DISTINCT FEATURES OF COMPANY REGISTRATION IN DMCC COMPARED TO OTHER ZONES
- Registration on the local territory..
- Registration in the Free Economic Zone..
In 2020, the United Arab Emirates issued Federal Law Decree No. 26, which allowed foreigners to 100% own commercial companies located in the UAE outside the FEZ. The law abolished the requirement that commercial companies be majority owned by UAE nationals, that companies must have a majority board of UAE nationals, and removed the requirement for a local agent from the UAE to be required. Thus, foreigners can now fully own businesses in the UAE in many sectors. Prior to this, the possibility of allowing foreigners to own 100% of the shares was one of the main advantages of registering companies in the FEZ.
COMPANY ESTABLISHMENT IN THE ZONEThe DMCC has recently issued new company regulations (DMCC Company Regulations 2020) applicable to entities (companies or branches of foreign companies) registered/established with the DMCC, effective January 2, 2020. Companies registered with the DMCC can now:
- adopt its own version of the charter;
- issuance of various classes of shares;
- transfer domicile/jurisdiction of incorporation from and to DMCC;
HOW TO REGISTER A BUSINESS?
STAGES OF COMPANY REGISTRATION IN DMCCThe following stages of company registration apply, which are listed on the official DMCC portal:
- Filing an application. Determining the type of license and type of activity. Within one business day after the request is received, the DMCC representative will provide access to a portal account specially created for the applicant, where he can submit an online application.
- Submission of an online application. The stage of filling out the form and paying the initial fee of 1035 AED (EUR 256). In seven business days, DMCC completes the company name reservation process.
- Payment, signing and submission of documents. The stage of payment of the registration and license fee, as well as the signing of legal documents. After five business days, DMCC will issue a pre-approval and a bank letter (to open a company bank account). If the applicant does not have the opportunity to come to DMCC, one of the international service providers of this FEZ can be used.
- Choosing the right office solution The applicant needs to sign and send the relevant documentation regarding the new office space. After 5 working days, DMCC will issue an electronic license that will allow the applicant to conduct business in DMCC.
ANNUAL AUDITThe management of the DMCC Free zone requires an annual audit of the company. Implementing rules require a DMCC member company to upload an auditor-signed and sealed Audited Financial Statement Summary Sheet and Audited Financial Statement Statement via a dedicated online request on the Member Portal within 90 days of the end of each financial year. Upon completion of the registration of the company, it is necessary to appoint an audit firm. In accordance with the Approved Auditor Rules (AAR), issued January 12, 2017, each DMCC member company is responsible for ensuring that their appointed auditor is registered as an approved auditor with the DMCCA and placed on the Approved Auditor List (AAL). The cost of accounting and reporting depends on the volume of turnover of the company. The minimum cost is from 10,000 AED per year.
OFFICE SPACEDMCC has a large selection of office space. You can rent a Flexi-desk (virtual office) or buy/rent an office in one of the 78 JLT towers. The minimum size of an office for one company is 50m2. Flexi-desk is a workplace in the DMCC business center, which is allocated for use for 16 hours per month. For hours spent in excess at the workplace, DMCC charges an additional fee. Flexi-desk entitles you to 3 residence visas.
THE AMOUNT AND PROCEDURE FOR SHARE CAPITALThe minimum share capital requirement for a new DMCC Free Zone company is AED 50,000 (EUR 12,380), the minimum amount of share capital per shareholder must be at least AED 10,000 (EUR 2,476). A branch of the company is exempt from capital requirements. The authorized capital must be paid into the company's bank account in the UAE within three weeks from the date of issue of the company's license. It can be subsequently withdrawn at any time. To confirm the contributed capital, a letter from the company's bank to the DMCC Free Zone Authority must be submitted. After that, the capital can be used in the interests of the company and at the discretion of the founder.
REQUIREMENTS AND RESTRICTIONS ON PERMITTED ACTIVITIESSpecialization of the free economic zone - DMCC Free Zone invites businessmen with any kind of business. There are 3 types of licenses available in DMCC: trade license, industrial license and service license. DMCC promotes and facilitates trading in a wide range of commodities, from gold, diamonds and precious metals to tea, food products and industrial materials. Each company is issued a license depending on the type of entrepreneurial activity. The license covers selected activities, but a company can also apply for multiple licenses or a general trade license. The full list of permitted events in the DMCC can be viewed at this link.
PROCEDURE FOR OBTAINING LICENSESA legal entity registered with the DMCC must not conduct or carry out any business or commercial activity in or outside the DMCC Free Zone without a valid license. To obtain a license, you need to follow a few steps:
- register a company in the DMCC;
- prepare the necessary package of documents;
- submit an appropriate application to the regulatory authorities;
- confirm the availability of sufficient capital to successfully run a business within 6-12 months;
- provide evidence of the necessary procedures in place to comply with strict KYC (know your customer) regulations;
- investors must demonstrate strict compliance with UAE laws regarding anti-money laundering (AML/CFT) laws and regulations;
- demonstrate the proper level of cybersecurity and data protection.
LICENSING REQUIREMENTSThere are several licensing requirements that the license holder must comply with:
- Initial valid real estate lease agreement, licensed for one year (must include tenant's name, company name, area of leased space and full address);
- Certificate of ownership of the property, or a document of title (originals must be provided), or a valid document indicating the date of entry into possession;
- The minimum required share capital requirement.
In addition, there are requirements for the founder to obtain a license:
- the company must be registered within the DMCC;
- capital resources and operating expenses should be calculated for 6-12 months;
- the company is obliged to comply with the requirements of the legislation and the anti-money laundering (AML/CFT) policy;
- providing a business plan and copies of valid passports of the founders of the enterprise;
- submission of a commercial license form issued by the Department of Economic Development;
- risk management procedures in place and mandatory information disclosure.
ADVANTAGES AND DISADVANTAGESDMCC can provide the following benefits of company registration and business organization within its jurisdiction:
- Possibility to have an office in the UAE;
- the company can open bank accounts in UAE banks;
- the opportunity to obtain resident and work visas;
- 100% ownership of the company by foreign founders is allowed;
- 100% withdrawal of capital and income received is allowed;
- complete absence of income tax;
- when doing business with residents of the UAE and countries belonging to the Cooperation Council of the Arab States, in general, a 5% VAT rate is applied;
- complete absence of income tax for individuals.
However, there are some disadvantages of registering a company in the DMCC that entrepreneurs need to consider:
- Companies have the right to conduct business only in international markets or within the zone of incorporation;
- mandatory presence of authorized capital;
- high cost of opening a company;
- high cost of license renewal.
As the world's flagship free zone and the Dubai Government's Commodity Trading and Enterprise Authority, DMCC provides a 50-year tax-free environment. Allowing you to register a company in the shortest possible time, DMCC is an excellent investment opportunity as DMCC offers many benefits for their companies.
The content of this article is intended to provide a general guide to the subject matter, not be considered as a legal consultation.