18 11 2020

The most common business myths in the UAE. Part 1

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In this series of articles, we will explore the myths that are spreading around the business sector in the United Arab Emirates.

1st myth. Doing business in the UAE is very expensive.

Of course, it cannot be said that absolutely everyone can open a company in the United Arab Emirates. But we are seeing a very significant tightening of requirements in all the already familiar offshore zones. These include: the need to conduct real company activities, and not just the fact of registration; opening an account in a local bank. In the UAE, you can see similar requirements, but also, in contrast, there is a large margin of advantage. Choosing the United Arab Emirates, you do not have to invest huge amounts in public sector bonds or real estate. For moderate money in the UAE, you can open a company for which you will not have to pay taxes. It should be noted that such a company will be able to prove real activity. Also, you can use a combined workplace if there is a need to save money.

It will not be difficult for individuals to achieve the status of a tax resident in the Emirates, you will not have to pay taxes on income, dividends and royalties. First you need to obtain a UAE resident visa, for example, by registering a business. There are no conditions for permanent residence, you will need to fly to the UAE at least once every 6 months. As you can see, becoming a tax resident is much easier than it seems at first glance, and the costs of opening and running a business in the UAE are not huge.

2nd myth. The bulk of the population is Arabs who speak their own language.

In reality, the picture is completely opposite. A very small number of Arabs live in the United Arab Emirates. The population of the UAE in 2019 was 9.7 million people, of which only 1.1 million were Arabs. The remaining 8.6 million are expats. This means that there are only 11% of UAE citizens and 89% of expats.

Almost all expats communicate in English. As for the Arabs themselves, then you need to plunge a little into the history of the UAE. The Emirates were part of the British Empire for quite a long time, so most of the UAE citizens speak English. To effectively interact with people in the UAE, work and do business, you need to know not Arabic, but English.

3rd myth. A citizen of the United Arab Emirates who owns 51% of the shares of a local company can easily take over the entire company or block the account.

Today, if you open a local company, there is a requirement that 51% of the shares must be owned by a UAE citizen, and a foreign investor can own a maximum of 49% of the shares. There are exceptions for some areas of business.

Most often, a contractual agreement is concluded with a UAE citizen, which states that the local shareholder does not claim the company's profit and does not participate in management, but simply receives a fixed remuneration, the amount is negotiated individually. Therefore, the local partner simply does not have access to the bank accounts and levers of company management, and the foreign investor can operate completely independently.