UAE - Company Laws in Dubai

Dubai Competition Law

It primarily aims to prevent the formation of monopolies and to protect investors from the impact of other negative practices present in global trade. The document was developed based on WTO recommendations. The legalized provisions will help create a favorable investment environment for business development, increasing efficiency and competitiveness, as well as consumer welfare.

UAE - Dubai Law on Certificate of Origin

It is intended to protect the market from fraudulent documents regarding the origin of goods. According to this law, the Ministry of Economy has received the right to impose fines on persons who forge certificates and other supporting documents.

Federal Law Regulating the Registration of Commercial Establishments in Dubai

This legal regulation aims to increase the transparency of firms' operations and protect the interests of shareholders. All commercial enterprises are now required to develop common corporate governance criteria that strengthen the protection of financial information, increase managerial efficiency, and ensure the integrity of the work of top management.

Dubai Commercial Arbitration Law

It will regulate the work of courts that deal with domestic and international disputes. According to the new rules, legal disputes will be handled in local courts, and international disputes in the federal Court of Appeal of the capital. The provisions of the law have been harmonized with the principles of international arbitration as well as the law of the UN Commission on International Trade Law.

Main legislative provisions regulating the registration and operation of a business in Dubai

The basic conditions for doing business are registration with the Dubai Chamber of Commerce and Industry and having a license. For sellers of goods and services - commercial; for artisans, freelancers, and narrow specialists providing services - professional; for entrepreneurs engaged in production activities - industrial.

Licenses are issued for a period of one year regardless of their type and must be renewed thereafter. The Dubai Department of Economic Development is in charge of issuing a permit. However, most licenses must also be approved by the relevant ministries or other state agencies. For example, a permit for the right to engage in the following activities:

• Banking and financial transactions are approved by the UAE - Dubai Central Bank;
• Production of finished goods - at the Ministry of Finance and Industry;
• Pharmacy or medical practice – at the Ministry of Health.

The greatest requirements for opening are imposed on firms whose activities are related to oil and gas operations. Such companies are required to pay corporate tax. Some commercial products are subject to high excise duty: tobacco products and electronic cigarettes - 100%, carbonated drinks - 50%, bank guarantees are required for some types of activities.

What registration forms are available when opening a company in the UAE - Dubai?

1. General Partnership.
2. Partnership.
3. Joint Venture (JV).
4. Public Joint Stock Company (JSC).
5. Closed Joint Stock Company (CJSC).
6. A limited liability company (LLC).
7. Partnership by shares.

Dubai Joint Venture Design

A Joint venture is registered based on a cooperation agreement between foreign and local entities and their licenses that legitimize the chosen profession. The new joint venture does not need to re-license. An important condition for opening a joint venture is the distribution of capital: the share of a local representative must constitute at least 51% of the funds. At the same time, the profit and loss distribution ratio can be any (these are internal decisions of the organization). A joint venture is most suitable for parties involved in the implementation of some special projects.

Registration of a Dubai JSC or CJSC

According to UAE - Dubai legislation, organizations engaged in finance, insurance, or banking must be registered as a joint-stock company. Foreign companies working in the insurance sector, conducting financial transactions, or engaged in banking can open a branch or representative office in Dubai, which will be considered an asset on the state territory. This form of registration is suitable for the implementation of large commercial projects. To open a bank branch, a registered capital of 40 million AED will be required, for an insurance or investment company - 25 million AED, for a public joint-stock company - 10 million AED, and for a closed joint-stock company - 2 million AED. In joint-stock companies, at least a quarter of the shares must belong to public representatives.

Dubai LLC Company Registration

Opening a business in the form of a limited liability company is suitable for those who rely on the implementation of long-term projects in the territory of the principality. An LLC can only be opened if there are two people (the maximum number of participants is 50). The participation of each shareholder is limited to their share of the capital. Foreigners have the right to own shares not exceeding 49% (51% must be the share of a citizen of the country). An LLC can engage in any type of trade except for investment, insurance, finance, and banking.

To register an LLC, you need to:

1. Choose a name, get approval from the Department of Economic Development.
2. Prepare the charter and have it certified at the notary and the court.
3. Apply for the registration of the LLC in the register of commercial entities.
4. Make a founding agreement and publish it in the Ministry of Economy's bulletin.
5. Obtain a license.
6. Enter the LLC into the register of the Dubai Chamber of Commerce and Industry.

Get Information for Opening a Company in Dubai

Opening a Branch or Representative Office in Dubai Without Registration

Foreign firms have the right to open subsidiaries or representative offices in the territory of the Emirate without registering in the usual way. A branch is a full-fledged entity with the right to contract and work in any area for which it has a license. A representative office is a marketing and management center that researches orders and customers and collects information. It cannot employ more than 4 employees. The main work on the implementation of orders and projects with new clients is carried out by the head office.

A branch or representative office must be 100% owned by a foreign parent company, but a local representative will be required when registering in the territory of the principality. An individual citizen or a company 100% owned by a local resident can act in this capacity.

To open a branch or representative office without registering a company, you need to:

1. Find a local representative and, with their support, apply to the Ministry of Economy for a license. Before the permit is granted, the Ministry of Economy will contact the Dubai Department of Economic Development and the Federal Foreign Affairs Committee to obtain approval for the permitted profession.
2. Obtain a license.

Sole Proprietorship Registration in Dubai

It is suitable for artisan or professional activities. A sole proprietorship can be 100% owned by a foreigner, but the participation of a local agent is mandatory. They may not be directly related to the business but must receive a fee for brokerage services in communication with authorities, banks, etc. Payment can be in the form of a one-time payment or a percentage of turnover or profit.

Registering a Business in a Dubai Freezone

Opening a business in a UAE - Dubai free economic zone is the most attractive investment option for foreigners, as the latter has many privileges:

• Exemption from corporate and personal income tax for 50 years;
• 100% ownership of the business;
• No tax on the import and export of products;
• Free withdrawal of earned funds to the homeland;
• Receiving assistance from the state in personnel selection, solving housing problems, and providing warehouse and office space.

In addition, each FEZ specializes in the development of a specific section of the economy and has all the conditions for this, taking into account the specifics of this section. Free economic zones are located near highways, seaports, and airports, which facilitates the transport of raw materials and finished products. The presence of giant warehouse terminals in the ports also facilitates storage.

What is a Commercial Agency and What is its Advantage?

For many large and medium-sized companies, it is often more profitable to create a commercial agency instead of opening a new entity, that is, to hire an authorized person who will deal with advertising, sales, and distribution as a sole distributor, offering products and services on behalf of the company, negotiating, and concluding transactions. Usually, this type of cooperation is formalized as an agreement (contract agency) in which the agent is permanently hired and receives a commission.

Only a local person or a company that is 100% owned by a citizen of the country can act as an agent. The contract is drawn up so that the agent can use all the means of protection provided by the country's legislation.

The agency must be registered with the Ministry of Economy and operate in the territory assigned to it (usually the entire Emirate).

If a foreign company decides to stop its activities without a valid reason or does not want to continue the work, the hired agent has the legal right to compensation.

Taxation during registration

According to the Dubai Income Tax Decree of 1969, entities whose annual profit exceeds one million dirhams must pay tax. If the income is from:

• 1 to 2 million AED, then the tax will be 10%;
• 2 to 3, then – 20%;
• 4 to 5, – 40%;
• over 5 - 55%.

A customs duty of 5% is levied on imports.

What other rules must be followed to avoid breaking the law during registration and further work?

1. All types of activities must be licensed.
2. It is forbidden to use the workplace as a residence at the same time.
3. A special permit must be obtained if the organization wants to work during hours that are considered non-working according to general rules.
4. A special permit is required in the following cases:
   • It is necessary to work during the Ramadan holiday;
   • It is necessary to install an ATM outside the bank building;
   • For promotional events and promotions;
   • A transport vehicle with a trailer is used in the work.
5. The distribution of printed, audio, and video products that advertise objects and actions contrary to public morals and Islam is prohibited.