UNDERSTANDING UAE BUSINESS RESTRICTIONS & SPECIAL APPROVALS
However, some business activities for foreign LLCs may still require partnerships with UAE locals. These activities are usually connected to certain sectors of national strategic importance and which require particular approvals or in some cases licenses.
UNDERSTANDING FOREIGN LLCS IN THE UAE: STRUCTURE, OWNERSHIP, & CAPITAL REQUIREMENTS
A foreign LLC in the UAE means a Limited Liability Company established and registered in the mainland and owned by foreign investors, ranging from one to 50 shareholders. A foreign LLC may be owned by natural persons and/or legal entities. The foreign LLC, considered as such because it allows limited liability to shareholders, is a limited liability business structure, meaning that unlike a sole proprietorship or partnership, it is a separate legal personality in and of itself, providing limited liability to its shareholders. There is no prescribed minimum capital under the Commercial Companies Law for a foreign LLC in the UAE; however, in practice, mainland LLCs are usually incorporated with a share capital of AED 300,000.
1. LEGAL REQUIREMENTS FOR ESTABLISHING A FOREIGN LLC IN THE UAE
The establishment of the foreign LLC in the UAE is subject to the principal legal requirements. These include the observance of the Commercial Companies Law; pursuant to foreign investment laws and regulations; undergoing licensing and permitting procedures necessary for their chosen business activities; and registering the company with the appropriate authorities, e.g., the Department of Economic Development (DED).
2. SECTOR-BASED REGULATIONS & GUIDELINES
There are also specific industry regulations and guidelines that would apply to foreign LLCs in the UAE depending on the choice of activity. This is especially relevant for activities under the “Relevant Activities” as mentioned in the Economic Substance Regulations (ESR), which may include banking, insurance, investment fund management, lease finance, holding different intellectual property assets, among others.
3. ONGOING COMPLIANCE & REPORTING REQUIREMENTS
All foreign LLCs are mandated to adhere to ongoing compliance and reporting requirements such that include Economic Substance Regulations (ESR) which involve reporting relevant financial information and activities to the authorities on an annual basis. Foreign LLCs also must ensure compliance with the Real Beneficiaries Law issued in August 2020, disclosing the details of Ultimate Beneficiary Ownership (UBO) individuals holding 25% or more of the company’s share capital or voting rights at the time of the company’s registration and renewal.
4. ANTI MONEY LAUNDERING REGISTRATION FOR DESIGNATED NON-FINANCIAL BUSINESSES AND PROFESSIONS (DNFBPS)
Additionally, all DNFBPs are required to complete Anti Money Laundering Registration at goAML portal of the Ministry of Economy in relation to the imposed Federal Decretal-Law No. (20) of 2018 on Anti- Money Laundering and Combating the Financing of Terrorism and Illegal Organisations.
5. EMPLOYMENT AND PROPERTY OWNERSHIP FOR FOREIGN LLCS
The foreign LLC may hire an expatriate employee in the UAE, on condition that it abides with the respective labour laws and obtains the labour card from the Ministry of Human Resources and Emiratisation (MOHRE), completes all the formalities of employment contracts, and registers the contracts with MOHRE. It must also apply for work permits and residency visas for its employees from the General Directorate of Residency and Foreigners Affairs.
Further, a foreign LLC may buy property in an area designated as a freehold area in the UAE, thus permitting non-UAE nationals to purchase real estate there. However, it is imperative that one complies with the specific regulations and procedures that govern property ownership as laid out by the laws of the UAE.
6. TAX IMPLICATIONS FOR FOREIGN LLCS IN THE UAE
Considered low-tax jurisdictions for foreign LLCs, UAE tops the list compared to other economies in the region. With the corporate tax in place since 1 June 2023, the taxable income up to AED 375,000 enjoys a zero rate for corporate tax. Taxable non-qualifying income exceeding that limit is subjected to a Corporate Tax (CT) of 9%; however, oil companies and foreign banks are interested sectors that fall outside this taxation. A 5% Value Added Tax (VAT) is imposed on taxable goods and services at each stage of the supply chain. It is an indirect tax set against selected goods considered detrimental to health or the environment at varying rates. Carbonated drinks attract an excise rate of 50%, tobacco and tobacco products 100%, while products with added sugar are at 50%.
TAKE AWAY – SETTING UP AN LLC COMPANY IN DUBAI & THE UAE
Setup of a foreign LLC in the UAE is variable in time depending on the various conditions, including the complexity of the chosen business activities, getting external approvals and licenses that may be required, and fulfilling legal formalities. In general, the process usually takes anywhere from a few weeks to a couple of months.
Ready to establish your foreign LLC in the UAE? Contact Creation Business Consultants today for expert guidance and a smooth setup process. Email [email protected] or call +971 4 878 6240.
