18 11 2020

The most common business myths in the UAE. Part 2


4th myth. Lack of confidence in the fact regarding full ownership of the company for a foreign businessman in the UAE.

Today you can open a company in the UAE of three types:

- a company in one of 50  free zones (Free Zone Company);

- a local (mainland) company, outside the FEZ;

- Offshore company.

About companies in the UAE:

1 - A company called “local”.

Such companies are registered outside the FEZ and have the right to conduct business:

- throughout the Arab Emirates;

- outside the UAE.

The main distinguishing feature of such companies is the rule on the maximum shareholding of a foreign investor, which is 49%. The remaining 51% must be owned by a citizen of the United Arab Emirates or a legal entity that is 100% owned by UAE citizens. But more recently, a new law was issued, now foreign businessmen will be able to own a local-type company 100% while conducting established activities.

2 - Business registered within the FEZ.

A foreign investor can own 100% of such companies. The company has the right to carry out activities:

- on the territory of the free economic zone in which the company is registered;

- outside the UAE.

As for the domestic market of the Arab Emirates, companies registered within the FEZ cannot conduct business here. Almost all companies are allowed to rent a combined workspace instead of a full-fledged office.

Each zone is suitable for a certain type of activity, for example, in some, full-fledged production can be started. You do not need to pay customs duties when importing and exporting goods to and from the territory of the FEZ.

3 - And the third type of company is offshore.

An offshore company can be 100% owned by a foreign investor. The company has the right to operate outside the territory of the United Arab Emirates.

5th myth. The United Arab Emirates is one offshore zone.

There are no taxes for most of the types of businesses in the United Arab Emirates. Regardless of the type of activity, each business pays 5% VAT when carrying out its activities in the domestic UAE market.

People believe that the fact that there are no taxes makes the UAE as much an offshore zone as others. But this is not the case, since the United Arab Emirates has a large number of additional advantages and, most importantly, an excellent reputation at the international level. It is much easier to conduct a business opened in the UAE, it is much easier to open an account in reliable banks. And with recent changes in other offshore zones, it has become much more profitable to own a company in the United Arab Emirates from all points of view.