Introduction to Dubai

Dubai is one of the seven emirates that make up the United Arab Emirates. It has a population of 3,331,000 (as of 2019) and the second-largest territory in the country. Dubai, mainly centered around its capital bearing the same name as the emirate, is the most internationally renowned region in the UAE and is known for its stable economy. This reputation is attributed to the immense success of its capital city, reflecting the country's economic ambitions.

Dubai's Economy

In order to prepare for and withstand the depletion of its natural resources of oil and gas, Dubai is restructuring its economy. The emirate aims to transition towards high-value-added activities in trade, new technologies, and luxury tourism. While oil exports now account for only 5% of the region's GDP, Dubai aspires to become the world's leading hub for luxury tourism.

To achieve this, Dubai has invested in improving its infrastructure (airports, marinas, hotels, metro, shopping malls, amusement parks, etc.) and has already established a strong presence in the sector with iconic landmarks such as the Burj-Al-Arab hotel (the world's most luxurious), the man-made Palm Islands in the shape of a palm tree, and the Burj Khalifa, the world's tallest building (828 meters).

Taxation in the Emirate of Dubai

Like the rest of the country, Dubai enjoys one of the most favorable tax environments globally, particularly in its free zones, including the Dubai International Financial Centre, Jebel Ali Free Zone, and Dubai Media City. These zones offer the advantage of conducting business in English. In Dubai, businesses are exempt from various taxes, including corporate income tax, profit tax, capital gains tax, dividends tax, income tax, wealth tax, and value-added tax (in free zones). Additionally, there are no social security contributions on salaries, and no requirement to reside in Dubai, even if you have the opportunity to obtain a residence visa for yourself, your family, and potentially your employees through your business, establishing your fiscal residence without proof of address or physical presence, and, most importantly, without any income tax. Therefore, setting up a company in Dubai is currently one of the most effective tax optimization tools worldwide.

Establish Your Company in Dubai

Whether you are a business owner, future leader, e-commerce entrepreneur, consultant, or influencer, establishing your company in the Emirates – offshore, free zone, or mainland (LLC) – allows you to benefit from a particularly advantageous legal and tax framework. There is no requirement for a minimum share capital or a physical office space, and you can maintain 100% ownership of your business.

It is worth noting that despite its extremely favorable taxation, Dubai and the rest of the United Arab Emirates are not considered a tax haven by the OECD and are not listed as "non-cooperative tax jurisdictions."

The most common types of companies include:

1. International Business Company (IBC/ICC) - Registration details are not accessible to the public.
2. Limited Liability Company (LLC)
3. Holding Company
4. Foundation
5. Trust

Your choice will depend on your specific needs, but it is advisable to seek assistance from an expert company to navigate the legal and tax obligations and potential bank requirements. We are here to help!

1. Establish an Offshore Company:

If your goal is to establish an offshore company in Dubai or one of the Emirates to manage your affairs with greater flexibility and efficiency, hold shares in a company, or engage in international trade while reducing your overhead costs and taxes, you can:

• Open a bank account in the Emirates
• Hold shares in companies
• Conduct business worldwide (except in the Emirates)
• Engage in all activities (except insurance, banking, and financial institutions)
• Acquire real estate in Dubai (only if the offshore company is established in Dubai)

2. Establish a Free Zone Company:

For activities such as import/export, e-commerce, dropshipping, service provision (marketing, advertising, communication, consulting, IT), financial or real estate investments, and the hiring of employees (local or expatriates) without any social charges. Furthermore, accounting requirements are significantly simplified. The only restriction is that you cannot trade with the local population, only with other businesses (B2B).

In this context:

• You own 100% of the company's shares and capital (no need to partner with an Emirati)
• No taxation on the company, profits, dividends, or income
• No VAT
• Possibility of customs duty exemption
• Repatriation of all your funds to and from the Emirates
• No foreign exchange controls
• Obtain resident visas (valid for 3 years, renewable for life) for each family member
• Personal bank account in Dubai with one of the local banks
• Fiscal residence
• While it is possible to rent offices in the free zone, it is not mandatory.

Whether in a free zone or mainland, the most common types of licenses include:

• Commercial License
• Service License
• Industrial Production License
• Tourism and Travel License
• Cryptocurrency License

After establishing your company and receiving the necessary documents, you will need to apply for your company's identity card (establishment card, approximately within 48 hours).

Subsequently, you can initiate the process of obtaining your resident visas (visa, stamping, medical examination, fingerprinting, local identity card issuance, domiciliation registration, etc.).

We will be there to assist you throughout the journey.

3. Establish a Mainland Company:

Accessing the local market entails certain restrictions for non-locals, and the procedures for establishing your LLC differ from those in the free zone. However, like in free zones, establishing a mainland company requires obtaining a license, notarized registration, and designation of an accredited accountant. Additionally, having a commercial office or local premises is mandatory, and the incorporation process typically takes longer.

Until 2020, it was mandatory for your company's share capital to be 51% owned by an Emirati (sponsor). Today, for most activities, you can own 100% of your company's shares. However, it is mandatory to engage a Local Service Agent (LSA) to obtain the necessary documents and authorizations, as well as to complete all the required steps for establishing and managing your LLC.

VAT Exemptions

Since 2019, a 5% VAT is imposed on products and services, except for:

• Food products
• Healthcare
• Education
• Petroleum products
• Social services
• Financial services
• Residential real estate
• Bicycles

If your offshore, free zone, or mainland company is located in the following Dubai free zones, it may be exempt from VAT in the UAE:

• Dubai Cars and Automotive
• Dubai Textile City
• Dubai Aviation City
• Dubai Airport Free Zone (DAFZA)
• Jebel Ali Free Zone Authority (JAFZA)
• Al Quoz
• Al Qusais

There are more than 25 free zones in Dubai, each with its own characteristics and installation costs that can vary based on the type of license, commercial activity, and office space.

In addition to the zones already mentioned for VAT exemptions, there are also other free zones, including but not limited to:

• Dubai Design District (D3)
• Dubai Healthcare City (DHCC)
• Dubai International Academic City (DIAC)
• Dubai International Financial Centre (DIFC)
• Dubai International Humanitarian City (IHC)
• Dubai Internet City (DIC)
• Dubai Knowledge Park (DKP)
• Dubai Maritime City
• Dubai Media City (DMC)
• Dubai Multi Commodities Centre (DMCC)
• Dubai Outsource City (DOC)
• Dubai Production City (DPC)
• Dubai Science Park (DSP)
• Dubai Silicon Oasis Authority (DSOA)
• Dubai South
• Dubai Studio City (DSC)
• Dubai World Trade Centre (DWTC)
• Meydan Free Zone (MFZ)

Taxation

While the Emirates do not impose tax on dividends, corporate profits are now subject to taxation starting from June 1, 2023. However, this "Corporate Tax" applies only to free zone and mainland companies that engage in direct trade with companies in the Emirates (excluding free zones). The applied tax rate is 9% if the company earns an annual profit exceeding 375,000 AED.

Property Tax

Dubai imposes a property tax exclusively on expatriate tenants or owners. The tax rates are:

• 5% of annual rent for tenants
• 0.5% of the property's value for owners These amounts are collected monthly.

A Promising Environment for Cryptocurrency

Dubai aims to position itself as a global hub for cryptocurrencies to attract new investors. This includes creating its own crypto-coin and appointing a regulator to oversee and control activities related to virtual assets such as cryptocurrencies and NFTs.

As a result, cryptocurrency and blockchain companies now have access to customized licenses provided by the DMCC free zone. Many companies have already responded to this initiative, including Binance, FTX, Crypto.com, and Bybit. These companies benefit from the protection of a new law, the Dubai Virtual Assets Regulation Law, which includes:

• Mandatory registration with the Virtual Asset Regulation Authority (VARA), establishing an official presence in Dubai while providing international positioning and regulatory clarity.
• Know Your Customer (KYC) procedures.
• Anti-money laundering (AML) and counter-terrorism financing provisions.
• Supervision by the Dubai Financial Services Authority (DFSA) for cryptocurrency exchanges, requiring exchanges to implement measures to prevent market manipulation.

Dubai: An Ideal Place for Dropshipping

Dropshipping is a method of selling products online without the need to manage inventory, allowing sellers to focus entirely on marketing. This method is particularly popular among influencers who have chosen Dubai as their place of residence. Furthermore, many suppliers have also set up in Dubai, creating numerous connections. The advantages of this system include:

• Limited initial capital investment, as the investment is minimal.
• Products are shipped directly to customers by suppliers, including handling potential returns.

Useful Links:

• Official UAE Government Website
• Dubai Municipality
• General Directorate of Residency and Foreigners Affairs