Mainland company formation in Dubai
Mainland company formation in the UAE – is the most comprehensive option for creating a legal entity in the Emirates. This corporate vehicle has become especially popular owing to lifting restrictions for foreign investors in 2021.
Mainland Dubai companies are increasingly gaining interest from foreign businesses, including those from Europe and Asia. The reason for this is not only low taxes but also a unique business-friendly environment in which representatives of various countries easily adapt.
What does a mainland (local) company mean?
Companies formed directly in the emirate of Dubai (not in free zones) are called “mainland” companies. The word “mainland” is used to distinguish between companies operating in the main territory of the country and free zone companies. Mainland companies are also known as “local” companies since they are the ones that can fully operate in the UAE’s local (domestic) market.
Dubai’s local companies are registered and licensed by a single governmental authority – the Department of Economy and Tourism (formerly the Department of Economic Development). Dubai free zone companies, by contrast, are registered by the relevant free zone authorities.
Benefits of mainland companies in Dubai
|100 per cent foreign ownership
|From 1 June 2021, persons and companies from any country can open and fully own a local company in the UAE. Previously, a mainland company founded by foreigners was required to have a local partner (“sponsor”) – a UAE resident person with a share of at least 51% in the company. The foreign member’s share, therefore, could not exceed 49%. Currently, such restrictions remain for companies in several strategic industries (as set by the Government).
|No residency or citizenship restrictions for directors
|Exceptions exist only for strategic industries, where a mandatory percentage of local citizens on boards of directors is required.
|A clear selection of legal forms
|Forms of companies provided by the UAE companies law (from partnerships to public corporations) have equivalents in the laws of most countries. They are understandable to businessmen representing different legal systems.
|Access to domestic and international markets
|Dubai’s mainland companies can operate within the entire territory of the UAE and overseas. They are suitable both for trading in the UAE domestic market and international business activities.
|No restrictions on capital flows
|There are no exchange controls, restrictions on the repatriation of profits by foreign investors and no withholding taxes when paying income to non-residents.
|Local companies in Dubai enjoy very moderate taxation – 9% on profits exceeding the non-taxable threshold. The small business exemption is available as a temporary option.
|Participation in government contracts
|Local companies that meet certain requirements may participate in government projects on a competitive basis.
Forms of local companies in Dubai
The Federal Law No. 32 of 2021 “On Commercial Companies” (entered into force on 2 January 2022), specifies the following legal forms of business entities:
- General Partnership;
- Limited Partnership;
- Limited Liability Company (LLC);
- Private Joint-Stock Company (PrJSC);
- Public Joint-Stock Company (PJSC);
- Branch of a foreign company.
The most common form of a mainland company in Dubai, including among foreign investors, is a limited liability company (LLC). Here are its main features:
|A company name must be followed by the relevant legal form (Limited Liability Company or LLC). If there is only one company member, the name will also contain “Single Owner” (LLC – SO).The name must comply with regulatory requirements and not violate the public order of the UAE. A company may not use the names of existing companies.
|An LLC consists of members (partners) who can be individuals or legal entities. The minimum number of members is two, and the maximum is 50. A company can also have a single member. If a member sells his membership interest in the company, the remaining members will have pre-emption rights with respect to such interest.
|A company’s capital must be sufficient to achieve its objectives. The Government can set the minimum capital requirement for an LLC. Most companies engaged in trade or services do not need to contribute the amount of their share capital at incorporation (exceptions exist for certain activities). Where required, a company must deposit the capital to its corporate account in a UAE bank within the period prescribed by the Registrar.
|Limitation of liability
|As a general rule, members are not liable for the debts and obligations of the company with their personal assets.
|An LLC needs a real (physical) office in Dubai to be registered and receive correspondence. The size of the office must be adequate for the declared activities and staff of the company.The presence of an office is confirmed by a valid lease agreement upon registration (and then annually) to the registration authority and the bank.
|An LLC is managed by a director or a board of directors appointed by members from among them or third persons. Directors are accountable to the general meeting of members. A company may have a single director and owner. The general meeting of members must be held at least once a year within four months after the end of the company’s financial year.
|Principal corporate documents
License requirements for companies in Dubai
Before starting business, a local Dubai company must obtain a license containing the activities it plans to carry out. A license in Dubai is required for any company, and not just for those that intend to engage in the activities usually known as “licensed”, such as banking, insurance, securities market and others. There are several types of licenses, for example, industrial, trading, professional and others.
One type of license can cover several specific activities. Companies can choose from more than 2,000 economic activities permitted in the UAE. Careful selection of activities is essential for obtaining the proper business license and affects its cost. To get the license, you will need to pay license fees, the amount of which depends on the type of license and the number of intended activities.
The issuance of a license follows the company’s registration in the Commercial Register. A license is usually issued for one year, although a longer period is possible. The license must be renewed upon expiration by paying a new license fee.
How to open a mainland company in Dubai
A Dubai mainland company is registered at the emirate level. A company acquires legal personality upon entering the Commercial Register. Company founders from abroad will have to visit Dubai personally to set up a mainland company (first time at the initial approval, and then to get a residence visa).
The stages of mainland company formation in Dubai:
|1. Preliminary stage
|2. Main stage
|3. Additional steps
Taxes for Dubai local companies
- The federal taxes – VAT and corporate profit tax apply in Dubai and the UAE as a whole.
- The VAT rate is 5%. Some categories of goods and services are taxed at a zero rate or are exempt from VAT.
- The corporate tax rate (effective from 1 June 2023) is 9% on the profit exceeding AED 375,000.
- Dubai’s local companies can use the small business exemption. It applies to UAE resident companies with revenue not exceeding AED 3 million in the relevant and preceding tax periods. The exemption can be applied for tax periods ending on or before 31 December 2026.
- Mainland companies cannot use the 0% corporate tax rate available to “qualifying free zone persons”.
Reporting obligations of Dubai local companies
Mainland Dubai companies must prepare annual financial statements applying the international standards (IFRS). The UAE Federal Tax Authority may request the taxpayer to provide its financial statements to support the company’s declared profits. If a company receives revenue exceeding AED 50 million (about USD 13.6 million) during the tax period, the company’s financial statements must be audited.
Companies carrying out VAT-taxable supplies and registered for VAT must quarterly file VAT returns within 28 days after the end of each tax period (usually three months). Companies must register for VAT purposes and obtain a tax registration number.
A Dubai company must annually file corporate tax returns and pay the tax within nine months from the end of the company’s financial year. No provisional returns or advance payments are required. Since the corporate tax was introduced on 1 June 2023, filing the first tax return will become due in 2025.
For companies existing when the corporate tax was introduced, the first tax period began on 1 June 2023. Accordingly, they will need to submit their first tax return by 28 February 2025. Companies whose tax period begins, for example, on 1 January 2024, must submit their tax return before 30 September 2025. A company must register for corporate tax and obtain a separate tax number, regardless of whether it has a VAT number).
Open a mainland company in Dubai with Uniwide Advisors
Uniwide Advisors provides professional services for mainland company formation in Dubai. With us, you can:
- Form a local (mainland) company in Dubai;
- Obtain and renew all required licenses and permits;
- Choose and lease an office for your company in Dubai;
- Obtain a UAE resident visa for company owners and employees;
- Open a corporate bank account;
- Get expert advice on setting up, renewal, taxation and accounting of a local Dubai company.