Establishing a Limited Liability Company (LLC) in Dubai, UAE, offers numerous benefits for businesses. Here’s a detailed overview of the legal framework, compliance requirements, and tax implications for setting up a Mainland LLC in Dubai. Legal Framework
Country Code: AE
Legal Basis: Mixed (Civil law and Sharia law). Sharia law applies to personal status matters for Muslims, while non-Muslims follow civil law.
Legal Framework: Governed by the Commercial Companies Federal Law No. 32 of 2021.
Company Form and Liability
Company Form: Limited Liability Company (LLC).
Liability: Shareholders’ liability is limited to the unpaid amount of their shareholdings.
Trade License
Approval: Business activities must be approved by the Department of Economy & Tourism in Dubai (DED).
Issuance: The trade license is issued by the DED upon incorporation and is valid for one year, renewable upon meeting specific requirements.
Requirements: Includes filing relevant forms, paying fees, and completing other necessary conditions for license renewal.
Business Residence Visas
Visas: Mainland companies can sponsor 2-year business residence visas for foreign directors and employees. The number of visas depends on the license package and office size.
Share Capital Requirements
Minimum Capital: No minimum share capital required. Adequate capital must be included in the LLC's memorandum of association and notarized by the UAE notary public.
Shareholders, Managers, and Secretary
Shareholders: At least one shareholder required, who can be a corporation or a natural person, resident or non-resident.
Manager: Minimum one manager required. The manager must obtain a business residence visa upon incorporation.
Secretary: Appointment of a company secretary is not mandatory.
Registered Office / Physical Office
Office Requirement: Mandatory to lease an office space of at least 100 sq. ft. within Dubai.
Lease Agreement: The commercial license is granted after submitting the Lease Agreement/Tenancy Contract to the Dubai Municipality/DED.
Municipality Tax: 5% of the lease amount is paid as municipality tax during registration.
General Meetings and Signatures
Annual General Meetings: Not mandatory.
Electronic Signatures: Permitted.
Re-domiciliation
Inward/Outward Re-domiciliation: Not allowed.
Compliance and Reporting
Tax Returns: Must be submitted to the UAE Federal Tax Authority within 9 months from the financial year-end.
Financial Statements: Companies must appoint an independent auditor and file audited financial statements annually within 6 months from the financial year-end.
Taxation
Tax Residency: Companies incorporated or effectively managed in the UAE are considered tax residents.
Tax Rates:
0% for taxable income not exceeding AED 375,000.
9% for taxable income exceeding AED 375,000.
15% for Multinational Enterprises with revenues over AED 3.15 billion.
Capital Gains: Treated as ordinary income and subject to corporate tax.
Dividends: Generally exempt from corporate income tax if certain conditions are met.
Withholding Taxes: No withholding taxes on dividends, interests, and royalties paid to non-residents.
Foreign-Source Income: Companies can elect to exempt profits from a foreign permanent establishment from UAE tax, subject to conditions.
VAT: 5% VAT applies to most goods and services. Export of services is generally zero-rated.
Other Taxes
No Personal Income Tax: There is no personal income tax, capital gains tax, real property tax, inheritance tax, estate duty, capital transfer tax, gifts tax, or wealth tax.
Real Property Tax: Levied on the transfer of properties (2% to 4%) and annual property tax on the assessed rental value in some municipalities like Dubai.
Conclusion
Setting up a Mainland LLC in Dubai offers significant advantages, including favorable tax rates, business flexibility, and access to a vibrant market. Understanding the legal and compliance requirements ensures a smooth incorporation process.
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