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Saturday, September 1, 2012

Top tips on how to set up a company in the United Arab Emirates (UAE)

There are countless reasons why a person might consider setting up a company in the UAE. But Paul Hymers, the finance director at Atlas Corporate Services, says there are a number of elements that must be considered before you take the plunge.

Paul Hymers says there are different types of companies you can set up depending on your business. 

1 If your customers are based in the UAE
It's likely you need to incorporate a Limited Liability Company (LLC). An LLC is formed with a minimum of two shareholders, one of whom must be a UAE national - who holds at least 51 per cent of the share equity - and the other a foreign partner, who can hold a maximum of 49 per cent. The local partner, or sponsor, does not have to be involved in the day-to-day running of the business and profits can be distributed as agreed between the partners.
2 If your customers are based in the UAE and you have an existing overseas company
You can retain 100 per cent ownership by setting up a branch of a foreign entity. This parent company must have traded for at least two years and the branch company you incorporate must conduct the same business as its parent and have the same name. A local service agent must be appointed and is responsible for acquiring and renewing licences, visas and so on, but holds no financial interest or equity in the business.
3 If your business is that of a profession or service
An option available is a sole proprietorship, which is also known as a professional licence. With this licence, 100 per cent foreign ownership is permitted, but a local service agent has to be appointed.
4 If your customers are based only in free zones in the Emirates
It's possible to register a company in a free zone as one of the following: a Free Zone Establishment, which has one natural or corporate owner; a Free Zone Company, which has two or more owners; or a branch of a foreign company. In all three options, the company must lease premises or land within the free zone, which is usually the most expensive component of the registration process. All three options allow for 100 per cent foreign ownership and 100 per cent repatriation of profits and capital. However, to conduct business outside the free zone and within the UAE, the company must appoint a distribution agent, which can incur a significant additional cost.
5 If your customers are not based in the UAE
An offshore company might be the best option because it will allow 100 per cent foreign ownership and the ability to open bank accounts in the Emirates. These companies, which are not required to lease office space in the UAE, are similar to those established in traditional offshore jurisdictions such as the British Virgin Islands and Jersey. They offer a quick and cost-effective set up with no residency requirements (other than a local registered agent) and 100 per cent tax-free operations. Their disadvantages are that they do not qualify for residence visas and no business can be conducted within the UAE. Jurisdictions in the Emirates that offer offshore companies include Jebel Ali, the Ras Al Khaimah Investment Authority and the Ras Al Khaimah Free Trade Zone. In certain locations, property in the UAE can be owned by a Jebel Ali offshore company, which can have significant importance in tax planning and estate management.
6 Think about all applicable set-up fees in advance
Set-up costs will differ depending on the desired activity, some of which may attract higher fees such as real estate or a general trading licence. All companies must renew their registrations every year with the relevant ministries, government departments or municipalities. It can be a complicated and time-consuming business, so it is very important to have the correct structure from the outset.
7 Understand the local regulations and culture
Ramadan hours, visa issues, gratuities, local holidays and time differences are all things not to be neglected. Look to those with local knowledge to help and guide you.
8 Choose your relationships and business partners carefully
A good PRO (public relations officer) can be worth their weight in gold. They need to have an intimate knowledge of how to get things done and how to deal with the various government institutions. When choosing a sponsor, don't go with the cheapest option. You need someone who will make themselves available to you and ideally have connections in your chosen line of business that they are willing to share.
9 Make appropriate time provisions for completion
Company formation in the UAE can be a complicated and time-consuming business. While efforts are being made to cut the red tape, patience is a necessary virtue because things might not always happen in your timescale.

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