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Starting 0% Tax Company in Dubai: Imagine a business environment that not only thrives on innovation but also lets you keep every dollar you earn. Sound too good to be true? Welcome to Dubai, a land of boundless opportunity and zero corporate taxes. Yes, you heard it right—zero. In the current year of 2023, you don’t even have to leave your home to tap into this fiscal paradise; you can set up a 0% tax company in Dubai right from your living room.
In this guide, we’ll unfold the blueprint to establishing a 0% tax business in Dubai without ever setting foot in the city. From understanding Dubai’s appealing tax landscape to choosing a business structure that perfectly aligns with your ambitions, we’ve got you covered. We’ll even share insider tips on how to seamlessly register your company.
So, let’s dive in and discover how to maximize your profits and minimize your taxes in one of the world’s most dynamic business hubs.
On this page, you’ll learn about the following:
- Tax in Dubai Mainland vs. Freezone
- Steps to Start a 0% Tax Company in Dubai
- Step 0: Choosing the Optimal Business Structure
- Step 1: Online Application and Initial Consultation
- Step 2: Remotely Complete and E-sign Essential Documents
- Step 3: Travel to Dubai to Secure Visa Packages, Emirates ID, SIM Card and More
- Step 4: Open a Business Bank Account in Dubai
- Step 5: Get Tax IDs for Your Company in Dubai
Tax in Dubai Mainland vs. Freezone
Dubai offers two primary options for business setup: Mainland and Free Zones. Each comes with its own set of rules, regulations, and tax implications. Understanding these can help you make an informed decision about where to establish your business.
What They Are:
- Mainland: Businesses in the Dubai Mainland operate under the jurisdiction of the Dubai Economy Department and are generally free to do business anywhere in the UAE, including in the Free Zones.
- Free Zones: These are designated areas within Dubai where companies operate under a separate jurisdiction and enjoy special economic regulations and tax benefits.
|9% (from June 2023) above AED 375,000
|0% (expect some activities)
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Why We Recommend Setting Up in a Free Zone:
- Zero Corporate Tax: The most compelling reason is the 0% corporate tax rate. While mainland businesses will be subject to a 9% corporate tax starting in June 2023, Free Zone businesses can enjoy a 0% tax rate, provided they do not engage in commercial activities with the UAE mainland.
- Ease of Setup: Free Zones often offer streamlined setup processes, making it easier and quicker to start your business.
- 100% Ownership: Unlike in the mainland, where you’d typically need a local sponsor, Free Zones allow for 100% foreign ownership.
- Custom Duties: Many Free Zones offer exemptions from import and export duties.
- Operational Benefits: Free Zones often come with perks like simplified reporting requirements and the freedom to repatriate profits.
Given these benefits, setting up your business in a Dubai Free Zone can offer significant advantages, particularly from a tax perspective. It’s an option that provides both financial and operational flexibility, making it a highly attractive choice for businesses looking to establish a strong presence in the UAE. So, let’s get started with the step-by-step guide.
Free Zone 0% Tax Exemption
While Free Zones in Dubai generally offer a 0% corporate tax rate, there are certain activities and conditions under which this benefit may not apply. For example, businesses that engage in commercial activities with the UAE mainland are generally not eligible for the 0% tax rate and may be subject to the standard corporate tax rate of 9% starting in June 2023. Additionally, some Free Zones may have specific regulations that impose taxes on certain types of activities or sectors, such as financial services or oil and gas.
It’s crucial to carefully review the terms and conditions of the Free Zone you are interested in to understand the full scope of tax implications for your specific business activities. Consulting with a tax advisor familiar with UAE tax laws and Free Zone regulations is often recommended to ensure compliance and to make the most of the tax benefits available.
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Steps to Start a 0% Tax Company in Dubai
Step 0: Choosing the Optimal Business Structure
When choosing the right business structure in Dubai, it’s crucial to consider tax planning strategies alongside factors like liability protection and operational ease. For example, while LLCs and Sole Proprietorships (formed in the UAE Mainland) offer liability benefits, they may require local sponsorship, adding complexity to your tax planning.
Free Zone Business Structures: If your primary goal is to establish a 0% tax company in Dubai, Free Zone options like Freezone Company (FZC), Freezone Establishment (FZE), or Freezone Limited Liability Company (FZ-LLC) are excellent choices. An FZC requires multiple shareholders (up to a maximum of 5), whereas an FZ-LLC is designed for single-shareholder operations. Both structures allow you to benefit from Dubai’s favorable tax policies without the need for local sponsorship.
Branch or Representative Offices: For businesses looking to expand into Dubai without creating a separate legal entity, Branch Office or Representative Office structures are viable options. These setups enable you to take advantage of Dubai’s tax benefits while still operating under your parent company’s liability coverage.
Online Registration Benefits: Only Free Zone structures like FZCs or FZ-LLCs offer the convenience of online registration from the comfort of your home. This feature is not available for Mainland and Offshore companies.
By carefully selecting a business structure that aligns with your specific needs and objectives, you can establish a 0% tax company in Dubai in 2023. This crucial decision sets the stage for a successful venture in Dubai’s dynamic business environment, free from burdensome taxation or complicated financial regulations.
Step 1: Online Application and Initial Consultation
Kick-start your entrepreneurial journey in Dubai’s Free Zone by completing an online application via the designated portal. Carefully input all required information and hit the ‘Submit’ button. Shortly thereafter, a dedicated Free Zone representative will reach out to guide you through the subsequent phases, including securing your “Certificate of Incorporation.” This person will serve as your single point of contact, ensuring personalized assistance throughout the process. Feel free to pose any questions or clarify doubts with them.
Step 2: Remotely Complete and E-sign Essential Documents
Once you’re in contact with your designated representative, they will forward you the necessary documents to electronically sign and secure your Certificate of Incorporation. These documents include the “Memorandum of Association (MoA)” and the “Co-working Lease Agreement.”
Key Decisions to Make:
- Location within the Free Zone: Choose whether your business will occupy a shared desk in a co-working space or require more extensive facilities like a warehouse, based on your operational needs. Suppose you are running an online business, you might need to go for a minimum 1-flexi desk option, it’s not mandatory to work from there.
- Visa Requirements: Evaluate the number of visas needed for your business license. Opting for a license with zero visas may appear cost-effective but could present challenges, particularly if you lack a UAE residency visa. For instance, opening a bank account without one could be problematic. Moreover, residing in the UAE offers an enriching experience you wouldn’t want to bypass.
Required Documents for Submission
While filing your formation documents, you’ll also need to include the following:
- 3 Proposed company name
- Shareholder’s passport copy
- Shareholder’s previous Dubai entry stamp (optional)
- Shareholder’s passport-sized, color photograph
- Contact details: Email ID and mobile number
- Chosen Licence/Visa package
Estimated Timeline for Company Formation
After successfully submitting your documents, expect to receive your ‘Certificate of Incorporation’ and Dubai business license in due course. Below is an approximate timeline for your reference:
|Choose a unique name for your business
|Prepare required documents
|Submit documents online via official channels
|Varies by case
Access to E-Channel Immigration System
Upon your company’s formation, you’ll gain access to the E-channel immigration system, an online portal for visa, residence, and entry permit applications in Dubai. Note that an annual renewal fee of approximately AED 1200 is applicable, and this too can be managed online.
By meticulously adhering to these outlined steps and timelines, you’ll be well-positioned to establish a tax-free company in Dubai’s Free Zone successfully.
Step 3: Travel to Dubai to Secure Visa Packages, Emirates ID, SIM Card and More
Technically, when you complete step 2, your company is formed. Now, you need to visit UAE to get your residency visa and Emirates ID done with some other things. The Emirates ID is an identification card issued by the Federal Authority for Identity and Citizenship in the United Arab Emirates (UAE). It serves multiple purposes and is a legal requirement for all citizens and residents of the country, including expatriates.
Opt for a one-way flight ticket to the UAE for greater flexibility upon arrival. Once you land in Dubai, likely on a tourist visa, your immediate priority should be to acquire a local SIM card, with Du SIM being our recommendation for its reliability and extensive coverage. While these tourist SIM cards are tailored for temporary use, you can easily transition to a permanent number after securing your Emirates ID. You can submit the necessary documents at a Du retail outlet to make this transition. This permanent number will be invaluable for banking and other essential activities in the UAE.
Assessing Visa Packages: Dubai Free Zone entities offer a variety of Visa Packages for business owners. It’s important to note that the number of Visa Packages you opt for will directly impact your License costs. For instance, choosing a five-visa package will incur higher costs than a two-visa package.
Medical Check-up and Emirates ID
Before securing your UAE residency visa, a medical check-up is required. To start, apply for a medical appointment and choose a date. After you visit the medical center, you’ll receive the test results in your email within a few hours. If you pass, you’re eligible to apply for a residency visa. Approval might take some time, so be patient. Once approved, your next step is to get the visa stamped on your passport. Submit your passport to the Free Zone Authority office, and they will handle the stamping process for you.
Getting Your Emirates ID
After your visa is stamped, you can apply for an Emirates ID. You’ll receive an SMS notification when it’s ready for pick-up at the post office. By now, you’ve completed most of the important paperwork. You have your Certificate of Incorporation, Emirates ID, residency visa, and a local SIM card, setting you up for a successful start in the UAE.
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Step 4: Open a Business Bank Account in Dubai
Typically, Free Zone representatives will assist you through the first three steps, which include setting up your company, obtaining a residency visa, and getting your Emirates ID. But what about opening a bank account?
Some Free Zones offer bank account setup as a value-added service, though this usually comes at an extra cost. However, you can easily handle this step yourself. The process is straightforward: submit the necessary documents and either visit the bank in person or complete the process online. Once your account is approved, you’ll receive a checkbook, debit card, and your account details.
What You’ll Need: Required Documentation
When you’re ready to open a business bank account, make sure you have the following items ready:
- ID proofs for everyone who can sign on the account (this could be a Passport or Emirates ID)
- A document proving where each signer lives (like a utility bill or a rental agreement)
- A copy of your trade license
- A copy of your Memorandum of Association (MOA)
Note: Some banks might ask for more documents, especially if your business is in a specialized field.
By following these steps, you’ll be well on your way to having a fully functional business bank account in the UAE. Once you have your bank account, you can start running your business as normal in most cases.
Step 5: Get Tax IDs for Your Company in Dubai
The concluding step in establishing your Dubai Free Zone company is acquiring the relevant Tax IDs. Although all businesses in Dubai are expected to file for Value Added Tax (VAT), it’s worth noting that the general VAT rate in Dubai is 5%. While it’s not strictly mandatory for Free Zone businesses to file for VAT, we strongly recommend clarifying this requirement with your specific Free Zone authority.
As a Free Zone company, you may primarily conduct transactions outside of the UAE or with other Free Zone entities. This creates a somewhat ambiguous situation regarding VAT filing, so it’s wise to consult with experts or your Free Zone authority for clear guidance.
Starting from June 2023, all Free Zone companies are mandated to obtain federal tax IDs. Even if your business falls under the 0% tax bracket, you’re still required to file an annual 0% tax return. Therefore, as your last step, it’s advisable to secure a federal tax ID for your Dubai Free Zone company.
By addressing these tax-related matters, you’ll ensure your company’s compliance with local regulations and avoid potential penalties or legal issues down the line.
To get the 0% tax benefit, you should start a Free Zone company.
Yes, you can start a home-based company in a Dubai Free Zone.
The cost varies depending on the Free Zone. Typically, it can range from AED 10,000 to AED 50,000.
You need to submit some documents such as passport copies, business plan, and proof of address.
It usually takes around 3-5 business days to register a company in a Dubai Free Zone.
Yes, you can apply for a visa for yourself and your family members based on your company in a Dubai Free Zone.
You can run any business activity that is legally permissible within the Dubai Free Zone.
You need to have a physical office space to register your company, but there are options for a flexi-desk, business centers, shared offices, etc.
Yes, a foreigner can own 100% shares in a Dubai Free Zone company.
You need to renew your registration and license yearly and submit some necessary paperwork.
Yes, it is possible to open a bank account in the name of your Free Zone company.
Setting up a 0% tax company in a Dubai Free Zone is a multi-step process that requires careful planning, attention to detail, and adherence to local regulations. From the initial application and consultation to the acquisition of your federal tax ID, each step has its own set of requirements and timelines. Utilizing value-added services from the Free Zone authorities can be beneficial, but it’s crucial to know which tasks you can comfortably handle yourself to save on costs.
Securing all the necessary permits and IDs—be it your Certificate of Incorporation, Emirates ID, Residence Visa, or federal tax ID—not only gives you the legal clearance to operate but also solidifies your business foundation in Dubai. As you navigate through this journey, remember that due diligence, accurate record-keeping, and timely tax filings are your best allies in successfully establishing and operating your 0% tax company in Dubai’s competitive business landscape.