Establishing A Business in The United Arab Emirates

Establishing a Business in the United Arab Emirates, Practical Law Country Q&A...
Establishing a Business in the United Arab Emirates

by Sherif Rahman and Jogan Punjabi, Al Tamimi & Company
Country Q&A | Law stated as at 01-Jun-2022 | United Arab Emirates
A Q&A guide to establishing a business in the United Arab Emirates.
This Q&A gives an overview of the key issues in establishing a business in the United Arab Emirates, including
an introduction to the legal system; the available business vehicles and their applicable formalities; corporate
governance structures and requirements; foreign investment incentives and restrictions; currency regulations; and
tax and employment issues.
Legal System
Business Vehicles
Establishing a Presence from Abroad
Forming a Private Company
Financial Reporting
Trading Disclosure
Membership/Shareholders
Minimum Capital Requirements
Shareholders and Voting Rights
Sectoral Restrictions
Foreign Investment Restrictions
Directors
Board Composition
Re-Registering as a Public Company
Tax
Grants and Tax Incentives
Employment
Proposals for Reform
Contributor Profiles
Sherif Rahman, Partner
Jogan Punjabi, Paralegal
© 2023 Thomson Reuters. All rights reserved. 1

Legal System
1. What is the legal system in your jurisdiction based on (for example, civil law, common law or a mixture of
both)? Does your jurisdiction operate a federal or unitary system?
Basis of Legal System
The UAE's legal system is founded on civil law principles, along with Islamic sharia law. Sharia law influences criminal and
civil law, but does not fully extend into commercial laws. The legal system features both sharia courts and civil courts; these
govern different areas of law. However, the financial free zones in the UAE, that is, Dubai International Financial Centre (DIFC)
and Abu Dhabi Global Market (ADGM) apply a common law system and have their own independent courts in which cases
are heard in English.
Federal or Unitary System
The UAE is a federation of the seven emirates: Dubai, Abu Dhabi, Ajman, Fujairah, Ras Al Khaimah, Sharjah and Umm Al
Quwain.
The UAE Constitution gives the federal government specific powers, while allowing for each emirate also to have its own
powers and to have control over its own internal security and its oil and mineral wealth.
The UAE is divided into mainland and free zones. Each emirate has:
• An autonomous mainland business licensing authority in the form of a Department of Economic Development (DED),
and policies issued by that body in addition to local municipality and other local government authorities.
• One or more free zones, where corporate entities are governed by the free zone's rules and regulations. The laws
relating to mainland companies only apply to companies in the free zone to a limited extent. Each free zone has an
independent regulatory authority, separate from the relevant DED.
• In addition to the free zones, there are two financial free zones in the UAE, the DIFC and ADGM (see above, Basis of
Legal System).
Companies established in any free zone in the UAE can be 100% foreign-owned, as compared with the UAE mainland, where
certain foreign ownership restrictions may apply, in limited cases (see Question 20). Moreover, Emiratisation requirements do
not necessarily apply in the free zones.
Business Vehicles

2. What are the main forms of business vehicle used in your jurisdiction? What are the advantages and
disadvantages of each vehicle?
Sole Proprietorship
Description. A sole proprietorship is a simple business method where an individual trades on their own account through a trade
licence issued in their own name. This form of business entity is referred to as an "establishment" rather than a company.
UAE nationals and nationals of Gulf Cooperation Council (GCC) countries (subject to certain conditions) often form sole
proprietorships in Dubai.
Foreign nationals can also form sole proprietorships, but a foreign sole proprietor must appoint a local service agent (an
independent representative who is a national of the UAE, or a company 100% owned by UAE nationals, who has no legal
interest in or liability for the business, but can act as its representative in the UAE).
Advantages/disadvantages. The advantage of this form is that the costs and formalities are low. The disadvantage is that the
establishment does not have a legal identity independent from that of the owner, and so the sole proprietor is personally liable
to the full extent of their assets for the liabilities of the business.
Joint Partnership
Description. A joint partnership is an arrangement between two or more partners where each partner is jointly and severally
liable without limit for the partnership's liabilities.
Advantages/disadvantages. Partners must be natural persons and are jointly and severally liable to the extent of all their
personal assets for the liabilities of the company. There is no real advantage for such legal form and it is therefore rarely used.
Limited Partnership
Description. Federal Law No. 32 of 2021 concerning Commercial Companies (CCL) defines a limited partnership as one which
consists of both:
• One or more active partners who are jointly and severally liable for the obligations of the partnership and act in the
capacity of a trader.
• One or more limited partners who are not liable for the obligations of the partnership, other than to the extent of their
respective shares in the capital, and do not act in the capacity of a trader.
Advantages/disadvantages. Joint partners are jointly and severally liable for the obligations of the company and act in the
capacity of a trader. There is no real advantage for such legal form and it is rarely used.
Civil Partnership

Description. A civil partnership is a partnership used to carry out professional activities. It requires at least two individual
partners whose liability is unlimited. A corporate body can be a partner, provided that body conducts a similar activity or
activities to that of the civil partnership.
A civil partnership must engage a local service agent. Civil partnerships are governed by Federal Law No. 5 of 1985 (Civil
Code) not the CCL.
Advantages/disadvantages. This entity can conduct professional activities, while LLCs are mainly used for trading activities.
Disadvantages of this entity are that:
• The partners' liability is unlimited.
• A local service agent must be appointed.
Limited Liability Company (LLC)
Description. LLCs are governed by the CCL. LLCs are often the most suitable method of establishing a business in the UAE
for foreign investors. Their form is similar to that of the private limited liability company in the UK.
An LLC must have between two and 50 shareholders (Article 71, CCL). Each shareholder is only liable to the extent of their
capital share.
An LLC can also be incorporated by a single (whether a natural or corporate person) shareholder where the suffix "One Person
Company LLC" must be added to the name. There is no specific circumstance or criteria as such for a single natural or legal
person to own an LLC.
Advantages/disadvantages.One of the advantages is that 100% foreign ownership is now permitted for most of the business
activities of LLCs on the mainland, and all LLCs in free zones. No minimum share capital is required, and shareholders' liability
is limited to the extent of their shareholding in the capital. The disadvantages are that:
• There many costs and formalities involved in maintaining an LLC.
• The shares of an LLC cannot be listed on a stock exchange.
Public Joint Stock Company (PJSC)
Description. PJSCs are governed by the CCL, which defines a PJSC as a company whose capital is divided into equal value
negotiable shares. A PJSC is very similar to a public limited company in the UK. Under the CCL, the shareholders of a PJSC
are liable only to the extent of the value of their shares in the company.
The minimum share capital requirement of a PJSC is AED30 million. The nominal value per share provision has been removed
under the new CCL.
Advantages/disadvantages. PJSCs have become very popular in UAE, as they enable businesses to raise substantial amounts
of capital for large-scale projects. In addition, a PJSC is permitted to carry out banking and insurance business, while other
corporate vehicles cannot.

However, a PJSC is a complex structure and involves many formalities, as well as regulation by, and compliance with, the
Security and Commodities Authority (SCA).
Private Joint Stock Company
Description. A private joint stock company is essentially the same as a PJSC (see above), with the following differences:
• The minimum capital requirement is AED5 million.
• Shares in it can only be offered to the public after two financial years have passed since its incorporation, and on its
conversion to a PJSC (among other requirements).
• It is supervised by the Ministry of Economy (MOE) rather than the SCA.
Advantages/disadvantages. Private joint stock companies are more popular with foreign investors than PJSCs. However,
extensive corporate and regulatory approvals are required, including pre-approval from the MOE in respect of the articles of
association.
The procedures for setting up a private joint stock company are the similar to those for a PJSC.
Branch of a Foreign Company
Description. A branch office is legally an extension of its parent company and does not have a distinct legal identity. The name
of a branch office must therefore be the same as that of the parent company.
A branch office in the UAE can only engage in activities similar to those of its parent company, and its activities must be
licensed by the relevant DED or free zone authority.
Branch offices (except those in free zones) cannot carry on the business of importing, exporting, manufacturing or distributing
the products of its parent company (see also Question 3 and Question 4).
A branch established in UAE mainland must be registered with the MOE, which requires submission of:
• A bank guarantee of AED50,000 in favour of the MOE.
• A letter from a registered local auditor confirming its appointment. The auditor must be registered with the Ministry of
Economy which is a federal authority.
Any liabilities of the branch are the responsibility of the parent company.
Advantages/disadvantages. One of the reasons for setting up a branch office in UAE is that the foreign company can conduct
its operations from UAE and have a global presence. In addition, the branch can act as a representative/marketing office of
the parent company.
The branch is owned 100% by its parent and does not have separate legal personality and therefore the operations of the branch
can be consolidated with the parent company’s financial statement.

From a practical perspective, local companies can also set up branches within the UAE to conduct their operations from different
locations, for example, shops or restaurants have multiple branches. From a UAE law perspective, there is no tax advantage in
setting up a branch office as neither the LLC nor the branch is liable to pay tax.
Establishing a Presence from Abroad
3. What are the most common options for foreign companies establishing a business presence in your
jurisdiction?
The most common route for a foreign company to establish a presence in UAE is by incorporating an LLC or establishing a
branch office (see Question 2).
Under the CCL, a mainland LLC can be 100% foreign-owned, subject to approval of its proposed activities by the authorities.
No restrictions apply to 100% foreign-owned LLCs in free zones.
A foreign entity can establish a branch office in the UAE to carry out:
• Activities which mirror those of the parent company.
• Services or marketing and advertising the products of the parent company in UAE.
See also Question 2.
A branch does not need to have its own memorandum and articles of association as those of the parent company apply.
4. How can an overseas company trade directly in your jurisdiction?
An overseas company can trade directly in the UAE through a commercial agent or a company registered in the UAE.
Branches
Description. See Question 2
Licensing and other legal/regulatory requirements. See Question 2 and Question 3.

Advantages/Disadvantages. A branch cannot be used by a foreign company to conduct trading and distribution activities in
the UAE mainland; this option is only therefore suitable for a foreign company wishing to trade through a branch in a free
zone (see Question 2 and Question 3).
Commercial Agents
Description. The overseas company can enter into a distribution or commercial agency agreement with an existing commercial
agent that has a licence to import and distribute products in the UAE.
Overseas manufacturers or traders wishing to regularly import goods into Dubai in large quantities can do so through a
commercial agency agreement. They can use a registered or an unregistered agent (see below, Advantages/disadvantages).
Licensing and other legal/regulatory requirements. On a federal level, only a UAE national, or a company wholly-owned
by UAE nationals, can be a commercial agent (UAE Agency Law No. 18 of 1981). Any chosen agent must therefore meet the
criteria set out under that law and be licensed to import and/or distribute products in the UAE. However, it is not mandatory
to distribute most products through a registered agent. Parties can enter into distribution arrangements which are not registered
with the MoE. Therefore, a company wholly owned by foreigners can still act as unregistered agent or distributor without the
need to register the agency or distribution agreement with the MoE.
Advantages/disadvantages. An advantage for registered commercial agencies is that the registered agency agreement with the
MoE cannot be terminated without the agreement of both/all the parties, or there is a material reason for termination which
provides justification.
However, the nationality restrictions on agents (see above) are a disadvantage as only UAE nationals can carry out registered
commercial agency business.
5. What are the formalities for setting up a partnership?
Partnership
Set up. See Question 2
Applicable legislation/regulation. The CCL.
Partnership agreements. A partnership agreement is required.
Liability of partners. The liability of the partners is unlimited.
Assets. Assets are held in the name of the partnership.
Legal personality. The partnership has a separate legal personality, but the partners are liable for the debts of the partnership
in a personal capacity.

Taxation. There is no taxation on partnership companies.
Limited Partnership
Set up. See Question 2
Applicable legislation/regulation. The CCL.
Partnership agreements. There is no partnership agreement; the memorandum and articles of association govern the limited
partnership company.
Liability of partners. The active partners who act in the capacity of a trader are jointly and severally liable for the obligations
of the company. The silent partners are not liable for the obligations of the company other than to the extent of their respective
shares in the capital (see also Question 2.
Assets. Assets are held in the name of the partnership company
Legal personality. The limited partnership company has a separate legal personality.
Taxation. There is no taxation on limited partnership companies.
Civil Partnership
Set up. A civil partnership must engage a local service agent (Question 2).
Applicable legislation/regulation. The Civil Code.
Liability of partners. The partners' liability is unlimited.
Taxation. There is no taxation on civil partnerships.
6. What are the formalities for setting up a joint venture?
Structure
Joint ventures (JVs) are common in the UAE not only between domestic companies but also between foreign companies and
local businesses, as there are large amounts of inward investment, and foreign ownership is restricted in certain sectors (see
Question 19. Foreign companies can take advantage of the local knowledge and expertise in the local market by local companies.
Co-Ownership Arrangements
Two individuals or entities can set up a new entity to be the dedicated JV company carrying out the business of the JV.

JVs with Unincorporated Bodies
Entities and/or individuals can also enter into contractual JV agreements for specific projects which do not result in the
incorporation of a company.
JV Agreement
A JV agreement or contract regulates the obligations and respective entitlement of each of the JV partners, including all the
rights and responsibilities, liabilities, management structure, requirements of formation and the distribution of profits and losses.
7. Are trusts (or a local equivalent) available in your jurisdiction?
Federal Decree-Law No. 19 of 2020 Concerning Trusts is the trust law for the UAE mainland. A trust can be a charitable trust
(with a humanitarian purpose) or a special trust (for the investment and use of property). A trust can:
• Enable the assets of a natural or corporate person to be held within a stable structure.
• Help to avoid tax liability.
• Protect assets from creditors.
• Dictate the terms of an inheritance for beneficiaries.
The DIFC has its own trust law (DIFC Law No. 11 of 2005).
Forming a Private Company
8. How is a private limited liability company or equivalent corporate business vehicle most commonly used by
foreign companies to establish a business in your jurisdiction formed?
Regulatory Framework
Mainland LLCs are governed by the CCL.
The licensing authority for the registration of a mainland LLC is the DED.
For LLCs established in a free zone, the regulator is the free zone authority of that free zone (see Question 1).

There may additional be regulatory approvals required to establish an LLC, depending on the activity of the company (see
Question 19).
Requirements for the formation of companies in the UAE mainland can be found on the DED website.
Tailor-Made/Shelf/Numbered Companies
There is no concept of a shelf company in the UAE.
Formation Process
The process is as follows:
• Step 1: initial approval and trade name reservation. The incorporating shareholders must provide three name options
and duly notarised and attested constitutional documents such as the incorporation certificate, memorandum of
association, board resolution resolving to incorporate the LLC, and commercial register extract. The passport of the
proposed manager and of the ultimate owner (holding 25% or more shares directly or indirectly) of the LLC will be
required for initial approval of the DED.
• Step 2: certificate. The DED will issue a trade name reservation certificate and initial approval certificate for the LLC
based on the documents provided under step 1.
• Step 3: memorandum of association. The memorandum of association should be drafted and signed before the Notary
Public by the shareholders or their representatives.
• Step 4: lease agreement. Based on the certificates issued by DED under Step 2, the LLC must enter into a lease
agreement in the mainland and register the lease with the Land Department.
• Step 5: business licence. The application for registration must be submitted to the DED with the above documents and
the registration and license fees must be paid. In addition, 5% of the lease agreement value must be paid to the DED
which will issue the business licence.
• Step 6: open a bank account for the company and obtain labour and immigrations cards.
Company Constitution
The main constitution documents of an LLC are its trade licence, memorandum and articles of association. These documents are
not generally available to the public, and the information available on websites is limited. In certain free zones, model articles
are available publicly and can be modified in line with the requirements of the LLC.
The constitutional documents of a mainland company are generally issued in bilingual format , i.e. in Arabic and English,
executed and duly notarised before the notary public in Dubai.
The constitutional documents of free zone entities can be in English, and are signed before the relevant free zone authority.
The memorandum of association of an LLC must include the :

• Full name of each shareholder and their nationality, date of birth and domicile.
• Name, address and trade name, if any, of the company and the object for which it was established.
• Head office of the company and its branches, if any.
• Share capital of the company, the shareholding of each shareholder, the estimated value of those shares, the means by
which they are assessed and their due dates.
• Commencement date of the company (and the planned date of termination, if any).
• Method by which the company is to be managed, the names of the company's authorised signatories and the extent of
their powers.
• Start and expiry dates of the fiscal year.
• Profit and loss sharing ratios (if applicable).
• Rules for transfer of shares in the company, if any.
• If the memorandum of association contains the name of the manager(s), then their full name, nationality, place of
residence and powers must be stated.
• Methods for settling disputes that arise from the affairs of the company, whether between the company and any of its
managers, or among the shareholders].
The memorandum of association must be signed by the shareholders before the Notary Public or the DED and must be filed
with the DED.
In addition to the constitutional documents, separate shareholder agreements can be used to encapsulate the shareholders' rights
and responsibilities, especially where a local shareholder is appointed as a nominee by a foreign shareholder to incorporate a
local entity for conducting activities which are not permitted by entities with 100% foreign ownership (see Question 20).
Financial Reporting
9. What financial or tax reports must the company submit each year?
Companies
Mainland LLCs' accounts must be audited by a locally registered auditor. The law requires LLCs to file their audited statements
with the relevant DED, but in practice there is currently no mechanism for doing this.
For free zone entities, the financial statements are filed with the free zone authority. This is mandatory in most free zones where
fines will be incurred for non-compliance.

Private joint stock companies and PJSCs must also have their accounts audited by a locally registered auditor. A PJSC must
disclose its financial statements to the public on a quarterly and annual basis.
Annual financial statements must be prepared in accordance with international financial reporting standards (IFRS).
Branches of Overseas Companies
A branch is an extension of its parent company and therefore is consolidated and forms part of the parent company's accounts
and reporting obligations. A branch office of a foreign company must have its accounts audited by a locally registered auditor
and the audited statements must be filed with the MOE.
A local service agent (see Question 2) does not need to have audited statements.
Trading Disclosure
10. What are the statutory trading disclosure and publication requirements for private companies?
The requirements are as follows:
• Trade name. The trading name of an LLC must:
• be derived from its objective or from the name of one or more of its partners;
• not contravene the public policy of the UAE;
• be followed by its legal status (for example, "Limited Liability Company" or "LLC").
• Communication. All contracts, documents, communications and application forms issued by a company must bear its
name, legal status, registration number and address.
• Signage. Companies must have a sign bearing their name outside their business premises.
11. How do companies execute contracts or deeds?
A commercial contract or deed in Dubai does not require notarisation.

Contracts can be signed by a director, general manager or authorised representative of a company. Electronic signatures are
valid and recognised in the UAE under Federal Decree-Law No. 46 of 2021.
Membership/Shareholders
12. Are there any restrictions on the minimum and maximum number of members?
An LLC can have between 2 and 50 members.
One person LLCs can be incorporated by a single natural or legal person (see Question 2).
Minimum Capital Requirements
13. Is there a minimum investment amount or minimum share capital requirement for company formation?
While there is no minimum share capital requirement prescribed under the CCL, most mainland LLCs in Dubai are incorporated
with a share capital of AED300,000.
The minimum share capital requirements for free zones vary.
14. Are there restrictions on the transfer of shares in private companies?
Article 80 of the CCL grants pre-emptive rights to the existing shareholders of an LLC, in the case of transfer of shares to a
third party.
Companies registered in free zones are also granted pre-emptive rights under the laws of the respective free zone.
A shareholder who wishes to transfer their shares must notify the other shareholders of the transferee's identity and the terms of
transfer, after which the existing shareholders can choose whether to exercise their pre-emptive rights and buy back the shares
at the agreed price.

The procedure and mechanism for transfer of shares is usually described in the memorandum of association of the company.
The transfer of shares must be made under a formal instrument duly attested as per the provisions of the CCL.
There are no other restrictions on transfers of shares]
Shareholders and Voting Rights
15. What protections are there for minority shareholders under local law? Can additional protections be given?
Is liability limited to the value of shareholders' shares?
The minority shareholders have a right to receive the annual audited accounts of the company and the right to inspect the
company's books and records (Articles 27 and 100 CCL).
Additional protections can be given to the minority shareholders by entering into a shareholders' agreement which include
provisions granting minority shareholders additional benefits and protection.
The liability of the shareholders of a LLC is limited to the extent of the capital contributed by the shareholder.
16. Are there any statutory restrictions on quorum or voting requirements at shareholder meetings? Must quorum
or voting rights be proportionate to shareholdings?
Statutory restrictions on quorum and voting requirements at shareholder meetings include the following:
• The quorum for a general meeting of the shareholders is attendance of shareholders holding at least 50% of the share
capital of the company (the articles of association can prescribe a greater percentage).
• The resolutions passed at a general meeting of the shareholders will only be valid if issued by the shareholders
representing at least 51% of the share capital of the company. (the articles of association can prescribe a greater
percentage).
• The voting mechanism must be determined under the articles of association of the company. The voting rights must be
proportionate to the shareholding in the company.
(Article 96, CCL)

17. Are specific voting majorities required by law for any corporate actions (for example, increasing share
capital, changing the company's constitution, appointing and removing directors, and so on)?
Certain corporate actions require a special resolution (that is, approval by holders of 75% shares of the company), including:
• Changing the name of the company.
• Amending the term of company (where it has a set termination date for incorporation.
• Amending the memorandum and articles of association of the company.
• Selling assets of the company.
• Discharge of debtors from their obligations.
• Mortgage of movable or immovable assets of the company.
• Making a compromise or agreeing on an arbitration.
• Increase of the company's share capital.
• Capitalisation of reserves.
• Reduction of share capital.
• Conversion of company to another legal form.
• Merger/acquisition of the company.
(Articles 108, 101, 154, 202, 276, 277, 285, CCL).
In practice, the relevant local authority can require 100% shareholder approval at a general assembly meeting for some of the
above actions.
18. Can voting majorities required by law be disapplied to protect a minority shareholder (for example, through
class rights, weighted voting or super-majority veto rights)?
In the UAE mainland, all shares have equal rights. Shareholders can stipulate in the memorandum of association that certain
resolutions require 100% approval of the shareholders instead of 75%, for example.
However, in free zones, different classes of shares have recently started to be used.

If there are different classes of shares, a resolution can be passed without approval of the other class of shareholders, by-passing
the voting majorities required by law.
Sectoral Restrictions
19. What are the conditions or restrictions on establishing a business in specific industry sectors? Are there
industry sectors in which it is not permitted to establish a business?
Some business activities are subject to regulatory approval. Approvals for strategic activities which are reserved for UAE
nationals, cannot be granted, such as activities related to public transportation, military equipment trading or manufacturing,
water and electivity related activities. Additional approvals/authorisations are required in the following sectors in the UAE,
for example:
• Media and Advertising. Companies engaged in advertising or media-related activities must obtain an additional
licence from the National Media Council, which is a federal institution that regulates and supports all media-related
activities in the UAE.
• Restaurants. Companies engaged in the restaurant business in Dubai must apply for additional approvals from the
Dubai Municipality (Food Control Department) and the Department of Drainage and Irrigation under the Dubai
Municipality. In addition, the restaurant must obtain a civil defence certificate from the Ministry of Interior.
• Hospitals/clinics. Hospitals and clinics must comply with the applicable rules and regulations of the Department of
Health and the Dubai Health Authority, including applying for permits and licences to operate.
• Educational institutions. Companies providing educational facilities need the additional approval of the Ministry of
Education and of the Knowledge and Human Development Authority.
There are certain industry sectors which are reserved for UAE nationals (see Question 20).
Foreign Investment Restrictions
20. Are there any restrictions on foreign shareholders/company members?
Strategic Activities

Businesses undertaking "strategic activities" require majority UAE national shareholders or must be wholly owned by UAE
nationals. Strategic activities include:
• Manufacturing or trading military vehicles, weapons and explosives.
• Banking and insurance-related activities (regulated by the Central Bank of the UAE).
• Fisheries-related services.
• Printing of bank notes.
• Telecommunication services (regulated by the Telecommunications Regulatory Authority).
There is no restriction on foreign shareholders of LLCs in Dubai carrying on trading, contracting, manufacturing, investments,
assembling, transport and logistics related activities
21. Are there any exchange control or currency regulations? Are there any registration requirements under anti-
money laundering laws?
Exchange Control or Currency Regulations
There are currently no exchange control or currency regulations in Dubai.
Anti-Money Laundering Laws
Federal Decree No. 20 of 2018 on Anti-Money Laundering and Countering the Financing of Terrorism as amended by Federal
Decree Law No. 26 of 2021 was issued with the aim of ensuring that UAE law complied with international standards on anti-
money laundering and countering the financing of terrorism. However, it imposes no registration requirements on companies.
Other Recording and Reporting Requirements
Economic Substance Regulations. The UAE recently issued the Economic Substance Regulations (Cabinet of Ministers
Resolution No. (31) of 2019 as amended by Cabinet of Ministers Resolution No. (57) of 2020) (ESR). These require all mainland
and free zone entities in the UAE to:
• Notify the authorities on an annual basis whether they are carrying on a "relevant activity" in the UAE (as defined
under the ESR),
• Provide details of any income which is subject to any tax outside the UAE, and the date of their financial year end.
If the entity is carrying on a relevant activity, it must provide a report with details of its activity, income, expenses and assets
and declaring whether the economic substance test is met. The report must be submitted within 12 months of the end of each
financial year.

"Relevant activities" include:
• Banking.
• Insurance.
• Investment fund management.
• Lease finance.
• Having their headquarters or a holding company in the jurisdiction.
• Shipping.
• Holding, exploiting or receiving income from an intellectual property asset .
• Distribution and service centres.
Real Beneficiaries Law. Any entity established in the mainland or free zone of UAE must disclose the details of its real
beneficiaries (that is, persons holding 25% or more of the share capital/voting rights of the entity through a chain of ownership)
at the time of the company’s registration and again on renewal of its commercial licence (Cabinet Resolution No. 58 of 2020
on the Regulation of the Procedures of the Real Beneficiary) (UBO Law).
The UBO Law was issued in August 2020 by the UAE Ministry of Cabinet Affairs in line with international disclosure
requirements and to shift the UAE towards greater transparency.
22. Are there restrictions on foreign ownership or occupation of real estate, or on foreign guarantees or security
for ownership or occupation?
In Dubai, there are certain designated areas referred to as “freehold areas”, where non-UAE nationals can own 100% of real
estate. There are no guarantees or security required as such unless the property is purchased via a property loan.]
In non-freehold areas, real estate is reserved for the ownership of UAE/GCC nationals. This applies to all Emirates.
Directors
23. Are there any general restrictions or requirements on the appointment of directors?
The following requirements apply for directors of LLCs in the UAE:

• A director must be 21 years or above.
• A manager of an LLC cannot manage a competing company or deal in any trade that competes with the business of
the company (whether on their own account or for third parties) without the consent of the shareholders in a general
meeting.
It is generally good practice for a foreign manager of an LLC to be sponsored by the company for their visa. This
means that the general manager should be on the residency visa of the company employing them. Although this is
not legally required, it is necessary from a practical perspective as banks in UAE require the general manager to be a
resident to carry out banking transactions for the LLC however the CCL does not expressly stipulate this.
There are no nationality restrictions or gender-based requirements for directors.
In addition, specific requirements for PJSCs are:
• A director of a PJSC cannot be a:
• board member for more than five joint stock companies based in UAE;
• managing director of more than one company based in the UAE.
Other general requirements for directors are as follows:
• Disclosure of interest. A director of a company who has a conflicting interest in respect of a transaction referred to the
board of directors for approval must notify the board of that interest, and cannot vote on the resolution.
• Loans to directors. No loans, guarantees or collateral security can be given by a PJSC to its own directors.
• Corporate directors. Corporate directors are not allowed in the UAE.
Board Composition
24. What are the legal requirements for the composition of a company's board of directors?
Structure
Except for a private joint stock company and a PJSC, there is no requirement for an LLC to appoint a board of directors, and
the management can be vested in a single manager.

A managing director of a PJSC can be elected by the board of directors and must not be the CEO or general manager of another
company.
The PJSC must appoint a secretary for the board of directors. The secretary must not be a director.
No person can be appointed or elected as a director of the company until they declare in writing their acceptance of the
nomination.
Number of Directors or Members/Shareholders
LLCs. The management of the company is vested in one or more managers, as determined by the articles of association of
the company.
PJSCs. The number of directors must be an odd number between three and 11.
Employees' Representation
Employees do not have a statutory right to board representation.
Re-Registering as a Public Company
25. What are the requirements for a business to re-register as a public company or when does an entity become
a reporting issuer?
Membership
The minimum number of members to incorporate a PJSC is five. However, this will not apply in case of conversion of a company
to a PJSC. Further, there is no limit to the maximum number of members of a PJSC.
Under the CCL, there is no restriction for a single person LLC to be re-registered as a public company, provided its legal
personality is maintained, and it meets the requirements under the CCL and the Securities and Commodities Authority’s
requirements in relation to the conversion.
Share Capital
The minimum share capital requirement for public companies is:
• AED30 million for a general company.
• AED40 million for a banking entity.
• AED250 million for an insurance company.

Other Key Requirements
A public company offering its shares to the public for subscription must comply with:
• The rules and regulations of the SCA.
• The listing requirements of the stock exchange on which its shares are listed.
See also Question 2
Tax
26. What main taxes are businesses subject to in your jurisdiction?
Income Tax. There is no corporate income tax in the UAE, except on oil companies and foreign banks.
VAT. Value Added Tax (VAT) is levied on tax-registered businesses, at a rate of 5% on a taxable supply of goods or services,
at each step of the supply chain. VAT-registered businesses collect the amount on behalf of the government, and consumers
bear the VAT in the form of a 5% increase in the cost of taxable goods and services they purchase in the UAE.
A business must register for VAT with the Federal Tax Authority (FTA) if the taxable supplies and imports exceed the mandatory
registration threshold of AED375,000.
A business can also choose to register for VAT voluntarily where the total value of its taxable supplies and imports (or taxable
expenses) exceeds the voluntary registration threshold of AED187,500.
Excise Tax. This indirect tax is levied on specific goods which are typically harmful to human health or the environment, at
the following rates:
• Carbonated drinks (50%).
• Energy drinks (100%).
• Tobacco and tobacco products (100%).
• Electronic smoking devices (100%) and liquids used in those devices (100%).
• Any product with added sugar (50%).

27. What are the circumstances under which a business becomes liable to pay tax in your jurisdiction?
See Question 26.
There is no concept of tax residence in UAE. However, companies can obtain a tax residence certificate from the Ministry
of Finance to be used in other jurisdictions under a double tax treaty, subject to the company submitting certain information
including the constitutional documents, proof of authorisation of the applicant, together with the last six months’ bank
statements.
The UAE is introducing a corporate tax regime which will be applicable to companies in the UAE with effect from June 2023.
28. What is the tax position when dividends or profits are remitted abroad?
There is no tax levied in the UAE on dividends or profits remitted abroad.
29. What thin-capitalisation rules and transfer pricing rules apply?
Not applicable.
Grants and Tax Incentives
30. Are grants or tax incentives available for companies establishing a business in your jurisdiction?

As currently there is no income or corporate tax applicable, no tax incentives are available for companies in UAE. Some free
zones offer a tax holiday for up to 50 years however, once corporate tax is introduced in the UAE, there may be certain incentives
available under the corporate tax regime (see Question 27).
Employment
31. What are the main laws regulating employment relationships?
Federal Decree by Law No. 33 of 2021 Regulating Labour Relations (Labour Law) governs employment relationships in the
UAE. This law applies to employees (whether UAE nationals or foreign nationals) working in an establishment in the UAE.
The financial free zones in UAE have their own labour laws.
With the exception of the financial free zones, all UAE entities are governed by the Labour Law.
See also Employment And Employee Benefits in the United Arab Emirates: Overview
32. What prior approvals (for example, work permits, visas, and/or residency permits) do foreign nationals
require to work in your jurisdiction?
To be able to work in the UAE, foreign nationals must:
• Apply for a residency visa from the General Directorate of Residency and Foreigners Affairs.
• Obtain a labour card from the Ministry of Human Resources and Emiratisation (MOHRE) demonstrating their
employment with the establishment.
• Sign an employment contract with their employer, which must be registered with the MOHRE.
Employees of free zone entities are granted labour cards by the free zone authority. Residence visas are also issued by the
immigration department in co-ordination with the free zone authority.
Proposals for Reform

33. Are there any impending developments or proposals for reform that concern any of the issues covered in
this Q&A?
There are currently no relevant proposals or developments affecting the matters discussed in Questions 1 to 32.
Contributor Profiles
Sherif Rahman, Partner
Al Tamimi & Company

T +971 4 364 1641
F +971 4 364 1777
E S.Rahman@tamimi.com
W www.tamimi.com
Professional qualifications. LLB, Alexandria University. Licensed Legal Consultant, Government of Dubai Legal
Affairs Department.
Areas of practice. Corporate structuring; mergers and acquisitions; private equity; foreign investments.
Recent transactions
• Advising on restructuring, acquisition and liquidation transactions, including business setup and change of
legal domicile.
• Advising on the Economic Substance Regulations, methods of implementation and related procedures.
• Advising on foreign investment setup or converting existing business to benefit from 100% foreign
ownership regulations.
• Advising major group of companies on the establishment and restructuring of clinics, transportation,
construction and logistics businesses, and implementing the structure.
• Advising a major group of companies existing in Dubai on the most prominent projects in relation to
entertainment, F&B, cinema, real estate, theme parks, hotel and shopping malls projects across Dubai.
Languages. Arabic, English.

Professional Associations/Memberships. Egyptian Bar Association.
Jogan Punjabi, Paralegal
Al Tamimi & Company

T +971 4 364 1641
F +971 4 364 1777
E J.Punjabi@tamimi.com
W www.tamimi.com
Professional qualifications. LLB, Mumbai University. Admitted to practice as an advocate with the Bar Council
of India.
Areas of practice. Corporate structuring; mergers and acquisitions; private equity; foreign investments; corporate
advisory.
Recent transactions
• Kalyan Jewellers - carrying out a due diligence and issuing a transaction opinion with respect to the UAE
subsidiaries of the Issuer, Kalyan Jewellers India Limited, pursuant to floating an IPO in India for raising
approximately USD 158 million.
• Providing advice to a prominent retail group in the UAE in relation to restructuring of its UAE entities.
• Providing advice relating to ultimate beneficial ownership (UBO) laws in UAE and preparing the UBO
registers for UAE entities.
• Conducting a due diligence in the real estate sector for a public joint stock company and drafting asset
transfer agreement.
• Providing structuring advice with respect to projects in the education sector and drafting cooperation
agreements and management agreements for such projects.
Languages.. English, Hindi.
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Establishing a Business in the United Arab Emirates, Practical Law Country Q&A...

Establishing a Business in the United Arab Emirates

Country Q&A | Law stated as at 01-Jun-2022 | United Arab Emirates

A Q&A guide to establishing a business in the United Arab Emirates.

Jogan Punjabi, Paralegal

© 2023 Thomson Reuters. All rights reserved. 1

Basis of Legal System

Federal or Unitary System

© 2023 Thomson Reuters. All rights reserved. 2

© 2023 Thomson Reuters. All rights reserved. 3

• The partners' liability is unlimited.

• A local service agent must be appointed.

Limited Liability Company (LLC)

• There many costs and formalities involved in maintaining an LLC.

• The shares of an LLC cannot be listed on a stock exchange.

Public Joint Stock Company (PJSC)

© 2023 Thomson Reuters. All rights reserved. 4

Private Joint Stock Company

• The minimum capital requirement is AED5 million.

• It is supervised by the Ministry of Economy (MOE) rather than the SCA.

Branch of a Foreign Company

• A bank guarantee of AED50,000 in favour of the MOE.

© 2023 Thomson Reuters. All rights reserved. 5

Establishing a Presence from Abroad

• Activities which mirror those of the parent company.

See also Question 2.

4. How can an overseas company trade directly in your jurisdiction?

Description. See Question 2

Licensing and other legal/regulatory requirements. See Question 2 and Question 3.

© 2023 Thomson Reuters. All rights reserved. 6

5. What are the formalities for setting up a partnership?

Set up. See Question 2

Applicable legislation/regulation. The CCL.

Partnership agreements. A partnership agreement is required.

Liability of partners. The liability of the partners is unlimited.

Assets. Assets are held in the name of the partnership.

© 2023 Thomson Reuters. All rights reserved. 7

Taxation. There is no taxation on partnership companies.

Set up. See Question 2

Applicable legislation/regulation. The CCL.

Assets. Assets are held in the name of the partnership company

Taxation. There is no taxation on limited partnership companies.

Applicable legislation/regulation. The Civil Code.

Liability of partners. The partners' liability is unlimited.

Taxation. There is no taxation on civil partnerships.

6. What are the formalities for setting up a joint venture?

© 2023 Thomson Reuters. All rights reserved. 8

JVs with Unincorporated Bodies

7. Are trusts (or a local equivalent) available in your jurisdiction?

• Help to avoid tax liability.

• Protect assets from creditors.

• Dictate the terms of an inheritance for beneficiaries.

Forming a Private Company

Mainland LLCs are governed by the CCL.

© 2023 Thomson Reuters. All rights reserved. 9

There is no concept of a shelf company in the UAE.

The process is as follows:

The memorandum of association of an LLC must include the :

© 2023 Thomson Reuters. All rights reserved. 10

• Head office of the company and its branches, if any.

• Start and expiry dates of the fiscal year.

• Profit and loss sharing ratios (if applicable).

• Rules for transfer of shares in the company, if any.