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
- Financial Reporting: Companies must maintain financial records and may need annual audits.
- Tax Filings: VAT returns and corporate tax filings are mandatory, with deadlines bases on the company structure.
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.
FAQs
Is it important to seek for Tax Agent advice before setting up a company?
Yes, seeking tax agent advice before setting up a company in the UAE is highly important.
What are the things need to consider as a new entrepreneur asper Tax Agent Advice?
As a new entrepreneur in the UAE, here are key things to consider from a tax agent’s perspective, Business Structure, Tax Implications, Location, Local Sponsorship, Economic Substance, Licensing and Compliance, Work Permits & Visas, & Long-Term Tax Planning.
