Dubai Fact-File Part 4:
Individual Business Tax-Efficient Structures

4.3 Dubai Individual Business Use Of Offshore

Tax-efficient structures involving offshore jurisdictions: Dubai's own economy is fairly clearly divided between the 'onshore' sector, dominated by local business interests, with restrictions on foreign ownership, and the 'offshore' sector which consists of the the Jebel Ali Free Zone, the Dubai Investment Park, Dubai Internet City, the Dubai International Finance Centre (DIFC), which opened in 2003, the Dubai Airport Free Zone, and Dubai Media City.

There are no taxes to speak of in Dubai, on- or offshore, but 100% foreign ownership and customs privileges make the Free Zone and other areas some of the most favourable locations in the Middle East for international operations, meaning that there may be little need to look elsewhere in order to achieve tax efficiency.

Companies approved for operation in Jebel Ali Free Zone are granted one of the following types of licences, renewable annually for as long as the company holds a valid lease from the Free Zone Authority:

• A General Trading Licence allows the holder to import, distribute and store all items as per Jafza rules and regulations;
• A Trading Licence allows the holder to import, export, distribute and store items specified on the licence;
• An Industrial Licence allows the holder to import raw materials, carry out the manufacture of specified products and export the finished product to any country;
• A Service Licence allows the holder to carry out the services specified in the licence within the Free Zone. The type of service must conform to the parent company's licence, issued by the Economic Department or Municipality of the relevant Emirate in the UAE.
• A National Industrial Licence is designed for manufacturing companies with an ownership or shareholding of at least 51% AGCC (Arabian Gulf Co-operation Council).
• In most of the Free Zones, the following types of business are available:
• Free Zone Establishment (FZE);
• Free Zone Company (FZCO);
• Branch Office

A FZE is for one individual shareholder. A FZCO is structured for more than one shareholder, and a Branch Office, as the name implies, is for a branch office of a foreign company. Businesses operating within a Free Zone fall completely within the jurisdiction of the Free Zone authorities.

When applying to set up a Free Zone business form, applicants must submit details of the business owner(s) with the application, plus passport, banker’s reference, and copies of the Memorandum and Articles of Association where appropriate.

If permission is granted, the Authority will record all relevant details in the FZE Register and issue a Certificate of Formation. This will specify the date of registration after which the FZE will be free to conduct any such business as is permitted in its Special Licence.

Using Offshore Jurisdictions: Although there is no corporate income tax burden, businesses in the ‘onshore’ sector of Dubai must pay import duty at a general rate of 5%. Should the Dubai authorities ever introduce corporate income tax, companies in the Free Zones will remain exempt for a further 15 years from the date of inception.

A Free Zone operator is currently not permitted to trade directly within the UAE federation and must use a locally appointed distributor if they wish to trade within the UAE market.

Introductory Guides

Dubai Artist Tax Guide

Dubai Contractor Tax Guide

Dubai Entrepreneur Tax Guide

Dubai Professional Tax Guide

Dubai Small Business Tax Guide

Dubai Sportsperson / Entertainer Tax Guide

Fact-File

Part 1: Dubai Business Formation for Individuals

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