What to Consider Before Opening Your Business HQ in The UAE
The UAE is the place to be if you want to make a profitable business investment. It’s the global hub for businesses around the world. Although the country is known as the 7th largest oil & natural gas producer, 71 percent of its GDP thrives on healthcare, tourism, construction, aviation, and other (non-oil) industries.
You can also benefit from the multiple business opportunities that UAE has to offer by setting up an offshore company. But before you make the move, consider the following:
What Are The Benefits?
UAE offers a politically stable business environment for entrepreneurs. It has a developed infrastructure with necessary roads, rail, ports, and airports to make your business accessible. In addition to this, UAE is home to the biggest banking and financial institutions including, HSBC, First Gulf Bank, and Standard Chartered Bank.
What Is The Tax Policy?
UAE is a business-friendly country. It attracts local and foreign business investment with its favourable corporate tax policies. UAE doesn’t tax the individual or corporate income. However, if you belong to the oil and gas sector, a 50-55 percent of the corporate tax will be levied on your earnings.
Moreover, banks that expand their subsidiaries in UAE have to pay a tax of 20 percent. Their tax policy for UAE-based, young companies is quite lenient, companies are charged with
- A one-time registration fee for an entry in the Register of Entrepreneurs
- A 5 percent tax on annual wages of employees that need to be paid to Emirate municipalities
- And 10 percent of your annual rent and warehouse rent
Offshore Company Or A Free-Zone Company?
There are 7 Emirates in UAE and each has a number of free zones and special trade policies. These free zones are controlled by an independent authority.
These independent authorities have the power to issue trade license, register businesses, and sign trade permits. Three options are available to businessmen; you can either open a Free Zone Company (FZC), Free Zone Establishment (FZE) or an offshore company.
There are pros and cons to all three options. FZE is owned and controlled by a single individual, whereas, an FZC is owned and controlled by two or more owners. Both zones, guarantee foreign ownership, tax exemption on foreign income, and the facility to hire locally.
But the drawback of these free zones is that it restricts business activities. Free-zone businesses can only trade within their specific zone. Some zones only allow industry-specific business operation in free zones. Lastly, a distributor or agent needs to be hired, if you want to trade outside a zone.
On the other hand, offshore companies provide entrepreneur more control over their business operations. You can establish your company in free-zone and avail tax exemptions while owning several international assets and conducting international transactions.
However, after issuance of license/trade permit or after purchasing shares in a local company, offshore companies can also trade inside UAE.
Do you still have questions about offshore companies and free-zones? Tune into Mikkel Thorup’s podcast, The Expat Money Show. He guides expats in setting up offshore companies in a profitable and systematic manner. To apply for a complimentary consultation and see if offshore incorporation is right for you click HERE.