ADNOC
- This LOA must specify what kinds of vehicles, how many, and for how long it will work in the CICPA region.
- Once the LOA is given, the number of personnel and vehicles that can apply for CICPA permits will be given.
- To receive a CICPA permit for a vehicle, the vehicle must be owned by the LOA holder.
- If the firm having the LOA lends its cars to a third party, then this third party must apply for an LOA for CICPA permits for the leased vehicles.
- To receive CICPA certification, a firm must be in Abu Dhabi and have permission for SPC (Supreme Petroleum Council).
- Once the third party has secured a Letter of Authorization for their cars, they may apply for CICPA permits to access CICPA zones with the first firm.
- PRO Partner Group may help with vehicle registration and acquiring CICPA permits for persons and equipment
What is the difference between a Branch office and a Rep office in UAE?
A Representative office is a branch formed by the parent firm. The rep office promotes a foreign company and introduces its goods to UAE-based businesses. In the UAE, a Representative Office cannot export, import, or sell. A Representative Office may only conduct promotional business for the parent company’s goods and services. However, a Branch office may do business in the UAE for reasons other than promotion.
The branch office is one of the most critical business structures a foreign company can establish in Dubai to invest in specific industries. A branch office is where business is conducted apart from the main office. Most branch offices are comprised of the company’s smaller divisions. It includes human resources, marketing, and accounting. Branch legal structures are available in both cases, mainland and free zone.
Operations –
A representative office does not participate in sales, services, or commercial activity. Instead, it promotes/markets the activities of its parent firm by collecting information and requesting orders and projects. Also, a Branch office may participate in commercial operations.
Sponsor/National Service Agent
Comparable to a Branch, each Representative office must have a local sponsor or National Service Agent (NSA). The NSA has no ownership stake in or obligation towards the enterprise.
Bank Guarantee
Comparable to a Branch, a Representative Office will need a refundable deposit bank guarantee of AED50,000 for the life of your license. Also, you cannot withdraw this fund as operating capital.
Is the general manager liable for the activities of a company in the UAE?
All firms in the UAE must designate a general manager solely responsible for the entity’s management and operations. This holds for onshore as well as a free zone. In the UAE, the general manager has significant rights and authority. The UAE Commercial Companies Law No. 2 of 2015 stipulates that:
A general manager is liable to the company, its shareholders, and third parties for all acts of fraud, abuse of power, and violations of the provisions of the Commercial Companies Law or the articles of association of the company, as well as for management mistakes.
The law of the UAE puts the civil and criminal obligation on the general manager regarding the entity’s activity. It is even for issues outside the general manager’s control. For instance, a general manager may be personally liable for a bounced check by the entity that the general manager signs. In the event of liquidation, the company’s management will go through the examination. Also, the general manager will be responsible for potential personal liability for the company’s debts and criminal proceedings.
General managers need to take the following measures to limit their possible liability risk and offer a defense against liability claims:
- Ensure they operate within the limits of the powers and authorities specified in the articles of incorporation or administration of attorney
- Ensure adequate money is in the entity’s bank account before signing checks
- Consider purchasing the director’s liability insurance or requesting indemnity from the company for acts made during routine business operations.
- Ensure that the organization is running with care and diligence and appropriate corporate governance documents reflect this
Where should I go for a consultation if I want to establish a company in the UAE?
We strongly suggest that you draft a business plan to gain a better understanding of the requirements that your company has. Also, you will have to provide answers to critical questions that will direct you toward the ideal location for the business. For example, whether it should be in a free zone or on the mainland in Dubai. Hence, Hire Business Setup Consultants in Dubai to know the most appropriate for your company.
Key questions include:
- I was wondering whether or not your organization would be trading, selling, or offering services.
- Is a governmental agency responsible for regulating the activity or commodity you offer?
- Who makes up your ideal customer profile, and where do most customers come from?
- Where can we expect to find you most of the time?
- Do you want to work with government organizations or semi-government organizations?
- How many members of staff do you anticipate needing?
- When do you anticipate finishing?
The answers to all of these questions are necessary for figuring out how to assist you. Your next step will be to hire Business Setup Consultants in Dubai to get complete guidance. These professionals suggest the right way for company formation in Dubai.
