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Business Operation Structures and Legal Forms in the UAE

Table of Contents
Introduction

Expanding into the United Arab Emirates market is a common strategy for companies seeking to grow their operations or attract foreign investments. Whether it’s for business expansion or relocation purposes, it’s crucial to understand the organizational and legal structures governing business operations in the UAE. Furthermore, adherence to the registration process is essential to ensure compliance with the state’s legal requirements.

How to choose the best Free Economic Zone?

Selecting the appropriate Free Economic Zone (FEZ) in the UAE is contingent upon various factors, including the nature of the business activity and the entrepreneur’s expansion plans within the United Arab Emirates. At the outset, entrepreneurs must consider geographical factors when choosing between registering an offshore company, establishing an entity in a free economic zone, or operating on the mainland. The decision also hinges on the organizational structure of the enterprise, with mainland registration potentially requiring local shareholders who hold a majority stake (51%) and local employees, allowing for nationwide operations.

 

Opting to register a business in a free economic zone is particularly advantageous for foreign nationals due to the simplified entry conditions. Presently, the UAE boasts approximately 50 FEZs, categorized by industry specificity such as logistics, technical, and innovation hubs. While the procedure for establishing an entity in a free zone is standardized, entrepreneurs must adhere to local regulations concerning licensing, banking, and leasing arrangements. Free economic zones cater to both novice entrepreneurs and seasoned businessmen, offering a range of benefits:

 

Advantages for Foreign Owners: Foreign investors enjoy full ownership of their businesses within the zone, along with tax incentives such as exemptions from VAT and corporate taxes, streamlined customs procedures, and logistical support.

Government Support: The UAE government actively encourages foreign investment through industry exhibitions, coworking spaces, and venture capital funds, fostering an environment conducive to startups.

Technological and Scientific Infrastructure: With a robust economy and a plethora of educational institutions, the UAE facilitates collaboration with global industry experts and provides access to cutting-edge innovations.

Registering a business in a free economic zone is streamlined, with online registration available, flexi-desks provided within the zone, and the option to lease physical office space. However, applicants must undergo a medical examination and biometrics process to obtain an Emirate ID, requiring a visit to the UAE.

Establishment within the Free Zone

This entails conducting actual business operations within the confines of the selected free zone. Upon submission of the company registration application, obtaining a license for the relevant type of activity becomes imperative. Careful consideration must be given to selecting the type of activity, as engaging in activities not specified in the license is prohibited. Although licensing requirements may vary depending on the specific characteristics of the free zone, the standard validity period for the license is one year. Foreign ownership of businesses in the UAE does not impose restrictions on employment of staff, with visa validity typically extending to two years.

Given that conducting business in a free zone facilitates not only interaction with UAE nationals but also fosters international collaboration, selecting a zone based on the unique attributes of the enterprise is paramount. For instance, when establishing a logistics company, emphasis should be placed on the transport accessibility of the free economic trade zone and its internal infrastructure. As an illustration, Dubai’s free zone hosts a government initiative aimed at optimizing the emirate’s logistics – the Dubai Logistics City, which serves as a centralized hub simplifying the organization of international freight transportation via all modes of transport. Conversely, for the establishment of an industrial or technical company, reliance on support for research initiatives and the availability of platforms for attracting foreign investments becomes essential.

Resident Tax Visas in the UAE

Depending on the scope of operations and the duration of a company’s presence in the United Arab Emirates, both the company’s founder and its employees are required to obtain visas. The founder typically obtains an investor visa, while in cases of multiple founders, they are granted partner visas. As for employees, they are issued work visas. Following the submission of the company registration application and the acquisition of a license, foreign founders are obligated to open a corresponding bank account in a UAE-based bank. Essential documentation for this process includes the Emirates ID. Securing a resident visa for a legal entity mandates confirmation of sustained business activities, asset allocation, and the founder’s continuous residency in the UAE over the preceding 12 months. Regulatory authorities may also request operational data spanning six months, along with an audit report. Resident visas are available in two variants and are valid for a duration of two years.

Foreign Company with an Account in a Similar Jurisdiction
When establishing a business in the UAE, opening a bank account is a compulsory step for investors. The country boasts a diverse array of both national and private banks, offering a wide range of financial services. Upon opening a resident account, investors gain access to a plethora of banking services, including online banking facilities, credit and debit card issuance, checkbook provision, and the ability to conduct financial transactions both domestically within the UAE and internationally.
 
Despite the comprehensive list of documents required for opening a bank account in a UAE bank, business founders are typically required to furnish evidence of their solvency, as well as provide visa and company registration documents. In certain instances, bank officials may also request additional documentation such as a curriculum vitae, a detailed business plan, articles of incorporation, information regarding the organizational structure and operational activities of the business, and details pertaining to the founder’s financial status in another jurisdiction. For instance, this may include a bank statement from an account held in a foreign bank covering the previous six months.
Benefits of UAE Banks

Establishing an account with banks in the United Arab Emirates guarantees confidentiality for foreign owners in their financial transactions, irrespective of where the transactions occur geographically. Both national and commercial banks in the UAE are renowned for their stability and commitment to safeguarding investments. Typically, these financial institutions offer fixed tariffs for account maintenance, with fees based on a standard rate rather than tied to transaction volume. Many UAE banks also maintain branches in other countries, facilitating seamless collaboration with international partners for global market expansion. Additionally, round-the-clock online customer service is available, providing entrepreneurs with continuous support.

The burgeoning economy of the United Arab Emirates attracts entrepreneurs seeking to develop both the local market within the Persian Gulf region and venture into global markets. However, when registering a business in the UAE, it’s crucial to consider not only the present circumstances but also long-term scaling plans for the company. This entails selecting the appropriate zone for company registration and determining its organizational and legal structure. Furthermore, commencing operations in the UAE necessitates obtaining the requisite license and opening a business account with a local bank. GenZone offers assistance in selecting not only the optimal organizational and legal structure for registration but also the most suitable zone for launching a business in the UAE.

Conclusion

Eentrepreneurs looking to expand their business operations. From the stability and confidentiality provided by UAE banks to the strategic opportunities for global market expansion, the country’s dynamic economy presents an attractive environment for business growth. However, success in the UAE market requires careful consideration of long-term goals, selection of the appropriate zone for registration, and adherence to licensing and banking requirements. With the right guidance and support, entrepreneurs can navigate the complexities of setting up and scaling their businesses in the UAE, unlocking the full potential of this thriving business landscape.

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