Doing Business in Dubai

Legal Structure for Business:

The Commercial Companies Law which governs the operations of foreign business stipulates a total local equity of no less than 51% in any commercial company and defines seven categories of business organization that can be established in the UAE. Other requirements of the Law determine minimal capital contributions, the number of directors and shareholders and incorporation procedures as well as provisions concerning mergers and dissolution or conversion of companies. Exemptions from the 51% law are available

• Where the law requires 100% local ownership;
• In free zones including Jebel Ali Free Zone;
• Dubai Airport Free Zone, Dubai Internet City, Dubai Media City and Dubai International Financial Center
• In activities open to 100% AGCC ownership;
• Where wholly owned AGCC companies enter into partnership with UAE nationals;
• In respect of foreign companies registering branches or a representative office in Dubai;
• In professional or artisan companies where 100% foreign ownership is permitted.

The seven legal structures for business are:

1. General Partnership Company
2. Partnership-en-commendam
3. Share Partnership Company
General partnerships are limited to UAE nationals only. The Dubai government does not encourage the establishment of partnerships en commendam and shared partnership companies.
4. Joint-Venture Company
This represents a contractual agreement between a foreign party and a local party licensed to engage in the desired activity. The local equity participation must meet the 51% threshold but the profit/less distribution can be negotiated. There is no need to license the joint venture - the foreign partner deals with third parties under the name of the local partner who (unless the agreement is publicized) bears all liabilities.
5. Public Shareholding Company
6. Private Shareholding Company
By law, companies engaged in banking, insurance or financial activities must be run as public-shareholding companies. Foreign banks, insurance and financial companies can establish a presence by opening a branch or representative office. A minimum of 55% of the shares of a public shareholding company must be offered to the general public. The Board of Directors must have a minimum of three and no more than twelve directors. The minimum capital required is Dhs 10 million for a public company. The chairman and majority of directors must be UAE nationals and there is less flexibility of profit distribution than is permissible with limited-liability companies. An amendment to the Law permitted the choice of Vice-President from non-UAE shareholders indicating that non-UAE nationals can participate in the management of such a company at the highest level.
A private shareholding company, like a public shareholding company issue shares but not through public subscription and the private shareholding company's incorporating documents must preclude public share offerings. The company must have a minimum of three shareholders and the minimum capital required is Dhs 2 million. In all other respects, this type of company is governed by the same regulations applicable to public shareholding companies.
7. Limited liability company
This can be formed by a minimum of two and a maximum of 50 persons whose liability is limited to their shares in the company's capital. Companies Law stipulates that an LLC may engage in any lawful activity except for insurance, banking and investment of money for others. The minimum capital required is currently Dhs300,000 and while foreign equity in the company is capped at 49%, profit and loss distribution can be prescribed. Management may be the responsibility of the foreign partners, the national partners or a third party. To establish a limited-liability company:

Once licensed by the Department of Economic Development, the company should be registered with the Dubai Chamber of Commerce and Industry.
Branches/ representative Offices of Foreign Companies
The Commercial Company Law stipulates that branches and representative offices may be 100% foreign owned provided a local agent is appointed. Only UAE nationals or companies 100% owned by UAE nationals may be appointed as local agents. The local agent (sponsor) assists in obtaining visas, labour cards etc subject to a mutually agreed payment.
To establish a branch or representative office outside of the free zones, a foreign company should:

Professional Firms

According to Local Order No.63, 100% foreign ownership is permitted in establishing a professional firm provided that a UAE national is appointed as a local service agent. The local agent has no direct involvement in the business and is paid a lump sum or percentage of profits or turnover. The number of staff members that may be employed in a professional firm is limited. Architects, engineers, management consultants, health care professionals. Legal and accounting firms can obtain professional licenses and operate as professional firms.

Setting up in Free Zones:

Dubai's free zones are testimony to Dubai's forward looking government, its sound policy making and its commitment to promoting balanced growth and economic diversification and encouraging foreign direct investment. Within the free zones, multinational companies find the state-of-the-art infrastructure and liberal regulatory framework that are conducive to quickly and efficiently establishing operations in the region. Incentives vary by free zone but typically include:

• 100% foreign ownership
• Exemption from corporate and income taxes
• Exemptions from customs duties
• The freedom to repatriate both capital and profits
• Absence of currency restrictions
• Abundant inexpensive energy supply
• Efficient transport and distribution facilities
• A high level of administrative and recruitment support via free-zone authorities' comprehensive and efficient One Stop Shop facilities.

From the JAFZA to DMC, Dubai has created robust economic clusters around its free zones and spared no cost in ensuring that these free zones are at the cutting edge in terms of infrastructure and strategic positioning. These knowledge clusters provide significant efficiencies and competitive advantages to companies and have been key in transforming Dubai to a knowledge economy. Dubai's meteoric rise to a position of leadership as an international trade and commerce hub can be largely traced to the policies that created the free zones and continue to pave the way forward with similar incentives and investments at the Government level.
Application procedures for the free zones are simple and streamlined with maximum support provided by the individual zones to speed the process for individual companies. When a company is approved for a Free Trade Zone, it is given one of the following licenses by the Free Zone Authority.

Trade License

Companies which are legally incorporated outside the UAE in imports and exports are permitted a Trade license. Ownership can remain 100% foreign and no license is required from the Economic Department

Industrial License

Companies that are legally incorporated in industrial production outside the UAE and are within the Free Trade Zone can be given an Industrial license. Ownership can be 100% foreign and no Economic Department License is required.

Service License

Companies holding a valid license from the respective government body in the UAE can offer banking, contracting services etc. but have to abide by any requirements of the governing body.

National Industrial License

Industrial manufacturers granted this license are accorded the same status as a local or GCC company in the UAE. Share capital must be at least 51% AGCC and 40% of the sale value of the product must be value-added.

Licensing:

The basic requirement for all business activity in Dubai is one of the following three categories of licences:

• Commercial licences covering all kinds of trading activity
• Professional licences covering professions, services, craftsmen and artisans.
• Industrial licences for establishing industrial or manufacturing activity.

These licences are all issued by the Dubai Economic Department. However, licences for some categories of business require approval from certain ministries and other authorities: for example, banks and financial institutions from the Central Bank of the UAE; insurance companies and related agencies from the Ministry of Economy and Commerce; manufacturing from the Ministry of Finance and Industry; and pharmaceutical and medical products from the Ministry of Health.
More detailed procedures apply to businesses engaged in oil or gas production and related industries.
Practising some trade activities (e.g. jewellery and insurance) requires the submission of a financial guarantee issued by a bank operating in Dubai.
In general, all commercial and industrial businesses in Dubai should be registered with the Dubai Chamber of Commerce and Industry.

Visa Regulations:

There are several types of visas for visitors to Dubai. A penalty charge of Dhs 100 per day is imposed on visitors who overstay.
Airlines may require confirmation that the sponsor is holding a valid visa for the incoming visitor.

• Israeli' nationals will not be issued visas.
• AGCC citizens: Citizens of the Arab Gulf Co-operation Council member states do not need a visa.
• AGCC residents: AGCC expatriate residents who meet certain conditions may obtain a non-renewable 30-day visa upon arrival at the approved ports of entry.
• Citizens of Western Europe and the Pacific Rim: Citizens of UK (with the right of abode in the United Kingdom), France, Italy, Germany, Holland, Belgium, Luxembourg, Switzerland, Austria, Sweden, Norway, Denmark, Portugal, Ireland, Greece, Cyprus, Finland, Malta, Spain, Monaco, Vatican City, Iceland, Andorra, San Marino, Liechtenstein, USA, Canada, Australia, New Zealand, Japan, Brunei, Singapore, Malaysia and Hong Kong will be granted a visit visa free of charge on arrival at any UAE port of entry. The visa enables them to stay for 60 days. The visa may be renewed once for a period of 30 days for a fee of Dhs 500.

Trading Regulations: Trading with Dubai

Direct trade International manufacturers and exporters may conduct business with Dubai by concluding transactions directly with importers and traders who are already established in the market. This type of arms-length arrangement may be suitable for low-volume trade.
However, for an ongoing business relationship, overseas companies may well want to consider a more permanent form of representation.
Commercial agencies
A foreign company wishing to supply goods and services from abroad, but without establishing a physical presence in Dubai, may find it advantageous to appoint a commercial agent. The main provision of the Federal Commercial Agency Law No 18 of 1981, as amended by Law No 14 of 1988, is that an agent must be a UAE national, or a company 100 per cent owned by UAE nationals.
A commercial agent may not carry out activities in the UAE unless its name is entered in the Commercial Agency Registry maintained at the Ministry of Economy and Commerce. The procedures and conditions for such an appointment are as follows:

• A commercial-agency agreement should be drawn up specifying the products and territories to be covered by the contract
• The agreement should be signed by both parties (principal and agent) and, if signed in Dubai, legalised before a Court Notary Public.
• The agreement should then be translated into Arabic by a sworn translator licensed to operate within the UAE.

The services of sworn translators are readily available in Dubai. If the agency agreement is signed outside the UAE:

Further Regulations

Imports into Dubai can be undertaken only by importers who have the appropriate trade licence. Import duties have been largely standardised at four per cent, but there are many exemptions, including food, building materials, medical products and any item destined for the Jebel Ali and Airport free zones.

• Food products must carry dates of manufacture and expiry and meat for the local market must have a certificate to prove compliance with Islamic law.
• Trade practices in Dubai are in line with normal international standards.
• All correspondence should be in Arabic or English.
• As a sophisticated market, full technical specifications should be provided with CIF Dubai prices and Middle East references.
• Payments are normally effected by letter of credit. The UAE is a member of the World Trade Organisation.