UNDERSTANDING UAE BUSINESS RESTRICTIONS & SPECIAL APPROVALS
Nonetheless, certain business activities may still be restricted for foreign LLCs or require UAE local partnerships. These activities are often related to specific sectors with strategic national significance, necessitating special approvals or licenses.
UNDERSTANDING FOREIGN LLCS IN THE UAE: STRUCTURE, OWNERSHIP, & CAPITAL REQUIREMENTS
A foreign LLC in the UAE refers to a Limited Liability Company established and registered in the mainland and owned by foreign investors, with a range of one to 50 shareholders. A foreign LLC may be owned by natural persons and / or legal entities. As a limited liability business structure, the foreign LLC is considered a separate legal entity from its owners, providing favourable limited liability protection to its shareholders. While there is no specific minimum capital requirement set under the Commercial Companies Law for a foreign LLC in the UAE, mainland LLCs are typically incorporated with a share capital of AED 300,000.
1. LEGAL REQUIREMENTS FOR ESTABLISHING A FOREIGN LLC IN THE UAE
There are key legal requirements for establishing a foreign LLC in the UAE. These requirements include adhering to the guidelines outlined in the Commercial Companies Law, complying with foreign direct investment laws and regulations, obtaining the necessary licenses and permits for the selected business activities, and registering the company with the relevant authorities, such as the Department of Economic Development (DED).
2. SECTOR-BASED REGULATIONS & GUIDELINES
Additionally, there might be specific sector-based regulations or guidelines applicable to foreign LLCs in the UAE depending on the selected activity. This is particularly relevant for activities falling under the “Relevant Activities” mentioned in the Economic Substance Regulations (ESR). Such activities may include banking, insurance, investment fund management, lease finance, and holding intellectual property assets, among others.
3. ONGOING COMPLIANCE & REPORTING REQUIREMENTS
All foreign LLCs are mandated to adhere to ongoing compliance and reporting requirements. These requirements include complying with the Economic Substance Regulations (ESR), which involve reporting relevant financial information and activities to the authorities on an annual basis. Foreign LLCs must also ensure compliance with the Real Beneficiaries Law issued in August 2020, which entails 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.
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
A foreign LLC can hire expatriate employees in the UAE, provided that the company complies with the relevant labour laws and obtains the labour card from the Ministry of Human Resources and Emiratisation (MOHRE), complete the employment contract formalities and registration with MOHRE, and applies for the necessary work permits and residency visas for its employees from the General Directorate of Residency and Foreigners Affairs.
Further a foreign LLC can own property in the UAE in designated areas referred to as freehold areas which allow non-UAE nationals to purchase real estate. However, adherence to specific regulations and procedures governing property ownership is imperative as per the laws of the UAE.
6. TAX IMPLICATIONS FOR FOREIGN LLCS IN THE UAE
The UAE offers favourable taxation rules for foreign LLCs compared to other economies in the region. The UAE corporate tax was implemented on June 1, 2023. A zero percent corporate tax is imposed for taxable income up to AED 375,000; a 9% Corporate Tax (CT) is applied on taxable non-qualifying income above that threshold, except for specific sectors like oil companies and foreign banks. Additionally, a Value Added Tax (VAT) of 5% is applied to taxable goods and services at each step of the supply chain. Excise tax is an indirect tax imposed on specific goods labelled as harmful to human health or the environment at different rates. For example, carbonated drinks are taxed at 50%, tobacco and tobacco products at 100%, and added sugar products at 50%.
TAKE AWAY – SETTING UP AN LLC COMPANY IN DUBAI & THE UAE
The timeframe to set up a foreign LLC in the UAE varies depending on specific conditions, including the complexity of the selected business activities, obtaining necessary external approvals and licenses, and completing the legal procedures. Typically, the setup process may take 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.
