Onshore companies in the UAE

The UAE is the center that allows you to operate in the UAE and the Gulf countries. A loyal tax burden allows local companies to obtain significant advantages for the markets of East and Asia. The decision to use a local company or a company registered in the free zone depends on the activities of the company. So the registration of an onshore company in the UAE is necessary if the company plans to work with all companies in the UAE (for example, selling products and services in the UAE) or the company will participate in government tenders. Some activities are possible only when using a local company.

Organizational and legal forms of onshore companies in the UAE

• Limited Liability Companies;
• Private Joint Stock Companies;
• Public Joint Stock Companies;
• Joint Participation Ventures;
• Partnerships (Limited Partnerships, General Partnerships).

The most commonly used form of the company is the Limited Liability Company (this form of the company will be mentioned further).

Requirements for onshore companies (Local company) in the UAE

According to the Law on Commercial Companies, a Limited Liability Company requires a minimum of 51% ownership of a local shareholder, i.e. a foreign investor can own only 49% of corporate rights. As a rule, it is not a problem for the UAE to find a local founder (partner). A real office rent is required for local companies, using Flesh Desk for this type of company is unacceptable.

Legislation

The UAE legal system is based both on the principles of the Shariah and the Romano-Germanic legal system. Sources of law in the UAE: the Constitution, Federal laws, legislative acts of certain Emirates. Commercial activity is regulated by:

• The Commercial Companies Law;
• The Law on Commercial Agents.

Requirements to the authorized capital

The Commercial Companies Law does not establish requirements for a minimum authorized capital, the main thing is to be able to divide the authorized capital into a corresponding percentage ownership. In practice, many companies continue to use the previous requirements for authorized capital (300,000 dirhams in Dubai and 150,000 dirhams in Abu Dhabi). Some sectors of the economy impose certain requirements on the authorized capital of the company.

Requirements for the director of an onshore company in the UAE

The residence of the director of the company in the UAE is not limited, the law does not allow the use of corporate directors for onshore companies. In practice, operational management is carried out by the director which is under control of the non-resident founder.

Taxation of onshore companies in the UAE

• Corporate tax

  At the federal level, UAE legislation does not set requirements for corporate tax for onshore companies. Each of the Emirates establishes additional taxation (in some emirates up to 55%), but in practice these rates are not applied. There is an additional tax for the companies engaged in activities related to oil production and oil refining. In some Emirates, there is a tax for banks at a rate of 20% of profits.

• VAT

  There is no VAT or similar tax in the UAE at the moment. At present, there is an active discussion of the possibility of introducing VAT on the territories of the Persian Gulf.

• Withholding tax

  There is no withholding tax in the UAE.

• Stamp duty

  There is no stamp duty on the territory of the UAE.

• Capital Gains Tax

  This type of tax is not available in the UAE.

It should be noted that the UAE does not apply transfer pricing legislation. There is no legislation on “Controlled foreign companies” in the country and “Fine capitalization rules” do not apply.

Reporting of onshore companies in the UAE

All resident companies are required to submit reporting. At the same time, accounting in English is allowed in accordance with International Financial Reporting Standards.