UAE: A Different concept of international jurisdiction Globalserve Seminar November 2013 By Phani Schiza Antoniou

UAE OR ‘The Emirates ‘ Situated in the southeast of the Arabian Penisula on Persian Gulf Federation of seven emirates since 1971 Dubai, Abu Dhabi, Ajman, Fujairah, Ras Al Khaimah, Sarjah, Umm Al Quwain Legal system is founded upon civil law principles and Islamic Shari’a law, the latter constituting the guiding principle and source of law 8.19 million population out of which 15% only are locals Non Oil Sector contributes 71% to GDP UAE- SOME FACTS

Strategic Location :closest proximity to top European and Asian markets: Access to 2.2 Billion Consumers World-class free zones: State of the art infrastructure 100% foreign ownership of business 100 per cent repatriation of capital and profits Easily accessible raw materials, cheap energy sources Zero corporate profit taxes and personal income taxes, with zero taxation with the exemption of foreign banks and oil exporting cos No minimum capital requirement to establish a limited liability company. Advantageous Tax Treaties with 71 Countries Stable Political Environment Strong Banking Sector World Bank ranked UAE 23 rd for Doing Business in 2013 Confidentiality WHY UAE?

There are 3 main options for registration of company in UAE : Mainland company – (LLC) Limited Liability Company But if the scope of the activities in the UAE is limited then branch of foreign company or Representative office can be considered Freezone company –onshore FZE or FZC IBC company- offshore Types of Company registration

 LLC; Limited Liability company  Shareholders: minimum 2 maximum 50  Gives access to the local market  Maximum foreign participation allowed 49%  Local partners UAE nationals with minimum 51% participation  Need office space/ warehouse  Residence permit is issued  Employee VISAs are eligible  No taxation  No foreign exchange restrictions  Apply benefits of double tax treaties Mainland company registration Mainland company registration

If the scope of the activities in the UAE is limited then consider:  Branch of Foreign company :  Needs local sponsor  May not carry out any commercial activity in its own name  May negotiate and enter into contracts on behalf of parent company  Support activities are allowed  If goods are supplied must come directly from parent  Representative Office  May undertake marketing and promotional activities on behalf of their parent company  Not permitted to trade Branch and Representative Office

 100% foreign ownership  Established at the Free Trade Zones; 40 Free zones  Could do business with companies within the free-zone or outside the country  Can do business locally only through a local distributor being a company registered in the mainland  There are free-zones which provide license with and without taking any genuine office space/warehouse – flexi desk offices  Different licenses are issued in accordance with line of business such as trading, consultancy/services, manufacturing  Residence permit issued  Employee VISAs are eligible to apply  No taxation  No foreign exchange restrictions  Application of double tax treaty benefits Free-Zone onshore company Registration Free-Zone onshore company Registration

 The Establishment of the Free Trade Zones ( FTZs) in the UAE has been one of the most significant and promising initiatives taken to attract foreign investment  An independent free zone authority governs each FTZ  Only Jafza Free trade zone ( of Dubai) and RAK ( of Ras Al Khaimah) offer apart from free zone companies, also international business cos ( IBCs) – offshore What are the Free Trade Zones?

 Do business only outside UAE  100% foreign participation  Can have tax free bank account in UAE  No employee VISAs are eligible to apply  No restrictions on foreign exchange  No taxation  Can aquire immovable property in the emirate where the free trade zone is i.e the Jafsa IBC can acquire real estate in Dubai and the RAK IBC can acquire property in Ras al Khaimah Offshore company formation Offshore company formation

 Limited liability company by shares  Shareholders: 1-15  There is no public register of shareholders and directors although it is held at the registered office but it is not open to public  Shareholders do not need to visit UAE to sign the incorporation documents  Registered agent is needed for the incorporation  No minimum capital is required but it has to be mentioned on the M&A  Bearer shares not allowed  Capital in AED or US$  Minimum one director and secretary; it can be the same and legal entity  No annual reports are needed to be filed  Change of shareholders and directors is accompanied by the resolution of members, execution of instruments, consents and amendment of M&A, while original M&A has to be returned; transfer of shares has to be approved by the registrar and proper instrument of transfer executed to be delivered at the Registrar Offshore company formation- corporate issues Offshore company formation- corporate issues

UAE OFFSHORE COMPANIES Offshore Jebel Ali Offshore (JAFZA) Must for Dubai Property Ownership Corporate Directors are not allowed Ras Al Khaimah Free Trade Zone (RAK) International Co Corporate Directors are allowed

UAE ONSHORE COMPANIES Onshore Mainland Limited Liability Company (LLC) Foreign Partner cannot own more than 49% Professional License 100% Foreign Owned but Limited Sectors Branch Setup 100% owned by Parent Co Free Zones Over 40 Free Zones to Choose From 100% Foreign Ownership

UAE RESIDENCY Fastest and Easiest way to become UAE Resident By obtaining “UAE Investor Visa” Setup a free zone company – 100% foreign ownership – No paid up share capital – No corporate tax – Travel to and from the UAE is easier – No personal income tax in the UAE – The UAE is an OECD “white listed” jurisdiction – Renewal Residency Visa every 3 years

COMPARISON RAK OFFSHORERAK ONSHORE Director Legal entities allowed 1 Yes 1 yes Secretary compulsory but can be same as director Yes Registered agent neededYes Shareholder : Minimum shareholders No minimum capital Legal entities allowed 1 Yes 1 Yes Limited liability companies√√ Confidentiality Company register not available for public inspection Yes Time for registration2 days but TaxNo COMPARISON RAK OFFSHORE & RAK ONSHORE

COMPARISON RAK OFFSHORERAK ONSHORE OperationsOutside UAE onlyIn Freezone and through UAE local distributor in UAE EstablishmentNo EmployeesNoMin 1 Annual accountsKeep records onlyYes Employee VISANoYes Ownership propertyNo except Jebel ali offshore ( Jafza) but corporate directors not allowed Yes COMPARISON RAK OFFSHORE & RAK ONSHORE

Dividend: 5/15%. 5% applies if min 10% shareholding Interest : 3% Royalty: 0/10% The 0% rate applies to royalties paid for a copyright of scientific work, a patent, trademark, design or model, plan, secret formula or process, or for information (know-how) concerning industrial, commercial or scientific experience. The 10% rate applies to royalties paid in respect of literature and art works, including cinematographic movies and films for radio or TV broadcasting. Double Tax Treaty with Ukraine

 Ratified 7/6/2013 and is expected to enter into force as of 2014  But limited scope of application  Covers the UAE and 7 emirates governments, the Central Bank of UAE, Investment Authorities of Abu Dhabi and of Emirates, any financial institution or investment entity, establishment, agency or any other body wholly owned by the government of UAE  WHT on dividends/interest is zero, is paid to an entity as above described  Contains exchange of information clause  Limitation of benefits clause i.e tax treaty benefits may be denied if proven that the only reason was tax  Facilitates inflow of investments into Russia ( note that currently UAE investors in Russia pay 20% tax on repatriated profits, 15% on profits from interest and 20% on Capital gains Double Tax Treaty with Russia

 As Holding into Ukraine  For trading or for services internationally and in the region  For Asset protection being the last shareholder in a structure  Property investment in UAEUSES