Procedure for Company Formation in Dubai

Narendra Kumar

26 Feb, 2025

Dubai is an important business center that has become an attractive hub for overseas investors. Dubai’s Companies Act was first enabled in 1984 and ever since it has gone through several amendments in order to provide local and foreign investors with a suitable business environment. Federal Law No.2 of 2015 on Commercial Companies establishes new regulations for those setting up companies in Dubai and the other regions of United Arab Emirates. Dubai Commercial Code regulates the existing business activities of Dubai. Lets know about the procedure for company formation in Dubai.

According to the Companies Act 2015, any company registered in Dubai must have one or more UAE citizens as partners who will own at least 51% of the share capital in the company. All companies must have a Memorandum of Association which will be drafted in Arabic and vetted by a public notary. Foreign investors opening companies in Dubai may draft the Memorandum in their native language provided that they also submit its version in Arabic when supplying the documents with the Trade Register.

• Foreign Investors will now be allowed to register limited liability companies & joint stock companies as holding companies in Dubai.
• The only places foreign investors may fully hold a Company Registration in Dubai is Dubai Free Zones.

Share Capital Requirement for Company Formation in Dubai:

In order to register a Public Joint Stock Company the Minimum Share Capital of 30 million AED will be required & for a Private Joint Stock Company, the requirement is 5 million AED.

Appointment of Independent Auditors is a must for setting up of Joint Stock Companies.

Types of Entities for Company Formation in Dubai:

• Private Joint Stock Company
• Public Joint Stock Company
• Limited Liability Company i.e. Min 2 to 50 Shareholders
• Free Zone Company i.e. allows 100% overseas ownership
• Offshore Company i.e. No Corporate Tax
• Onshore Company
• Partnership
• Branch Office
• Subsidiaries

The Incentive for Setting up Business in Dubai:

• Tax-Free Haven
• Strong Gov. Policies
• Business-friendly environment
• Tax-free Salaries
• Cheap Human Resource

Limited Liability Companies are the most popular types of business entity in Dubai. The minimum share capital is 3 Lakhs AED. However, it cannot perform activities in insurance, banking or investment sector.

Steps in Incorporation:

1. Search for a local sponsor or partner to own 51% of ownership.
2. Reservation of name of Company by applying to the Department of Economic Development.
3. Drafting & Notarization of Companies Articles & Memorandum of Association.
4. Submission of Documents & Business license application form to the Department of Economic Development.
5. Thereafter registration with Dubai Commercial Register under Dubai Companies Act.
6. Application of Business License from the Dubai Chamber of Commerce. (Commercial/Trade, Industrial or Professional License).
7. Appointment of 1-5 Managers as per the Companies Act.
8. The opening of the Corporate Bank Account.

Taxes in Dubai:

United Arab Emirates Government does not impose an income tax on companies & individuals living in the country. How so ever foreign citizens registered in their native countries & making profits in Dubai, have to pay some taxes.

Dubai has also signed certain Double Tax avoidance agreements & taxation treaties with other countries enabling it to become even more interesting for foreign investors.

There is no VAT in Dubai.

Currently, the UAE doesn’t have a Federal Corporate Tax Regime. Taxation is determined on Emirate to emirate basis. However, in reality, CIT is only imposed in respect of entities engaged in Oil & Gas Exploration at the rate of 55%.

Also imposition of 20% tax rate on taxable income of branches of the foreign bank. There are no withholding taxes for remitting dividends, royalties & interest abroad.