Dubai is a city that welcomes businesses from all over the world due to the high demand for jobs.
Dubai leads in sectors including, but not limited to: real estate, hospitality and construction. To fuel their economy with foreign direct investment (FDI), a country needs to have a specific regulatory framework that attracts FDI.
The possibility of establishing business plans like free zones and companies through 100% foreign ownership has encouraged many investors to consider beneficial opportunities available in Dubai.
In this article, you will find an overview of the different types of business entities public in Dubai, together with a general description of the benefits associated with each.
You can establish various business entities in Dubai, but it is important to note that not all of them are available to 100% foreign investors.
The most typical types of business entities include:
- companies limited by shares
- companies limited by guarantee
- branch offices
- representative offices and
- Free zones.
Companies limited by shares
A company limited by shares is Dubai’s most common business organization. It is an incorporated body with a legal identity separate from its members.
A company limited by shares may be set up as an ‘open’ company. It means the liability of its members are only limited to their respective share capital or as a ‘closed’ company where the detriment of its members is limited into fixed amounts determined at the time of incorporation.
Companies limited by guarantee
A company limited by guarantee means it is formed without Share Capital. The objective is not to profit for shareholders but to undertake some particular activity or purpose.
This business form has no legal personality, i.e., it cannot sue or be sued in its name; instead, all legal actions are taken by and against the individual member(s).
The membership fee for a company limited by guarantee is cheaper than a ‘private’ limited company.
You can establish a branch of a foreign company in Dubai to carry on business operations where it does not have its registered office.
You should apply to the Department of Economic Development (DED) to register the branch.
The process for registration has been intentionally made complex with several procedural steps that you must consider before submitting an application which is why many investors prefer establishing representative offices instead of branches.
Representative Office means an office managed and controlled by a body corporate or natural person representing one or more companies or undertaking specific commercial, professional or technical advisory functions on behalf of their principals.
It may operate for no more than three years and must be renewed before the expiry of that period.
A Free Zone Company is a private limited liability company established in a free zone and has 100% foreign ownership.
The company may engage in local and international business transactions, but its activities are not subject to taxation either at the federal level or within the free zone itself.
The main advantage of establishing a Free Zone Company in Dubai is that it provides investors with more flexibility and transparency than they would have in setting up an equivalent locally incorporated entity.
Dubai International Financial Centre (DIFC)
The DIFC was established by decree as an independent territory for conducting global business and finance with its legal system based on English Common Law.
It comprises two distinct areas: the DIFC and the Financial Services Authority (FSA).
The DIFC is an onshore financial centre with a business-friendly environment and world-class infrastructure.
The FSA is the independent regulator of the DIFC.
Benefits of establishing a company in the DIFC
- 100% foreign ownership – companies can be wholly owned by foreign investors without local partners or shareholders.
- No corporate or personal income tax on profits generated from within the DIFC.
- Tax exemption on dividends, interest and capital gains.
- There are no restrictions on repatriation of profits and capital – you can freely move funds in and out of the DIFC.
- English common law as the basis for business contracts and case law.
- An independent judiciary for dispute resolution by international commercial norms.
- A flexible framework allows companies to be established quickly; there is no need to register offices, bank accounts, or even file annual returns.
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