Setting up a holding company in the UAE

Setting up a holding company in the UAE

- James Elliot-Square

Holding companies are legal entities that incorporate subsidiary business entities. Whilst not allowed to undertake standalone commercial activities like producing goods or providing services, holding companies are ideal for shareholding, trademark and patent ownership or purchasing real estate and other assets. Under UAE law holding companies have only a supervisory structure with no active management within subsidiaries i.e. they can own shares and implement processes for running operations and can benefit from assets transactions, services supply and dividends. Depending on their structure, holding companies can appoint a director or a board of directors to supervise subsidiaries operations, set out regulations and control the flow of money to and from subsidiaries.

Why the UAE is a popular location for holding companies

UAE corporate law provides holding firms with lucrative opportunities for real estate ownership or retaining shares in other corporate bodies. Starting up a holding company in the UAE provides an array of advantages including banking benefits, assets security and reduction in administration. Key benefits from incorporating a holding structure in the UAE are:

Gaining residency visa

Owning a property through holding companies is a quick way to obtain a residency visa in the UAE. Visa options include up to 10 years validity for Investors and the new UAE Golden Visa.

Tax benefits

With 0% tax on corporate profits, capital gains and dividends, starting up a holding company has an advantage over individual business ownership. In the case of leaving the UAE, no tax is imposed on income earned abroad for holding companies. With no income tax applicable to holding companies in the UAE, setting up this structure to hold assets elsewhere and receive dividends / income in the UAE offers tax savings.

Different ownership options

Distributing your ownership over different subsidiaries as branches or franchises in various sectors allows for better investment opportunities, flexible decisions and risk mitigation / reduction. It also has the advantage of anonymity and reducing personal exposure to risk, especially when the individual has many investment assets since assets are held by the corporation and not the individual. Different ownership options are available depending on which Emirate to set up the holding company in, such as ADGM, DIFC, RAK, IFZA and JAFZA.

Simplified Banking

Most holding companies have the option of granting a resident visa to the shareholders, the UAE resident visa of directors and managers can also be obtained elsewhere - for example setting up an operational company elsewhere in the UAE. Having a manager/director or shareholder with a UAE resident visa makes the process of opening a corporate bank account much easier. All UAE corporate banks allow user friendly internet banking platforms which allows funds to be accessed from anywhere around the world.

HR and Legal Structure Management

With holding companies, legal changes can be easier to streamline across subsidiaries. Additionally, the human resources function becomes easier as employees can be located more efficiently to best utilise their skills.

From setting up bank accounts, completing the necessary documentation to selecting the appropriate ownership structure, location and jurisdiction options PRO Partner Group’s dedicated team of business set up experts are here to help. We will liaise on your behalf with local authorities to ensure the swift and successful formation of the holding company.

Forming a holding company in Dubai/Abu Dhabi

Company Law in Dubai conditions that holding companies have a management board that creates and organises the rules and regulations for the subsidiaries, oversees all of their activities and sets restrictions in order to limit market risk, such as foreign exchange exposure. Additionally, each subsidiary needs to have its own director and the necessary resources to function efficiently. Negotiation and terms of arrangements are taken up by the holding body.

Holding firms can be set out in two ways:

  1. In one of the UAE Freezones – e.g. ADGM, DIFC, DMCC, RAK, JAFZA
  2. In Mainland UAE – Dubai, Abu Dhabi, other Emirates

Depending on the place where the holding company is set up – Mainland vs Free zone, Dubai vs Abu Dhabi for example, foreign owners can have 100% ownership or share 51% of the business with local owners, in free zones and onshore respectively.

See more information on the options and comparison of Freezone vs Mainland UAE www.propartnergroup.com/blog/2019/04/mainland-vs-freezone-business-uae

Registration process

Registering a holding company in the UAE requires the following:

Location

The right location and jurisdiction is important and it is highly recommended to research available options beforehand.

Dubai international financial district (DFIC) is one of the most attractive places to start up a holding firm. As a leading hub in business, DIFC allows holding companies to hold assets locally and globally. Among the merits of establishing a holding company in DIFC are:

  1. 100% ownership
  2. A well established centre for banks and other international financial institutions
  3. Zero income, capital, asset and profit tax for 50 years (except for 5% VAT tax)
  4. Top-rated funding environment in the region
  5. State of the art quality of professional services
  6. Zero capital repatriation
  7. Strategic location for emerging markets
  8. Common law jurisdiction and courts within the zone

Abu Dhabi Global Market (ADGM) is the key Financial Freezone centre in Abu Dhabi. Holding companies in ADGM can incorporate assets within the UAE, the GCC and worldwide, in addition to owning real estate properties. Holding firms in ADGM can benefit from an array of advantages, among which:

  1. Engaging and business appealing regulatory and legal framework
  2. Favourable taxation system
  3. Common law jurisdiction and courts within the zone based on British Common Law
  4. Independent and distinct jurisdiction written in English language and defaulted to English Law in cases of ambiguity
  5. A diversely rich environment for legal and financial services with state of the art quality of service
  6. The epicentre for the global economy connecting business networks between the Middle East, Africa and South Asia

Registration requirements

The completion of the registration process for the holding company can be expedited by using a professional company formation business with strong relationships within government authorities such as PRO Partner Group.

It is worth noting that the application process can be delayed by omissions or errors in your application. Therefore, it is recommended to partner with company formation expert or law firm during the registration phase. The team of company formation experts at PRO Partner Group will guide you through all aspects of the holding company set up, including; all relevant licensing elements and any regulatory approvals, as well as staff and investor residency and visa requirements.

PRO Partner Group can then also provide ongoing support to renew the Commercial Registration annually, obtain and maintain the commercial space, and undertake Company Secretarial and Corporate Governance Assistance.

How can PRO Partner Group help?

Setting up a holding company or SPV in Dubai or Abu Dhabi can be fairly straightforward with the right company formation partner. At PRO Partner Group, our team of expert advisors can help you select the correct Free Zone or Mainland jurisdiction for the hold co. as well as assist with other elements of the setup process such as Investor Visas, staff and family Visas, PRO services and HR, Payroll and Company Secretarial Services. Please get in touch with us on +971 (0)4 456 1761 for Dubai or +971 (0)2 448 5120 for Abu Dhabi, email us at info@propartnergroup.com or complete the contact form below and we will be delighted to assist you.

Get in touch with James Elliot-Square

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