UAE Company Formation as per Corporate Tax Agent’s Advice

Starting a business in UAE offers great opportunities, but it’s important to understand the key tax and legal aspects before setting up. Here’s a brief guide on company formation in the UAE, from Tax Agent’s perspective.

Business Structure Options

  • LLC (Limited Liability Company): Requires a local partner holding 51% of shares; common for foreign investors.
  • Free Zone Company: 100 % foreign ownership, tax exemptions, ideal for specific industries like trading or manufacturing.
  • Branch of a Foreign Company: Allows full control but limited to the parent company’s activities.
  • Sole Proprietorship: Ideal for individual professionals like consultants, with limitations on employee numbers

Tax Considerations

  • Corporate Tax: 9% on profits above AED 375,000 (introduced in 2023). Freezones may be exempt if profit thresholds are met.
  • VAT 5% VAT on goods/ services; applicable to businesses with annual turnover over 375,000.
  • Withholding Tax: No withholding tax on dividends, interest o royalties. 
  • Double Taxation Treaties (DTA): The UAE has treaties with many countries to avoid double taxation.

Licensing & Registration

  • Business Activity: Must align with UAE’s approved categories.
  • Trade Name: Reserved and approved by the Authority.
  • Local Sponsor/Service Agent: Required for mainland businesses (LLC’s) but not for free zone companies.
  • Economic Substance: Some activities (e.g., banking, insurance) require proof of economic presence.

Employment Regulations

  • Visa & Work Permits: Business owners can sponsor visas for themselves and employees.
  • Labor Law: Governed by local regulations, including working hours, contracts, and end-of-service benefits.
  • WPS: Employers must ensure timely salary payments through the Wage Protection System.

Compliance & Reporting

Professional Advice

Engaging with a tax agent or business consultant is essential to navigate the setup process, ensure compliance with regulations, and optimize tax strategies.

How MACKA can help?

The UAE offers a favorable business environment but understanding local tax rules and regulations is crucial, MACKA can professionally guide you all through out and can streamline the company set up and ensure long-term success.

When will e-invoicing become mandatory in UAE?
E-invoicing will become mandatory by July 2026 under FTA regulations.
Can small companies delay implementation?
No. All businesses must comply. Small firms should prepare early to avoid penalties.
Why is integration important in e-invoicing?
Integration prevents duplication, saves time, and reduces invoice errors.
How can e-invoicing improve data security?
It uses encryption and secure servers, which protect financial information.
How can Mubarak Al Ketbi (MAK) Auditing help businesses?
We provide e-invoicing solutions, training, and tax compliance support, so businesses stay compliant and efficient.

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