Organizational and Legal Forms of Business Operation in the UAE

Entering the market of the United Arab Emirates is a popular option for scaling up a company as part of attracting foreign investments or relocation. However, regardless of the primary reason for launching in the country, it is important to consider the organizational and legal forms of business operation in the UAE for foreign investments. Additionally, the registration process of the company should be followed to comply with the legal norms of the state.

Choice of Free Economic Zone

The mechanics of registering a business in the UAE depends on the specifics of the particular type of activity and the founder's plans for scaling the company and implementing goods or services in the territory of the United Arab Emirates. At the initial stage, the entrepreneur chooses the jurisdiction based on the geographical factor: in the UAE, it is possible to register an offshore company, as well as an organization in a free economic zone or on the mainland. It is worth considering the management structure of the enterprise. For example, registering a business on the mainland sometimes requires the involvement of local shareholders (who will own 51% of the shares) and employees. Such an organizational and legal form allows conducting activities throughout the country.

Registering a business in a free economic zone is the optimal option for foreign citizens, as this format implies simplified conditions for starting operations. Currently, there are about 50 free economic trade zones in the UAE, which are divided depending on the specificity of the industry. Logistics, technical, innovative, and other hubs are distinguished. Formally, the procedure for opening an organization in a free zone for foreign founders does not depend on a specific zone, but it is always important to consider local requirements for obtaining a license, opening a bank account, and leasing premises. In addition, free economic zones are suitable for both novice entrepreneurs and experienced businessmen, as they combine several advantages:

• Benefits for foreign owners. Along with the possibility for foreigners to own businesses 100% within the zone, special conditions apply: tax breaks for VAT and corporate tax payments, simplified customs and logistics operations, etc.
• Government support. Since the government of the United Arab Emirates is interested in attracting foreign investments, it organizes industry exhibitions, coworking spaces, and venture funds, which is particularly relevant for startups.
• Technical and scientific base. Due to the development of all sectors of the economy and the large number of educational institutions in the country, there is active interaction with international industry experts and access to cutting-edge developments.

Registering a business in a free economic trade zone is available in an online format, flexi desks are provided on the territory of the free zone, and the founder can rent a physical office within the respective zone. However, it is necessary to fly in for a medical test and biometrics to obtain an Emirate ID.

Choosing the Type of Company

After selecting the jurisdiction, the founder needs to determine the type of company. For registration on the mainland, the most relevant format is a joint-stock company or a branch office. When starting operations in a free zone, the following options are available:

Offshore company.

This involves legal registration in the UAE without actually conducting business activities in the country. In this case, it is not necessary to rent an office or any other premises, but the entrepreneur is not allowed to engage in the sale of goods or services in the Emirates. This organizational and legal form is suitable for businessmen planning to enter the international market and receive corresponding economic and political preferences, as well as to use bank accounts in the United Arab Emirates. One of the conditions is the existence of the same business model in the country of residence.

Enterprise within the Free Zone.

This implies the actual conduct of business within the boundaries of the chosen free zone. After submitting the company registration application, it is necessary to obtain a license for the corresponding type of activity. It is essential to carefully select the type of activity, as engaging in activities not specified in the license is not allowed. At the same time, licensing requirements may vary depending on the specific characteristics of the free zone, but the validity period of the license is standard - one year. Foreign ownership of businesses in the UAE also does not restrict the employment of employees. The visa validity period is two years.

Since conducting business in a free zone is available not only for interaction with UAE citizens but also for organizing international cooperation, it is important to choose a zone based on the individual characteristics of the enterprise. For example, when launching a logistics company, it is advisable to focus on the transport accessibility of the free economic trade zone, as well as its internal infrastructure. Thus, in Dubai's free zone, there is a government initiative to optimize the logistics of the emirate - the Dubai Logistics City, where a single hub simplifies the organization of international freight transportation by all types of transport. When opening an industrial or technical company, they rely on support for research initiatives and the availability of platforms for attracting foreign investments.

Resident Tax Visa in the UAE

Depending on the scale of the activity and the duration of the company's operation in the United Arab Emirates, the company's founder and other employees must obtain a visa. The founder receives an investor visa. If there are several founders, they receive a partner visa. Employees receive a work visa. After submitting the company registration application and obtaining a license, the foreign founder must open a corresponding account in a UAE bank, where one of the necessary documents is the Emirates ID. To obtain a resident visa for a legal entity, it is necessary to confirm the permanent conduct of activities, asset placement, and the owner's permanent residence in the UAE over the past 12 months. In addition, the regulatory authority may request data on operations for six months, as well as the conclusion of an audit. There are two types of resident visas, valid for two years.

Foreign Company with an Account in a Similar Jurisdiction

Opening an account in a bank is a mandatory requirement for an investor when opening a business in the UAE. The country has both national and private banks. When opening a resident account, all services of the financial organization are available: online banking, obtaining credit and debit cards, receiving a checkbook, as well as conducting financial transactions in the UAE and abroad.

Despite the wide range of documents required to open an account in a UAE bank, business founders must confirm solvency, visa, and company registration documents. In some cases, bank employees may additionally request a resume, business plan, articles of incorporation, information about the organizational structure and business activities, and information about the founder's financial standing in another country: for example, a statement from an account in a foreign bank for the last six months.

Advantages of Banks in the UAE

Opening an account in banks in the United Arab Emirates ensures confidentiality of financial transactions for foreign owners regardless of the territorial location of the transaction. At the same time, both national and commercial banks are characterized by high stability and guarantees of investment security. Typically, financial organizations in the UAE offer fixed tariffs for account maintenance: the fee is calculated depending on the number of financial transactions at a standard rate without tying to the transaction volume. Also, many UAE banks have branches in other countries, which simplifies cooperation with international partners when expanding into the global market. And free customer online service is available around the clock, providing support to entrepreneurs.

The developing economy of the United Arab Emirates attracts entrepreneurs for both local market development in the Persian Gulf countries and entry into the global market. However, when registering a business in the UAE, it is necessary to take into account not only the current position but also the long-term plans for scaling the company. This determines the choice of the zone for company registration, as well as its organizational and legal form. In addition, to start operations in the United Arab Emirates, it is necessary to obtain the appropriate license and open a business account in a local bank. The Level Consulting company helps to choose not only the optimal organizational and legal form for registration but also the most suitable zone for starting a business in the UAE.