- Audit obligation: No
- Continent: Asia
- Disclosure of beneficial owners: No
- EU VAT ID available: No
- Local manager required: No
- Minimum paid-up capital: Various
- Obligation to submit an annual report: Various
- Tax system: Fixed taxation
The United Arab Emirates is a federation of seven emirates, located in the southeast end of the Arabian Peninsula on the Persian Gulf. The country is often referred to as the “New Switzerland” for its low-tax or in some regions no-tax benefits, and its entrepreneurial ambiance with more than fifty Double Taxation Treaties. The UAE’s traditional source of income is oil and gas. However, they naturalized other industries in order to diversify and expand the economy.
Over the past decade, offshore and so-called free-zone companies establishment in the UAE have become very popular, with more and more entrepreneurs choosing to take advantage of the low-tax or no-tax zones of the Emirates. Both business forms can be established in these special zones. The free-trade zones are not simple tax havens.These jurisdictions are well equipped with trade, fiscal and knowledge centres set up in various industries to provide opportunities for foreign investors. The creation and operation of the special economic zones is a clear success story, with some 40 zones already working and at least another ten zones in the pipe-line over the next few years.
A common features of the zone companies is, the firms are tax exempt but cannot carry on business as “onshore companies” on the internal market of United Arab Emirates without a special permit. Foreign investors may open offshore companies or “free trade zone companies”. Offshore companies have mostly only an address and cannot operate locally, these firms may only undertake their business activities outside the Emirates. Offshore companies do not have to pay corporate tax, on profits derived from the full spectrum of their business activities, nor do they have to submit tax returns and financial reports. In addition to the favourable tax environment the relaxed local laws help significantly in establishing companies and business operations. In most of the zones shareholders do not have to pay-up the share capital. One director and one shareholder suffice for the formation of a company, and can be foreigners (non-UAE nationals). These person(s) can be natural or legal person(s), with no restrictions on choice. Details of the directors and the shareholders are registered at the local Registry of Companies.
Special economic zones specialized in particular activities may differ in certain aspects. Share capital is not everywhere must be paid up, or not must be fully paid up. For instance in a few zones directors must submit an annual report, but in other zones this obligation does not exists. The number of work/residency permits granted depends on each zone’s own rules.
Umm Al Quwain is an emirate situated between similarly popular Ajman and Ras Al Khaimah on the West Coast of the United Arab Emirates. Given a good central location and a high quality of services it makes it an ideal place to both work and live at very affordable rates. UAQ is the Free Zone of the future, where companies can do business in a safe, secure and prosperous environment, close to the UAE’s primary sea ports, within 1 hour drive from Dubai International Airport. In addition, the companies are not obliged to make a capital share payment, present tax return or accounting records.
In the Emirate of Ajman legislators decided to establish a free zone in 1988, but the Ajman Free Trade Area Authority started its official operation in 1996. Since then, the Ajman Free Zone has become one of the most popular tax-free entrepreneurial areas, where billions of dirhams (official UAE currency) worth development projects have started. 1500 companies found a new home on the 1 million square meters land of the Ajman Free Zone. Currently, 20% of the country’s industrial production originates from the zone. In addition to the usual advantages of the free zones, Ajman has several benefits due to its central location, the low cost of living and the affordable cost of office space. Of course, the most important solution for foreign investors is the tax exemption, which is available up to 40 years. Offshore companies do not have to pay-up the share capital and do not have to file tax returns or financial reports. Free trade zone companies are required to pay up AED 185,000, but do not have to file tax return or report.
The Hamriyah Free Zone operates in the city of Sharjah since 1994. It covers an area of 24 square kilometres and has a 14 meters deep port. Currently, investors from 155 countries are operating more than 6000 companies in the zone. Hamriyah’s greatest advantage is the tax exemption available up to a period of 50 years. In addition to all these benefits, the offshore and “free zone” companies registered in this zone “also” do not have to pay up the share capital or file returns and financial reports.
Ras Al Khaimah Free Trade Zone is one of the most popular global areas for company formation. This special economic zone is less than an hour’s drive from Dubai with more than 8,000 companies operating there in a total of 55 industries. The companies can operate completely tax-free in the free trade zone, which was founded in 2000. Share capital for the offshore companies is a mandatory fee of AED 1000. The non filing of tax returns and financial reports is also enjoyed in this zone. There is no mandatory fee or share capital for the “free trade zone” companies, but these firms must submit an annual report. Additional more work permits are available, depending on the activity of a company, in order to encourage venture diversity in this zone.