|Feature||Mainland Dubai||Free Zone|
|Ownership||A UAE National or an entity owned by UAE Nationals, must have a 51% shareholding||100% shares may be owned by a foreign national.|
|Minimum shareholders||A minimum of two shareholders if Limited Liability Company (LLC), where one of the shareholders is an Expatriate (non GCC National). Certain professional services licenses allow 100% ownership on Expatriate.||A minimum of one shareholder. A single shareholder LLC is titled a ‘Free Zone Establishment’ and a multiple shareholder LLC is titled a ‘Free Zone Company’.|
|Branch||The service agent must be a UAE National.||No requirement to have UAE National as service agent.|
|Conduct of business||May conduct licenced activities in the mainland, subject to any restrictions.||Entities doing business in Free Zones cannot conduct business activities in mainland Dubai.|
|Minimum capital requirement||The law prescribes no minimum capital requirement. However, the LLC is required to have capital that is sufficient for conducting its commercial objectives.||LLCs in a Free Zone are required to have a minimum capital. The prescribed minimum capital varies between AED 50,000 to AED 1 million depending on the Free Zone.|
|Tax||As such, no tax on profits is payable by entities operating in Dubai, except for certain specific industries such as banking. Value Added Tax or VAT is applicable at 5% for most of Business Activities all over UAE.||Free Zone laws prescribe a tax-free period where establishments and employees are exempt from tax on Profits. The period is usually of 50 years, which is extendable. Value Added Taxes are applicable when Companies in Free Zone export their Goods & Services to Dubai Mainland.|
|Physical office space||Mandatory for Companies requiring Multiple Employment Visas. Optionally, Desk Spaces or commonly known as Virtual Offices are Acceptable for Companies requiring upto 5 Employment Visas.||Mandatory for Companies requiring Multiple Employment Visas. Optionally, Desk Spaces or commonly known as Virtual Offices are Acceptable for Companies requiring upto 5 Employment Visas.|
|Customs duty||Normally 5% of the invoiced value is paid as customs duty.||Corporate entities are exempt from payment of any customs duties if the imported goods are for company use or for re-export outside of the UAE.|
While foreign nationals are permitted 100% ownership in Free Zones, the Commercial Companies Law (CCL) prescribes that UAE Nationals must own at least 51% of the shares in an entity incorporated in mainland Dubai to conduct Commercial (Trading) Activities. Professional Category Licenses in Mainland Dubai are exempt from requirement of 51% UAE National Ownership and 100% Shares can be held in the name of Foreign National or Entity.
With regard to UAE Nationals and foreign nationals, an overview of the minimum ownership requirement is listed below:
|Corporate Forms||UAE National Requirement|
|Corporate Forms General Partnership||UAE National Requirement, All the partners must be UAE Nationals.|
|Corporate Forms Simple Limited Partnership||UAE National Requirement, All the general partner must be UAE Nationals.|
|Corporate Forms Joint Participation Venture||UAE National Requirement, UAE National(s) should constitute at least 51% of the capital.|
|Corporate Forms Public Joint Stock Company||UAE National Requirement, UAE National(s) should constituted at least 51% of the capital, and must constitute the majority of the board of the directors. The Chairman of the board of directors should be a UAE National as well.|
|Corporate Forms Private Joint Stock Company||UAE National Requirement, As per Public Joint Stock Company.|
|Corporate Forms Limited Liability Company (LLC)||UAE National Requirement, UAE National(s) should constitute at least 51% of the capital. A foreign national may be appointed as the manager and director of the company.|
|Corporate Forms Branch of a Foreign Company||UAE National Requirement of a UAE National as service agent if the branch is established in mainland Dubai. 100% Ownership of Branch in the name of the Foreign Company|
The interests of foreign nationals with a shareholding can be protected by the following Commercial Companies Law (CCL) measures:
- Directors are liable to be sued by both the company and the shareholders for mismanagement (this includes the minority shareholders as well).
- A shareholder (who does not have a board seat) may review company books by permission of the board of directors or a General Assembly.
- A unanimous or 75% approval of the shareholders or directors is required for the Memorandum and Articles of Association.
- A Shareholders Agreement must be prepared, addressing key areas and providing mechanisms for the exit of shareholding of minority foreign shareholders.
The Jebel Ali Free Zone in Dubai offers an offshore jurisdiction. The purpose of companies incorporated in the offshore jurisdiction is mainly to act as a Holding Company. By law, a Holding Company is authorized to own designated properties in mainland Dubai and can own shares in other companies as well. An offshore entity is not regarded as an operational entity and does not require business licence.
Setting up an offshore company does not require a foreign company to establish any physical existence. This means no office space is required but all benefits of being a Free Zone entity can be availed. Not all corporate forms are able to be set up in a Free Zone environment. Usually entities permitted are Limited Liability Companies (LLC) and branch or representative offices of a foreign company.
If a Free Zone entity wishes to trade in mainland Dubai. It must appoint agents in the mainland area to carry out the distribution of their goods, similar to a foreign entity appointing a local Commercial Agent, registered or unregistered.
Note: Upon entry of goods into the mainland, either from another country or from a Free Zone, an import duty will be applicable.