United Arab Emirates: Destination UAE

Last Updated: 29 August 2018
Article by TMF Group

The United Arab Emirates (UAE) is a magnet for business thanks to its ultra-low tax environment, reputable regulation and convenient time zone. Over the past 20 years the seven emirates that make up the UAE have become a major international hub for business.

There is no corporate or personal tax in the UAE and no limits on the repatriation of capital or profits. Until very recently it was one of the least complex jurisdictions for doing business, with minimal admin, compliance and forms. Of the 94 jurisdictions analysed by TMF Group's Financial Complexity Index in 2017, the UAE was ranked least complex for tax and accounting compliance and described as 'among the least complex nations in the world'.

Free zones

Any complexity that did exist in the UAE, the index report added, was a result of the free zones. There are more than 40 free zones in the UAE, half of them in Dubai, with each catering to a specific business category. The best known are Dubai International Financial Centre (DIFC), Abu Dhabi Global Market (ADGM), Dubai Multi Commodities Centre (DMCC), Ras Al Khaimah Free Trade Zone (RAK) and Jebel Ali Free Zone (Jafza). All have their own licensing authority, regulations, fee structure and capital requirements.

'The UAE remains one of the less complex jurisdictions globally for accounting and tax compliance'.

'Companies looking to operate in or from the UAE, or that have employees based there, must register a legal entity,' says Stephanie Williams, legal and governance director for TMF Group in the Middle East. 'Every company active in the country requires a company licence, which is linked to the registered activity of the entity.'

In general, there are two options when setting up an operational entity in the UAE:

  • Free trade zone. There is no UAE-national shareholder or split ownership requirement for companies setting up in a free zone – a foreign entity or individual can have 100% business ownership. Free zone companies are limited in what they can do on the UAE mainland (ie outside the free zones) but can operate freely everywhere else.
  • Onshore jurisdiction. Onshore jurisdictions refer to any part of the UAE not within a free zone. They are subject to federal laws and regulations, with regulating and authority bodies under the Ministry of Economy in each emirate.

'The most common company types in onshore jurisdictions are representative office, branch office and limited liability company [LLC],' says Williams. 'An LLC requires a 51% local UAE shareholder; a branch or representative office requires a local service agent as the point of contact with local authorities. Being based onshore allows you to do business anywhere in the UAE.'

Other challenges are more practical. 'Getting the right staff visas can be complicated, and there is still a heavy reliance on paper – a graduate applying for a job will need to show their degree certificate,' says Lindsay Degouve De Nuncques, head of ACCA Middle East. 'But underpinning all this is a real desire within the UAE to be open for international business.'

The VAT hit

The UAE's reputation for business simplicity, though, has shifted over the past year. In January, the UAE and Saudi Arabia became the first members of the six-nation Gulf Cooperation Council (GCC) to implement the terms of a treaty to introduce VAT at a rate of 5% on many goods and services. The agreement lets members issue their own national VAT legislation and determine specific VAT rules in certain areas.

VAT registration is compulsory for UAE-based businesses with over 375,000 Emirati dirham (about US$102,000) of taxable supplies and imports, but optional for businesses with over 187,500 Emirati dirham of taxable supplies and imports. VAT returns must be filed electronically within 28 days of the end of each tax period (quarterly for businesses with a turnover of less than 150m Emirati dirham, monthly for those with a higher turnover).

VAT income will help the UAE government reduce its revenue dependence on oil and other hydrocarbons. Studies suggest VAT will contribute 1.2%–1.6% of GDP in its first year. But its introduction, following the introduction of excise on carbonated drinks, energy drinks and tobacco in 2017, has also made the UAE a more complex jurisdiction for businesses. The UAE rose from 92nd in TMF Group's Financial Complexity Index (the higher the ranking, the more complex the business environment) in 2017 to 74th this year. 'VAT is a big step away from the UAE's reputation as a tax-free paradise,' declares the 2018 report.

Jonathan Wheeler, TMF Group's regional director, Middle East and Africa, explains: 'VAT is a fundamental change to the way businesses operate locally. The transaction tax is embedded in virtually all functions of a company – from sales contracts to accounting and bookkeeping – so it is an important one for businesses to document and report correctly. However, the UAE remains one of the less complex jurisdictions globally for accounting and tax compliance – and a very attractive market for business.'

The GCC's VAT Framework Treaty will also be implemented in Oman, Qatar and Bahrain (most likely from 2019). Until that happens, special rules for inter-GCC transactions apply, adding huge amounts of complexity to the way businesses operate in the region.

'The adjustment period for companies operating in the UAE – and Saudi Arabia – is very much ongoing,' Wheeler adds. 'Based on the VAT compliance struggles we continue to see with companies six months since implementation, the biggest recommendation we can give is for companies to partner with local experts so that they can focus on their core operations.'

Despite the new complexity, Degouve De Nuncques stresses the UAE's business-friendly credentials. 'Once you are established as a business, the ongoing reporting requirements are quite simple, although the introduction of VAT and excise duty has increased that obligation,' she says. 'But VAT has also introduced greater expectations around business, and made financial regulation and finance functions more robust. VAT introduction has been a catalyst for much broader financial transformation in the UAE, and that is a very positive move.'

The direction of VAT in the UAE

TMF Group's Financial Complexity Index (FCI) looks at the complexities of maintaining tax and accounting compliance in 94 jurisdictions worldwide. The 2018 edition predicts that after VAT has been implemented in all GCC countries, the next step for the UAE will be to raise the rate from its current 5%.

Download the 2018 Financial Complexity Index.

Need more information? Get in touch with us today and discover how we help companies of all sizes to maintain focus on their core operations .

This article was written by journalist Liz Fisher, and produced in partnership with ACCA Global, first appearing in their September 2018 publication.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
BSA Ahmad Bin Hezeem & Associates LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
BSA Ahmad Bin Hezeem & Associates LLP
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions