MSI Global Alliance · 2020. 6. 3. · maintained growth and development and has become the most...
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Transcript of MSI Global Alliance · 2020. 6. 3. · maintained growth and development and has become the most...
MSI Global Alliance
UAE| 2
The United Arab Emirates has a total
population of 9.68 million inhabitants
(2019).
The United Arab Emirates is a federation
of 7 constituent emirates: The Emirates
of Abu Dhabi, Dubai, Sharjah, Ajman,
Ras-Al-Khaimah, Umm-Al-Quwain,
Fujairah. The ruler of each emirate rules
their emirate individually.
The ruler of Abu Dhabi is also the
President of UAE, and Head of state,
while the ruler of Dubai is the Prime
Minister of the UAE, and head of
government.
The government reforms in each
emirate is set by its own individual ruler.
The official language is Arabic. However,
most people speak English, especially in
the big cities like Dubai, due to the high
immigrant population.
The national currency is the United Arab
Emirates Dirham (AED or commonly
known as Dhs).
GDP: USD 383 Billion
Income per capita: USD 74,410
Inflation: -2.4%
Although the UAE’s economy as a whole
does depend on the oil and natural gas
industry, it is also the most diversified
economy in the GCC. However, Dubai’s
economy is not entirely dependent on
oil, due to its bold diversification policies,
tourism and trade are some of the
dominant sectors of its economy
currently.
The UAE has great connectivity with the
world provided by the Emirates and
Etihad, making it an international hub.
The country’s easily accessible location,
facilities at port, and low tax regulations
has boosted its trade industries to make
the country one of the trade hubs of the
world.
The UAE enjoys a stable economy, with
financial and monetary stability
strengthened by the fixed exchange rate
tied to the US Dollar, and the developed
credit facilities and abundant liquidity.
Furthermore, the UAE has consistently
maintained growth and development
and has become the most popular re-
exporting location in the Middle East,
with Dubai leading in this aspect.
Moreover, Dubai, with its more
diversified economy has also become
one of the top tourist hotspots in the
world. Apart from trade and tourism, the
UAE has other important sectors
including construction, engineering and
real estate, retail, advertising and market
research.
The UAE is a member state of the GCC
and is one of the most attractive for
business and investment due to its low
regulations and business friendly tax-
free policies in the region.
The UAE benefits the most from being in
GCC, due to it being more diversified, its
recent upswing in tourism, an excellent
infrastructure, and its international
outlook. All these features place the
country in a strong position for
international business.
Dubai is an important hub in the GCC for
tourism and international business due
to its diversified economy and developed
facilities.
Under UAE law, a foreign individual may
operate through an incorporated or
unincorporated entity or branch. The
UAE corporate law provides a relatively
liberal and flexible framework for
organizations of several subsidiaries and
branches. However, there are some
laws, where a foreign individual would
have to take certain additional steps to
set up business in the UAE:
The type of firm needs to be determined
and checked which licenses are required
to operate in the UAE – from the
Department of Economic Development.
To have 100% ownership, there are
certain regions of the country known as
Free-zones where foreign nationals can
operate. To operate in other regions of
the mainland, foreign individuals would
need to find a local UAE national partner
with 51% of the ownership, in order for
the business to operate. However, the
UAE national can pledge the shares to
the expatriates without any
consideration.
There is a new FDI law that has now
been issued by the cabinet and has
come into effect. This law will allow
foreign investments with 100%
ownership for certain listed activities.
However, these include some conditions
with respect to investment in
technology, employee headcount along
MSI Global Alliance
UAE| 3
with some others. In addition, each
unique type of firm may have more
regulations to comply to in order to
operate within the UAE.
1. Sole proprietorship
2. Partnership
3. Limited partnership
4. Limited Liability Company
5. Public Joint Stock Company
6. Private Joint Stock Company
7. Branch
In the UAE, most businesses operate
either as a Limited Liability Company
(LLC) or a sole proprietorship.
Many foreign companies make use of a
subsidiary rather than a branch. The
main legal reason to set up a subsidiary,
instead of a branch, is the limitation of
liability. As a shareholder of a subsidiary,
the foreign company’s liability is basically
limited to the extent of its capital
contribution; whereas, if the foreign
company makes use of a branch, it is
fully responsible for all the obligations
and liabilities of the branch.
Setting up a business could vary
depending on the type of business, but
to set up an LLC (the most popular
business type in UAE), the following
steps need to be taken:
1. Agree to an allowed trade name and
attain initial approval from the
Department of Economic
Development.
2. Find a suitable local partner (if
required)
3. A Contract of Establishment must be
signed before a notary public
4. Administrative tasks such as office
spaces and bank accounts must be
completed
5. A Commercial License must be
obtained from the Department of
Economic Development
6. Become a member of the Chamber
of Commerce and Industry
The financial year is usually equal to the
calendar year. However, there is no such
limitation, and businesses in the UAE can
follow any financial years they wish.
Though a statutory audit is required for
all companies, only free zones have
implemented it strictly to submit the
audit report at the time of license
renewal.
The primary incentive to set up business
in the UAE has been its stable pro-
business tax free government that works
to maintain the UAE’s steady yet strong
economic development. Apart from
these, there are certain incentive
schemes that apply to certain sectors as
part of the Khalifa Fund, and are usually
restricted to sectors that the
government feels would benefit the
UAE’s development in a stronger way.
The tax system in any given country is
invariably an extremely important
criterion when it comes to companies
finding a country for incorporation. The
view taken by the UAE government is
that the tax system may under no
circumstances form an impediment for
companies wishing to incorporate in the
UAE. This is strengthened more as there
is no income tax or corporate tax. The
recently initiated VAT is also simple and
easy to follow, and a low rate supporting
businesses.
The general VAT rate is 5%. For certain
products and services, the rate is either
0% or is exempt from VAT. VAT is only
applicable to a company under
numerous conditions.
A firm can only register for VAT if its
taxable income is above AED 187,500,
however, it must be VAT registered if its
taxable supplies exceed AED 375,000.
Private persons and companies must
register online on the Federal Tax
Authority’s website when their taxable
income meets the registration threshold.
An employment agreement may be
agreed for an indefinite or fixed period
of time. If an employment agreement for
a fixed period of time is continued, a
new agreement will then be deemed to
have been entered into under the same
conditions and for the same period of
time (subject to a maximum of 1 year) as
the former employment agreement.
All companies are to pay for the
premiums of all employees’ medical
insurance directly to the insurance
company. Any other type of insurance is
optional, and more often paid directly by
the employee. Rates differ from each
insurance company to another as well as
the insurance cover. The company can
decide which insurance would be most
suitable for the employees.
Although there are no pensions in the
UAE, gratuities are mandatory and are
given at the end of employment for
every employment. The minimum
amount of gratuity is dependent on the
number of years an employee has
worked, and the basic salary of the
employee over these years.
Payroll in the UAE works differently in
Free-Zones and the rest of the regions
(Mainland). Both regions pay for salaries
on a monthly basis. In Free-Zones,
business can pay wages and salaries to
the employee directly via bank transfer
or cash as long as the Free-Zone
authorities are notified to ensure the
employees receive their payments.
However, in mainland UAE, employers
must pay the employees through a
Wage Protection System through which
the bank transfers to the employees are
monitored by the labour department.
All foreigners must either be an investor,
owner of a business, or an employee, in
order to gain a working visa in the UAE.
For these individuals their families may
also stay in the UAE with their own visa.
Disclaimer: MSI Global Alliance (MSI) is an international association of independent legal and accounting firms. MSI does not accept any responsibility for the commission of any
act, or omission to act by, or the liabilities of, any of its members. The information in this guide for general guidance only. It is essential to take professional advice on specific issues
and their impact on any individual or entity.
Accounting member: Abu Dhabi
Al Maher Group
www.almahergroup.com
Mohammed Maher
[email protected] +971 (2) 626 8223
Sheikh Khalifa St.
Green Tower Bldg.
3rd Floor - Office No. 32
Abu Dhabi
Accounting member: Dubai
Al Gaith & Co
www.agcmsi.com
Tim Howe
+971 (4) 398 8575
Al Hana Centre
Al Mankhoul Road
Dubai
Legal member: Dubai
ProConsult Advocates & Legal Consultants
www.uaeahead.com
Tony Maalouli
+971 (4) 329 8711
Burj Khalifa Blvd., Westburry Offices Tower
Suite 707
Business Bay
Dubai
Accounting member: Sharjah
Alnoman & Ravi
www.msiauditors.com
Ravi Kannampillil
+971 (6) 573 9859
Office 506, Golden Tower
Buheirah Corniche
Sharjah
*** this guide was kindly prepared by Alnoman & Ravi
MSI Global Alliance
147-149 Temple Chambers
3-7 Temple Avenue
London EC4Y 0DA
United Kingdom
www.msiglobal.org
