Business redomiciliation in the UAE

Business redomiciliation can have various prerequisites, including the desire to optimize the corporate structure, investment, tax, reputational or other considerations. When planning such an “exercise”, it is important to identify the country that will best align with the business goals and expectations of the company and its shareholders.

Recently, the United Arab Emirates has gained significant popularity in international business structuring. Progressive legal system, favorable tax regime, extensive financial opportunities, as well as political stability – this is what attracts entrepreneurs to the UAE and encourages them to conduct business in this jurisdiction. If you are interested in the issue of redomiciliation to this jurisdiction, this material is for you.

What requirements must be met to redomicile a company in the UAE?

To initiate the redomiciliation process, certain requirements must be met, specifically:

1. Jurisdiction of incorporation: the company must be incorporated in a jurisdiction whose legislation permits the redomiciliation of a business to the UAE.
    
2. Compliance with corporate documents and procedures: the company’s founding documents must provide for the possibility of redomiciliation, and all applicable corporate procedures must be followed.
    
3. Legal procedure: the company must undergo the legal process of redomiciliation, which includes gathering and submitting the relevant documents to the authorities of both jurisdictions – the country of the company’s original registration and the jurisdiction to which the company plans to redomicile. It is important to ensure that a «certificate of continuation» is obtained in the UAE during this process.
    

From which jurisdictions can a company be redomiciled to the UAE?

Companies may be redomiciled to the United Arab Emirates from jurisdictions that allow redomiciliation to other countries. In particular, such jurisdictions currently include Cyprus, British Virgin Islands, Seychelles, Cayman Islands, Singapore, Switzerland and others.

However, it is worth remembering that business redomiciliation is not always possible for companies registered in certain jurisdictions where the legislation does not provide for the procedure of transferring the company’s registration to another country. However, if the target company is registered in the European Union (e.g. Poland, Lithuania, Germany, France, etc.), then a two-stage redomiciliation can be considered. This means that under EU regulation, the company can be redomiciled first to Cyprus, for example, and then from Cyprus to the UAE.

Where can a company be redomiciled within the UAE?

In the UAE, there are three types of jurisdictions for conducting business and, accordingly, three types of companies: onshore local companies (Mainland companies), onshore companies in free economic zones, and offshore companies in free economic zones. For redomiciliation purposes, free economic zones, or «free zones», are most commonly chosen.
Free zones in the UAE are special economic areas where foreign investors can conduct business and enjoy tax benefits. There are about 40 such zones in the country: some are designed for specific industries, while others offer the possibility of registering companies for various activities. Among the most popular free zones are Dubai International Financial Centre (DIFC), Abu Dhabi Global Markets (ADGM), Jebel Ali, Dubai Multi Commodities Centre (DMCC), Meydan, and Ras Al Khaimah Economic Zone (RAKEZ).

Onshore companies in free zones can operate only within the free zone where they are registered or outside the UAE, but not within the Emirates’ mainland.

Companies in free zones are governed not only by federal laws and the legislation of the specific Emirate but also by special regulations of the zones themselves. Each free zone has its own management structure, including a registrar, immigration authorities, customs, police, and medical facilities. Some free zones also have their own courts. The most developed regulatory systems are found in DIFC and ADGM free zones, which actively use elements of English law, among other things.

What is the key advantage of a freezone? 

• Onshore companies in freezones can be 100% owned by foreign nationals and provide for the possibility of obtaining resident visas.
• Favorable tax regime:

The general corporate tax rate is 9% and typically applies to income exceeding 375,000 AED (~103,000 USD).

However, in free zones, the tax rate remains 0%, but only for companies that meet certain criteria and are recognized as Qualifying Free Zone Persons. The exemption does not apply to all income but only to qualified income, which includes, among others, income received from other free zone residents, income from holding shares and other securities for investment purposes, provision of logistics services, and more.

Free zone residents can also earn other types of income not classified as qualified without losing the right to corporate tax exemption, provided that such income does not exceed the de minimis threshold, which is the lesser of the two amounts: 5 million AED or 5% of the total income.

What is the process of business redomiciliation in the UAE?

Basically, the redomiciliation procedure in the UAE can be divided into the following stages:

Preparatory stage, which generally includes the collection and submission of the necessary documents:

• Selection and approval of the company name in the «receiving jurisdiction». The name and legal form of the company must remain the same as in the country from which the company is being redomiciled;
• Decision by the company’s governing body on redomiciliation;
• Founding documents of the company;
• Reports on the financial and economic activities of the company;
• Documents confirming the company’s registration in the current country of registration;
• Notifications to creditors about the redomiciliation;
• Documents confirming the company’s solvency and compliance with its tax obligations;
• Legalization of documents — currently, the UAE is not a party to the Hague Convention Abolishing the Requirement of Legalization for Foreign Public Documents, so consular legalization is required;
• Submission of the redomiciliation application to the relevant authority in the UAE.
   

Verification and approval

At this stage, the registering authority reviews the submitted documents to ensure that the company is indeed eligible for redomiciliation. An assessment of the company’s overall financial condition is conducted, along with a check of its tax obligations, among other evaluations.

Registration 

If the verification is completed positively, the registering authority makes the appropriate decision, enters the company into the UAE companies register, and issues a certificate of continuation, confirming the company’s new legal address in the UAE.

What else is important to consider when redomiciling a company in the UAE?

There are several important aspects to consider when redomiciling a company in the UAE, namely:

Opening a bank account

This important step requires special attention. If the ultimate beneficiaries or the director of the company are citizens of the Republic of Belarus or the Russian Federation, a local UAE resident visa may be required to open a bank account.

License

License is one of the key constituent documents required to register a company in the UAE. Each company is required to renew its license annually, which confirms the right to conduct business in accordance with the specified activities.

The list of basic licenses includes: 

1. Service or consulting license – to provide services such as consulting and marketing. Ideal for holding companies providing consulting services to subsidiaries.
2. Trade or commercial license – allows trade in a limited list of goods (usually 3-5 product groups), which are specified in the license.
3. General trade or commercial license – allows trade in all types of goods, except those requiring special permits.
4. Industrial license – allows the importation of raw materials for the production, processing and/or assembly of products.
    

Each freezone has its own approaches to licensing, including different license names, design, cost, and the ability to combine different activities under a single license.

Office

In order to obtain a license, it is important to have a registered address for the company. A business owner can buy or rent an office, enter into a lease agreement in a business center, or rent a workplace in one of the free economic zones.

Migration issues

If the redomiciliation of the company is planned together with the relocation of the final beneficiaries and management, it is necessary to ensure the preparation of the necessary resident visas and residence permits in the UAE. Please note that in some free-zones the number of resident visas obtained depends on the size of the office or warehouse space (e.g. ADGM).

In general, the redomiciliation of a company in the UAE is a strategic step that allows to reformat the company’s structure and change its position in the markets of presence. However, before making a decision, it is necessary to thoroughly study all aspects and make an informed choice, taking into account the specifics of the business and the company’s strategic goals.

REVERA’s team of lawyers has the necessary experience in redomiciling companies in various jurisdictions. And having our own legal panel in the UAE allows us to offer our clients a seamless service in relocating their corporate structure to this jurisdiction and other Middle Eastern countries.

Authors:

Egor Zelianouski – LL.M, senior lawyer at REVERA law group – e.zelianouski@revera.legal
Firsiankova Marharyta – lawyer at REVERA law group – m.firsenkova@revera.legal

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