The United Arab Emirates provide the largest trade hub between Europe and Asia. In combination with its strong financial centre as well as a high purchasing power, Dubai attracts business and labour from all over the world. Companies that would like to gain a foothold in the Emirati markets are well-advised to contact legal experts in order to ensure compliance with the local law.
Various possibilities, either by structuring a business with the help of a legal vehicle or setting it up in one of more than 30 freezones, are at one’s disposal when establishing a firm or branch in Dubai. Yann Mrazek from M / Advocats of Law and his team know how to best deal with the regulatory challenges that arise in the second largest Emirate. And their solutions are as individual as their clients.
The Mudaraba Agreement
One thing is crucial when doing business in Dubai: the Mudaraba agreement. It is based on a partnership in which one partner is the investor or silent partner and the other one manages the economic activities. When building a LLC (Limited Liability Company, comparable to a GmbH) one always requires a local partner with a 51% stake in the company. This ensures that parts of the revenue and investments stay in the country.
From white paper to law in six months
While there are some bureaucratic hurdles to deal with and difficulties in enforcing contracts might arise, the benefits outweigh the downsides.
When talking about the advantages, Dubai is at the top in terms of taxes and effectiveness. Mrazek’s own story highlights Dubai’s attitude perfectly: He handed in a white paper about bankruptcy law; six months later, the white paper became law.
Moreover, there are no corporate, no capital gain and no personal income taxes. In addition, OECD memberships and tax treaties with emerging market countries strengthen Dubai’s market position. It will be interesting to see how the VAT – most likley to be implemented by 2018 – will influence the economy.