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Abu Dhabi, the capital city of the UAE, is the wealthiest Emirate and one of the fastest growing business and industrial centres in the Middle East regions. Abu Dhabi is a prosperous market and has been widely recognised for its foreign investment opportunities due to the stable economy, future project investments and state of the art infrastructure.
Abu Dhabi ranks in the top 10 biggest oil reserves holders globally and the International Monetary Fund expects the United Arab Emirates’ economic growth to nearly triple next year as the capital, Abu Dhabi, benefits from oil exports. Given the emirate’s hydrocarbons wealth, oil and gas will continue to play a leading role in the economy. However, a much wider range of industrial activity as well as other sectors will continue to grow with the IMF expecting Abu Dhabi’s non-oil economy to grow 3.3 percent from 3.2 percent in 2017.
The Abu Dhabi 2030 Economic Vision focuses on key priorities to enhance Abu Dhabi as a world class business hub to include; economic development through investment and entrepreneurial activity; infrastructure development and environmental sustainability; social and human resources development and optimisation of government operations.
This vision has led to high demands for setting up business in Abu Dhabi across multiple sectors to include; Metals, Aviation, Pharmaceuticals, Tourism, Healthcare, Transportation, Education, Media Financial Services and Telecommunication Services. This will allow for a reduced reliance on the oil sector as a source of economic activity and in turn allow for a greater focus on knowledge-based industries.
Setting up a company in Abu Dhabi
Establishing a business in Abu Dhabi typically follows the same key stages, however, there are nuances to be applied to individual business sectors.
There are various legal forms that a company in Abu Dhabi can take to include; Limited Liability Company, Branch Office, Representative Trade Office, Professional Service License, Free Zones and Commercial Agent (Exclusive Distributor).
Limited Liability Company (LLC)
A Limited Liability Company (LLC) is the most commonly used vehicle for setting up in the UAE as a foreign investor and is often the only choice for many business activities. A LLC can be formed by a maximum of fifty shareholders whose liability is limited to their shares in the company’s capital. At least 51% of the shares in the company should be owned by UAE National(s) or a 100% owned UAE Company (The Sponsor).
Setting up a branch office of a foreign company in the UAE is easy and an attractive prospect for clients in that it can be 100% foreign owned. A branch office is not a separate legal entity, but rather an extension of the parent company abroad. As such, a branch office will, when conducting business in the UAE, be acting on behalf of the foreign parent and as such be linked to all contracts entered into in the UAE. Depending on the parent company’s tax jurisdiction, profits earned by the branch will be taxable in the home country. (Please speak with your tax professional to see of the potential implications).
In order to establish a branch office, a National Service Agent (NSA) will need to be appointed. The NSA must be a UAE national (or a 100% UAE owned company). The NSA is normally in charge of dealing with local, and Federal authorities for the purposes of obtaining necessary documentation for the branch office and its staff; such as approvals, licences (including their renewal), labour cards and visas.
Setting up as a Free Zone entity allows the investor to own the business 100% without the need of a local Sponsor or National Service Agent. There are numerous Free Zones in the UAE and they are centred on one or more business industry categories and only offer related industry licences to these sectors. The key restriction of a free zone entity is that it is principally permitted to conduct business solely within its relevant free zone and is limited to performing solely those activities specified in its licence.
Commercial Agent (Exclusive Distributor)
Companies unwilling or unable to establish their own entity in the UAE but still interested in providing access to their products within the UAE or seeking to offer their services, may appoint a commercial agent in accordance with the provision of Federal Law No.18 of 1981 Regulating Commercial Agencies and amending laws thereof.
For more information about how to set up a company in Abu Dhabi, please contact me here.