Shuraa

Author: Saima Khan

  • Why Dubai LLC structure in free zone is ideal for company setup

    Why Dubai LLC structure in free zone is ideal for company setup

    UAE has made a name for itself amongst all of the Middle East to be one of the countries with a large number of free zones for conducting businesses. With an abundance of opportunities and benefits, UAE has without a doubt attracted investors and entrepreneurs from all over the globe. 

    One of the most desirable factors of setting up a company in the UAE is the various structures of companies and benefits that come with it, particularly Free Zone Limited Liability Companies (FZ LLC). In this blog, we will explore what an LLC business structure is, its benefits all the way up to the differences between mainland and free zone to set up your company with the LLC structure in a free zone in Dubai and other emirates.

    What is a limited liability company in a free zone?

    A free zone establishment (FZE) or free zone company (FZC) is a limited liability company that is formed and governed by the rules and regulations of the free zone in which it is established. 

    There are two company structures for free zones businesses: Free zone establishment limited liability company (FZE LLC) and free zone company limited liability company (FZCO LLC). The feature of FZ LLC is that it has a single shareholder (single member LLC), unlike FZCO LLC where one can have multiple shareholders.

    Benefits of LLC structure in a free zone:

    One of the main benefits of having an LLC company structure is that it allows the shareholder of the company to be protected from personal liability, debt and more that may occur with the operations of the company.

    An LLC structure in a free zone in Dubai and other Emirates would also mean that you could only suffer losses up to the amount you have invested in your company and not any more than that. Therefore, LLC is a business that offers flexible ways to manage your profits and losses without being personally liable for the entire gains/losses. There are various other benefits of having an LLC business structure in a free zone including:

    • 100% foreign ownership: Foreign entrepreneurs can benefit from having complete ownership of their company with no local partner. However, you will need a local sponsor to whom you will be required to pay a mutually agreed annual fee.
    • Full repatriation of capitals and profits: Free zone companies can repatriate all their profits to their home country. Giving them the freedom to transfer 100% of their capital to their place of origin without any requirements.
    • No personal, corporate or income tax
    • Exemption from all import and export duty
    • Convenient recruitment and cost – effective workforce
    • Range of business activities: Free zones support a range of business activities. This makes it easy for individuals to connect and network.
    • Numerous options of facilities: There are various options for facilities you can choose for your business setup. This includes flexi-desk facilities, standard offices all the way to warehouse facilities.
    • UAE residence visa for 3 years 

    LLC company formation and licenses offered:

    When considering LLC structure in a free zone in the UAE, unlike mainland, it enables you to opt for an LLC structure regardless of the type of license you have. You will still have the protection of having a limited liability company LLC structure and not suffer any setbacks in terms of liabilities, unlike when you have a sole proprietorship where you could suffer 100% loss. The types of licenses you can have with LLC structure include:

    A free zone LLC structure is suitable for clients looking to provide services or obtain a professional license. Professional license in a free zone enables you to conduct business in local markets without the concern of debts or liabilities that could carry forward with your business.

    There are about 45 free zones that offer a structure of LLC in Dubai and other emirates.  The free zone that is most suitable for LLC structure for your company would depend upon the nature of your company such as the business activities, nature of the facility, number of visas and more. 

    LLC formation on mainland and on free zone:

    LLC company formations are usually formed on the mainland. Mainland companies with LLC structure would require 51% ownership to be given to a local sponsor while 49% is owned by the foreign expat.

    This is however not the case with free zones LLC company structure where the expat has the opportunity to have 100% ownership of the company without the need of a local sponsor. If you choose to have more partners in an LLC structure in a free zone, you are given the choice to choose how your shares are divided and do not need any other individuals in your business that you do not require.

    The similarities between a mainland LLC company and a free zone limited liability company is that you will still have the same protection of the LLC structure that would enable you to have. However, not all free zones have LLC structures.

    What’s the Difference between LLC and FZE in the UAE?

    Limited liability companies and free zone establishments have their set of benefits and limitations. Here, we compare them on various grounds to make it easier for you:

    1. Business Scope

    A key difference between LLC and FZE is that each has authorities that have its own set of rules and protocols. One common restriction imposed on businesses is that they’re only permitted to have an operating agreement within their designated free zone. It mainly refers to commercial licensing. Professional licenses can still work in the local market if they want to. 

    LLCs are free to trade independently with the local marketplace, any free zone, or even outside the UAE. The same applies to all commercial and professional business licenses.

    2. Office Space

    A free zone limited liability company license can be applied for with or without a physical address. For a minimum of 5 hours per week, administrations authorize the use of flexi desks or smart office spaces. Business Bay, Media City, and JLT are all good places to look for offices. 

    A minimum of 200 square feet of office space must be leased out yearly to qualify for an LLC license. Upon registration, the certified tenancy contract must be given to the Department of Economic Development (DED). The DED will then grant the LLC license.

    3. Authority Approvals

    A free zone limited liability company is managed by the authority in charge of it. By presenting the required documentation, you must obtain the necessary authorization from relevant departments. External approvals are usually not required unless a specific activity necessitates them. Standard permits from agencies such as the Department of Economic Development, the Ministry of Labor, and the Ministry of Immigration (MOI) are required for an LLC license. 

    Individual and corporate shareholders may have different documentation. It is occasionally necessary to obtain approval from external authorities. Education-related licenses, for example, are to be approved by the Knowledge and Human Development Authority (KHDA).

    4. Visa Eligibility

    Another vital aspect of free zone vs. LLC Dubai is visa eligibility. The number of visas available to free zone enterprises is limited. They are usually limited to one to six visa packages. If a corporation requires more, they must rent a physical area within their designated free zone. 

    The Ministry of Labor (MOL) issues LLCs a digital quota for visa candidacy. The quota is determined by the size of the office. One visa is granted for every 80 square feet of office space, with the number of visas available growing as the size of the office grows. Companies might request a separate quota for employees who don’t work in the office. 

    Get started in the world of business with Shuraa

    Getting your company formed all by yourself can be quite taxing and time-consuming. When starting a business in the UAE, there are various factors and steps that are involved in the process of business setup. For more in-depth information about the business structure of free zone LLC in Dubai, contact Shuraa Business Setup – one of the leading providers of company formation solutions.

    Our free zone specialists at Shuraa will guide you through the entire process and get you started with setting up your company in the UAE. You can get in touch with our specialists by contacting us on +971 44081900 or drop a WhatsApp message on +971 507775554. You can also email your query to info@shuraa.com.


    Author
    Seema Sasidharan
    Corporate Advisor | Free Zone Specialist

  • Detailed Guide to UAE VAT Registration Services in Dubai

    Detailed Guide to UAE VAT Registration Services in Dubai

    Dubai is known the world over as one of the foremost business hubs of the Middle East. Its stellar reputation as an entrepreneur- and investor-friendly city is the reason why, even during the pandemic, thousands of new companies are being formed regularly each month. This is because the UAE government has done, and continues to do, an excellent job at containing the pandemic to ensure the safety of all those residing in, and visiting, the UAE. The government also introduced several extensive stimulus packages to support UAE businesses impacted by the pandemic.

    If you are a new entrepreneur seeking UAE VAT registration services in Dubai, it is important that you learn whether your business is eligible or required to apply for VAT in the UAE. You must also understand the different types of VAT registration services in the UAE. The Federal Tax Authority is the government body responsible for implementing VAT. It has specified certain eligibility criteria that new businesses must satisfy to apply for VAT registration services in Dubai.

    VAT in the UAE

    VAT or Value Added Tax is an indirect tax imposed on the sale of goods and services. One of the most common types of consumption tax, VAT has been adopted by over 150 countries across the globe. In the VAT collection process, it is the final consumer in the supply chain that usually bears the VAT cost.

    In the UAE, VAT was introduced on January 1, 2018 and is also levied on imports of goods and services. Once you complete your VAT registration process in UAE, you will act as the tax collector on behalf of the Federal Tax Authority (FTA), collect the tax from your end consumers, and pay it to the government. Your business can also claim a refund from the government for the tax you have paid to your suppliers.

    VAT for UAE Businesses

    Businesses in the UAE that deal in taxable goods and services must register for VAT. Whether your company engages in trade on UAE mainland (onshore) or in UAE free zones, you will have to apply for VAT registration services in UAE, if you meet the eligibility criteria set by the FTA.
    As per the Federal Tax Authority, ‘A VAT registration covers ALL of the business activities undertaken by the registered person.’

    It is mandatory for your Dubai business to have a Tax Registration Number (TRN) to comply with the UAE VAT laws, if the UAE business qualifies for VAT mandatory registration threshold. A Tax Registration Number is a unique 15-digit number assigned to a vendor or business, by the Federal Tax Authority, that registers for tax purposes in the UAE. The TRN is issued once you complete your UAE VAT registration process. The TRN is important because it –

    • acts as a proof of your established and operative business status
    • allows you to claim input VAT on your business expenses and apply for VAT refunds
    • facilitates VAT returns filing
    • allows the business to collect UAE VAT on sales and pay to the UAE government
    • is as per UAE VAT laws and regulations

    Types of UAE VAT Registration Services in Dubai

    The Federal Tax Authority’s VAT eligibility criteria are dependent on a company’s annual revenue and annual taxable expenses.
    There are two types of VAT registration services in the UAE:

    1. Mandatory VAT Registration
    2. Voluntary VAT Registration

    Mandatory VAT Registration in UAE

    It is applicable on individuals or companies that have an annual turnover of AED 375,000 or more. If your business falls in this category, you are required to get a Tax Registration Number (TRN) to conduct your business in the UAE. You can then implement VAT on your supplies and collect VAT on behalf of the FTA.

    You are eligible to apply for Mandatory VAT Registration if you satisfy either of the following criteria:

    • Your business turnover and imports were more than AED 375,000 during the last 12 months
      OR
    • You anticipate that your business turnover and imports in the next 30 days will be more than AED 375,000

    Voluntary VAT Registration in UAE

    It can be applied by individuals or companies that have an annual turnover of more than AED 187,500 but less than AED 375,000. If your business falls in this category, you may apply for VAT registration and get a TRN, voluntarily. Should you choose to not register for VAT, you will not be fined, nor will you face any legal issues.

    You are eligible to apply for Voluntary VAT Registration if you satisfy either of the following criteria:

    Your business turnover or taxable business expenses or imports were more than AED 187,500 in the last 12 months
    OR

    • You anticipate that your business turnover or taxable expenses or imports in the next 30 days will be more than AED 187,500

    Here is a quick comparison between the two types of VAT registration services in UAE that are based on annual turnover.

    MANDATORY VAT REGISTRATIONVOLUNTARY VAT REGISTRATION
    Registration threshold is AED 375,000Registration threshold is more than AED 187,500 but less than AED 375,000
    It is mandatoryIt is optional
    Applicable if last 12 months’ turnover or imports were or exceeded AED 375,000Applicable if last 12 months’ turnover or taxable expenses or imports exceeded AED 187,500
    Applicable if your turnover in the next 30 days is expected to be more than AED 375,000Applicable if your turnover in the next 30 days is expected to be more than AED 187,500
    Non-registration within stipulated time will result in payment of fineNo fine or penalty associated with non-registration

    VAT Fines in UAE for Non-Registration

    UAE VAT Law requires that any business eligible for mandatory VAT registration must get themselves registered within the time frame specified by the FTA. Failure to do so will result in fine for non-compliance of procedure.

    If your business meets or exceeds the mandatory VAT registration threshold, you have 30 days from reaching the turnover limit, to register for VAT and obtain a Tax Registration Number. If you fail to register within these 30 days, your business will have to pay a late registration fine of AED 20,000.

    VAT Registration in UAE for International Companies

    If you are a non-resident of the UAE, that is, if you do not have a place of establishment or fixed establishment in the UAE, and your company is based outside the UAE, your business is categorised as an international company or foreign or non-resident business.

    As an international company, if you sell or expect to sell your goods or services in the UAE, and there is no other person who accounts for the VAT due in the UAE on your behalf, then you are required to register for VAT and get a Tax Registration Number.

    VAT Registration for Amazon Sellers in UAE

    If you are a vendor or a business located outside the UAE and want to sell your products or services in the UAE through e-commerce platforms such as Amazon and Noon, you must register your company with the FTA before you start selling online in the UAE.

    As a vendor on Amazon or Noon, you can start selling only after completing your VAT registration process in UAE and getting your TRN. If you register your business after making sales, your business will incur a hefty penalty. Also, the condition of a minimum turnover does not apply to these platforms.

    Conclusion

    When starting a new business in Dubai, there are many factors to consider before applying for VAT registration services. For in-depth discussion about how to register your company for VAT in UAE, what are the exemptions for UAE VAT registration, or to learn how Shuraa can help you with your VAT registration requirements in UAE, VAT compliance, and VAT refund processing connect with us today. Start today! Book your FREE VAT consultation with our VAT & tax experts.

    Since 2001, Shuraa Group has helped over 35,000 local and foreign entrepreneurs with customised Dubai company formation solutions, specific to their business needs. In addition to UAE company registration and VAT & accounting services, we also offer business centre and office solutions, Dubai bank account opening assistance, and reliable corporate sponsorship, among many other services.

    You can get in touch with us on +97144081900, +971506923280. You can also send us an email at info@shuraatax.com with your enquiry about UAE VAT registration services in Dubai.

    Author
    Hassan Sheikh
    UAE VAT Expert/Tax Consultant

  • Why form a Holding Company in Dubai Mainland?

    Without a doubt, Dubai attracts investors and entrepreneurs from all over the world seeking to expand their businesses in the commercial hub of the Middle East. Whether these are startups or corporate offices and branch offices of MNCs or family-owned businesses, the city is a hotspot for economic activities. In this blog we will explore why is it wiser to form a holding company in Dubai.

    Suppose you have a wellness clinic and with time, you want to set up a retail store for dietary supplements and publish a fitness magazine as well. Though the three business verticals are complementary, one license would not cover all the activities and services you plan to offer. Therefore, for running a clinic, you not only require a professional license from the UAE Department of Economic Development (DED), but your company also needs to be an LLC approved by the Dubai Health Authority (DHA). For trading, you need to get a commercial license. And for the printing press, an industrial license must be obtained.

    While you are free to choose the operational structure for each of your ventures, it is wiser to form a holding company in Dubai Mainland.  

    What is a holding company?

    In basic terms, a holding company is an LLC or a corporation which owns and controls subsidiary business entities. This parent company by itself does not provide any service or product or engage in manufacturing. Nor does it look after any operations. It mainly owns the stocks and controls the operating companies which do the actual carrying out of operations and activities. The holding company may either own 100% stocks or just enough to have undisputed control over its subsidiary firm. Each of the subsidiaries also have their own management to see to the daily operations.

    Five benefits of forming a holding company

    You might be wondering, why form a holding company in Dubai Mainland when an entrepreneur does have an option of investing in more than one business under multiple licenses? Therefore, listed below are some of the key benefits of incorporating a holding structure:

    1. Easy asset management – The parent company’s trademarks such as name, logo, real estate and equipment can be utilized by the subsidiaries as well.
    2. Legal Structure – Any legal change in the operational company can be simplified by making changes in the holding itself.
    3. Privacy of ultimate beneficiary – The information regarding shareholders need not be disclosed outside the holding.
    4. Investment in multiple ventures – You can have subsidiaries as branches or franchises. Via a holding, you can own numerous international franchises. At the same time, you can have branches in varied sectors. For instance, usually, the branch of a restaurant is another restaurant. But under a holding model, you can invest in retail, real estate as well as hospitality.
    5. Movement of employees – The human resource function becomes easier as the workers can be deployed from one organization to another to best utilize their skills.

    Costs involved

    If you are considering forming a holding company in Dubai Mainland, you have to process it via DED. Below is the general process along with approximate cost break up:

    • Obtaining initial approval: AED 120/-
    • Getting name approval: AED 620/-
    • Drafting Memorandum of Association (MoA): AED 1,500 onwards
    • Getting an office space
    • Local sponsor: Partner will have 51% of the shares
    • Activity fees: AED 15,000/-
    • License fees: AED 10,000/-

    To learn more about how to form a holding company in Dubai Mainland, get in touch with one of the leading providers of company formation solutions – Shuraa Business Setup. Call us on +971 44081900 or drop a WhatsApp message on +971 507775554. You can also email your query to info@shuraa.com.

    Author
    Saima Khan
    Corporate Legal Advisor | Holding Company & Investment Specialist

  • Starting a Financial Consultancy Company in Dubai Free Zone

    Starting a Financial Consultancy Company in Dubai Free Zone

    The UAE has become the go-to location for investors to set up a business. One of the noticeably booming businesses in the country is financial consultancy.

    Especially in Dubai, there is a high demand for aid in financial advisory. The demand is due to the increase in the businesses being established in the emirate. This inevitably leads to the need for additional support to ease the process of running a company. Hence, a lot of corporations turn to the aid of professionals in this industry.

    If you’re interested in starting your own company, continue reading to find out how you can obtain a financial consultancy license in Dubai free zone.

    Benefits of starting a financial consultancy company in a free zone

    • Full foreign ownership of business
    • Full profit repatriation
    • Strategic location
    • Global connectivity
    • Range of business activities
    • Time-efficient process
    • Convenient registration
    • No Currency restrictions

    Financial consultancy 101

    Financial consultancy services are those that are provided by certified financial consultants to individual clients, small and large scale corporations, as well as government agencies.

    Corporations and individuals who require expertise in accounting, debt management, insurance, fundraising and other aspects of finance would require the aid of financial consultants in Dubai.

    Activities permitted under the license

    The following activities are permitted under this professional license:

    • Financial statements and performance analysis
    • Market research, price trends, analysis, and future forecasts
    • Arrange feasibility studies
    • Operate consulting on securities, commodities, and related contracts
    • Investment portfolio modelling
    • Investment consulting services

    The cost for a financial consultancy license in Dubai is approximately AED 17,000. This price is with the inclusion of visa.

    Procedure to start a financial consultancy business in Dubai

    Setting up a financial consultancy business in a free zone is an easy procedure. These jurisdictions do not require plenty of paperwork and can be completed fairly quickly. The process is as follows:

    • Selecting the preferred free zone

    The first step in starting your company is to select the most suitable jurisdiction to fit your business needs. There are numerous free zone options. You can pick one depending on which available activities are the most fitting for your business.

    • Submit application forms and required documents

    The next step is to submit your application form. During this process you will also have to finalise the location of where your company will be based.

    • Start the process of visa application

    Upon submitting all the required documents, you can start the process of visa application. If you want to sponsor dependents, you can also register to do so during this stage. Based on the chosen free zone and activities, you will have a certain visa eligibility. However, exceeding that limit would require you to pay additional charges.

    • Open a bank account

    Having a free zone bank account is necessary to ease the process of running a business. This would help the investor keep track of their company’s finances such as expenses. This would also help to calculate tax liabilities smoothly and regulate cash flow more successfully. Moreover, having a corporate bank account is key to ensure you don’t need to complicate your business finances. It can be a one-stop solution for all your business’ financial needs.

    Documents required to start a financial consultancy in a free zone

    • Passport copy of the investor
    • Visa copy of the investor
    • 2 coloured passport sized photographs
    • Business plan

    Taking the chosen free zone into consideration, you may have to submit additional documents.

    Connect with Shuraa and start your company

    Free zone company setup in Dubai is undeniably one of the most opted choices for foreign investors. This is because the UAE free zones offer several benefits to entrepreneurs looking to venture into the world of business in the country.

    Shuraa is one of the top business setup companies in the UAE. Active for over 26 years, we have been aiding investors from around the globe to maintain their business. We guarantee that the entire procedure of setting up your company in the country is easy and quick.

    Get in touch with our free zone business experts and find out more about setting up a company in Dubai, UAE. Call us at +97144081900 or send a WhatsApp message on +971507775554. You also have the option to drop us an email at info@shuraa.com and get your queries answered in no time.