Doing business in United Arab Emirates – Ras al-Khaimah

Doing business in Ras al-Khaimah

Ras al-Khaimah is one of the emirates of the United Arab Emirates (UAE). The emirate is situated in the east of the Persian Gulf and is the northernmost emirate of the UAE. It covers an area of 1,700 square kilometers. Ras al-Khaimah has a population of about 250,000 inhabitants. The emirate is governed by a hereditary emir. The United Arab Emirates is a member of several international organizations, such as the League of Arab States (LAS), the Organization of Islamic Cooperation (OIC), and the Organization of Petroleum Exporting Countries (OPEC). Ras Al Khaimah has become a true trading and industrial hub with an economy that continues to expand and thrive. For example, Ras al-Khaimah achieved an 8% Gross Domestic Product growth in both 2011 and 2012.

Types of companies

Ras al-Khaimah offers the following company formation options: limited liability company, branch and representative office of a foreign commercial company, joint venture company, public and private shareholding company, public joint stock company, private joint stock company, free zone company, free zone establishment and international business company.Limited liability company Foreign investors are entitled to conduct business through a limited liability company in Ras al- Khaimah. It can be incorporated with a minimum of two and a maximum of fifty shareholders. A limited liability company requires a minimum 51% shareholding by UAE citizens. Profit and loss distribution can be allocated to favour the minority shareholder in ratios of up to 90/10. In order to establish a limited liability company, it is mandatory to show that capital has been deposited in a UAE Bank. After registering with the Ras al-Khaimah Chamber of Commerce, the capital may be released.Branch and representative office of a foreign commercial company Foreign companies are entitled to establish branches or representative offices in the UAE. Because branches and representative offices are not regarded as separate legal entities, foreign companies are held liable for the obligations of their branches/representative offices.The activities of a representative office are restricted only to collecting information and marketing the activities of its parent company.On the contrary, a branch office is allowed to perform contracts or conduct other activities in the name of its parent company. Such activities must be related to the objects of the parent company and mentioned in the branch office trade license.Joint venture companyA joint venture is a contractual agreement between a foreign party and a local party licensed to engage in the desired activity. The local party’s participation in the joint venture must be at least 51%, but the profit and loss distribution can be allocated to favour the minority shareholder. There are not requirements for licensing the joint venture or publishing the agreement. The foreign partner deals with third parties under the name of the local partner. Unless the agreement is publicised, the foreign party bears all liability.Public and private shareholding companyTwo or more individuals carrying out non-commercial or professional/artisan activities may form professional partnerships. An individual is also entitled to conduct such activities, provided that he/she obtains a professional license. These types of businesses may be 100% foreign-owned. However, public and private shareholding companies are obliged to appoint a UAE national agent. Individuals carrying out business under a professional partnership or a sole professional proprietorship are liable to the full extent of their assets for the obligations of the business.Public joint stock companyPursuant to the draft Federal Corporate Law, a public joint stock company must have a minimum capital of AED 15,000,000. The number of the shareholders must not be below 10. A public joint stock company must be licensed by the Ministry of Economy and Commerce. If the company conducts banking or investment activities, it must be approved by the Central Bank. At least 20% of the company’s capital and a maximum of 45% should be subscribed by the founders of the company. A single shareholder is not entitled to subscribe more than 10% of the capital.Private joint stock companyA private joint stock company cannot have less than three shareholders. Shareholders must subscribe to the full capital of at least AED 2,000,000. The shares of a private joint stock company cannot be put up for public subscription.Free zone companyA free zone company (FZCO) is a limited liability company. It can be registered by two or more shareholders. The minimum capital for setting up a FZCO is AED 250,000.Free Zone EstablishmentA free zone establishment (FZE) is a separate legal entity with a sole business owner. A FZE can be owned either by a person or a corporate body. The minimum capital for setting up a FZE is AED 150 000.International business company In January 2007, the RAK Investment Authority (RAKIA) launched the international business company concept. There are no restrictions on the number of shareholders or directors of an international business company. Shareholders and directors are not obliged to hold an annual meeting or to file audited accounts. The International Business Companies (IBC) Registry displays only the name of the company and the date of incorporation.International business companies are not authorised to conduct business activities in Ras al-Khaimah with the exception of accounting, audit, legal and banking activities. International business companies cannot employ staff locally.

Corporate tax

Ras al-Kaimah is a “no tax” emirate. This means that there are no direct corporate income taxes, no sales taxes and no wealth taxes.The only exception to this zero tax policy is the treatment of oil and gas exploration companies and branches of foreign banks. Oil and gas exploration and production companies are subject to tax and branches of foreign banks are taxed as well.

Withholding tax

There is no withholding tax.

Tax incentives: Ras al-Khaimah Free Trade Zone

The UAE offers several free trade zones with renewable 50-year tax holidays and exemption from import duty on goods brought into the free zones. Two of the UAE free trade zones are located in Ras al-Khaimah, namely, the Ras al-Khaimah Free Trade Zone (RAKFTZ) and the Ras al-Khaimah Media Free Zone (RAKMFZ).The Ras al-Khaimah Free Trade Zone is a special zone where trade barriers such as taxes, tariffs and quotas are completely removed in order to facilitate international business. The red tape and documentation requirements are brought to the absolute minimum to attract foreign businesspeople.The Ras Al Khaimah Free Trade Zone Authority (RAK FTZ) was founded in 2000 and it continues to be a tremendous success. RAK FTZ was named ‘Best Emerging Free Zone’ three years in a row by the Middle East Logistics Awards (MELA) and is considered one of the fastest growing free trade zones in the region.FeaturesCorporate income tax rate: 0%;Personal income tax rate: 0%;100% foreign ownership allowed;Transparent regulations;Withholding tax rate: 0% so no restrictions on capital and profit repatriation;Access to multilingual staff;Strategic location with proximity to Dubai;State-of-the-art communication facilities;Easy access to Ras Al Khaimah’s airport and seaports.Requirements to do business in the RAK Free Trade ZoneFree zone companies need to have a physical presence in the free zone. In other words, it’s impossible to work from home without renting an office in the free trade zone. The company license is only issued after the authorities have inspected the premise in the free zones. The minimum requirement is to rent a flexi desk, which reduces the rent expense drastically. It’s not necessary to rent a complete office, a flexi desk solution is sufficient to start with.Setting up a Free Zone Company is equal to obtaining UAE residenceThe RAK Free Trade Zonde has become the ideal location to obtain residence as a shareholder of a RAK Free Trade Zone company. UAE residence is issued after going through the application process and it is valid for a period of three years.As a UAE resident, you’re not allowed to stay outside the UAE for more than six months. In other words, you have to be in the UAE at least twice a year. Otherwise you have to repeat the residence application process again.RAK Free Trade Zone: affordableRas Al Khaimah Free Trade Zone (RAK FTZ) has affordability, flexibility and efficiency as benchmarks placed at the top of its operating priorities. RAK Free Trade Zone can be considered as one of the best providers of competitive and customised free zone business services in the region.

Double tax treaties

The UAE has signed tax treaties with Algeria, Armenia, Austria, Azerbaijan, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, Canada, China, Cyprus, Czech Republic, Egypt, Finland, France, Georgia, Germany, Greece, Indonesia, Ireland, Italy, Kazakhstan, Korea, Lebanon, Luxembourg, Malaysia, Malta, Mauritius, Mongolia, Morocco, Mozambique, Netherlands, New Zealand, Pakistan, Philippines, Poland, Portugal, Romania, Seychelles, Singapore, Spain, Sri Lanka, Sudan, Syria, Tajikistan, Thailand, Tunisia, Turkey, Turkmenistan, Ukraine, Uzbekistan, Venezuela, Vietnam, Yemen.