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.