Tax Laws and Company Registration in Dubai
Dubai has become a desirable location in the entrepreneurial sphere as an ideal place for starting, relocating, or expanding a business. With very few exceptions, Dubai does not assess income taxes on business income and starting a business there is relatively simple compared to several western countries. The government of Dubai also offers several benefits for foreign investors with streamlined procedures to start a business in both mainland Dubai and designated economic free zones. However, tax laws and company registration in Dubai can still be difficult to navigate for novice investors and entrepreneurs. In 2018, the Federal Tax Authority instituted VAT requirements which not all business owners are subject to and has been the source of some confusion. For example, the Federal Tax Authority website states that ‘Any business which exceeds mandatory or voluntary registration thresholds may be required or may be able to register for VAT’. There are also different guidelines for who must register and who can register voluntarily.
- A business must register for VAT if their taxable supplies and imports exceed the mandatory registration threshold of AED 375,000.
- Furthermore, a business may choose to register for VAT voluntarily if their supplies and imports are less than the mandatory registration threshold, but exceed the voluntary registration threshold of AED 187,500.
- Similarly, a business may register voluntarily if their expenses exceed the voluntary registration threshold. This latter opportunity to register voluntarily is designed to enable start-up businesses with no turnover to register for VAT.
Registration itself is an 8 steps process, requiring individuals to submit statements and the appropriate documentation - which if incorrectly completed could lead to your registration being declined.
There are also specific rules to follow depending on what type of business you wish to register in Dubai and whether you will operate on the mainland or in a free zone.
Working with Tax and Business Advisors to Better Understand Tax Laws and Company Registration in Dubai
MZ Auditing & Consultancy has a distinct focus on the unique needs of cross-border entrepreneurs. We can assist you with all manners of financial compliance and business taxation in accordance with UAE law. While the lack of corporate income taxes has made Dubai attractive to the intrepid foreign investor, there are additional tax types to be aware of as well as steps you must take before commencing operations in the country.
Whether you plan to start, relocate, or expand your business in Dubai, you will need to decide if you will register your business in the mainland or one of the free zones. Pursuant steps include deciding which business entity to use, your trade name, office location, then you will need to apply for the appropriate business licenses and permits.
Registering Your Business in the Mainland or Free Zone
Free zones offer two types of business, Free Zone Limited Liability Company or Free Zone Company (FZ LLC and FZ Co. respectively) or a Free Zone Establishment (FZE.)
The free zones in UAE are designed especially for foreign investors and there are about 30 of them. Every free zone has its own authority and grants business licenses to foreign-owned companies with each zone purposely meant for specific industries or groups of industries. The Jebel Ali Free Zone is one of the largest seaport free zones in Dubai and other prominent free zones include the Dubai Airport Free Zone and Dubai Internet City.
Registering your company in a free zone has several benefits like tax exemption, customs duty exemption, low renewal fees, and being able to have 100% ownership yourself with no sponsors. The registration process is also expedited compared to starting a business on the mainland. If you register in the mainland, you are required to have physical office space but can do business all over Dubai instead of being restricted to the free zone. You also must grant 51% ownership to a local partner.
Allow us to guide you through
As we have outlined about there are many intricacies when it comes to tax laws and company registration so let us assist you with starting or migrating your business with little or no disruptions.