Corporate laws are the rules and regulations governing the formation and operation of businesses in the United Arab Emirates (UAE). These laws are designed to protect stakeholders’ interests, promote economic growth, and ensure the orderly conduct of business. As amended, the UAE’s corporate law regime is based on the Commercial Companies Law of 1984. This law applies to all businesses operating in the UAE, with the exception of corporations wholly owned by the federal government or any of the emirates. Companies must comply with the requirements of this law to obtain a trade license and operate legally in the UAE.
Corporate Laws on Company Ownership
The UAE’s Commercial Companies Law of 1984 requires that all businesses be incorporated as either a limited liability company (LLC) or a public joint stock company (PJSC). LLCs are the most common form of business organization in the UAE and can be either wholly owned by UAE nationals or foreign investors. PJSCs must be listed on the Abu Dhabi or Dubai stock exchanges and can be owned by UAE nationals, foreign investors, and other PJSCs.
There are certain restrictions on foreign ownership of businesses in the UAE. For example, businesses in the banking, insurance, and telecommunications sectors may only be owned by UAE nationals. In other sectors, such as aviation and shipping, foreign ownership is capped at 49%.
Corporate Laws on Governance and Management
The Commercial Companies Law requires businesses to appoint a board of directors and maintain corporate records. The board of directors is responsible for making decisions on behalf of the company and ensuring that the company complies with applicable laws and regulations. The corporate records must include minutes of board meetings, financial statements, and shareholders’ agreements.
The law also imposes certain restrictions on the management of businesses. For example, companies cannot engage in activities contrary to public morality or order. Additionally, businesses must comply with the UAE’s labor laws, which require that employees be given certain rights and protections.
Corporate Taxes in the UAE
The UAE does not have a corporate income tax. However, businesses must pay value-added tax (VAT) on their supplies of goods and services. VAT is levied at a rate of 5% and is payable on all supplies of goods and services made in the UAE. Businesses must also withhold taxes on certain payments made to foreign suppliers.
The UAE has double taxation treaties with several countries, which allow businesses to avoid paying taxes twice on the same income. These treaties generally provide for a reduction or exemption from withholding taxes on payments made to residents of the treaty countries.
The UAE has also entered into free trade agreements (FTAs) with several countries. These FTAs eliminate tariffs and other barriers to trade in goods and services between the UAE and the FTA partner countries.
Requirements for Incorporating a Business in the UAE
Businesses wishing to incorporate in the UAE must submit an application to the Registrar of Companies.
The application must include the following information:
- The proposed name of the company
- The type of company to be incorporated (LLC or PJSC)
- The registered address of the company
- The names, nationalities, and addresses of the company’s shareholders
- The names and addresses of the company’s directors
- The amount of share capital to be issued
- The purpose of the company
Once the Registrar of Companies has approved the application, businesses must obtain a trade license from the Department of Economic Development. Trade licenses are valid for one year and must be renewed annually. Companies must also register with the Chamber of Commerce and Industry.
Preferential Tax and Regulatory Treatment for Free Zones
The UAE has established a number of free zones which offer preferential tax and regulatory treatment to businesses operating in these zones. Free zone businesses are exempt from corporate income tax, VAT, and customs duties. They are also granted other benefits, such as 100% foreign ownership and long-term visa entitlements. These laws and provisions are designed to encourage foreign investment in the UAE.
The free zones are governed by their laws and regulations, which are generally more liberal than the UAE’s commercial laws. UAE Commercial Laws do not apply in the free zones, except to the extent that they are specifically mentioned in the free zone laws.
UAE Offshore Companies
UAE offshore companies are businesses that are incorporated in one of the UAE’s free zones but which carry on their activities outside of the UAE. Offshore companies are exempt from corporate income tax, VAT, and customs duties. They are also granted other benefits, such as 100% foreign ownership and long-term visa entitlements.
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