When incorporating a business in Dubai and the UAE, you have several setup types to choose from. If you’re looking to start a company to trade from or within the UAE, you can set up a mainland business or a free zone company. If, however, you are looking to start a business in order to purchase real estate or hold investments in other corporate entities, you can start a UAE Holding company. Holding company creation is one of the most common reasons for registering a company in the United Arab Emirates. That is due to the fact that the UAE offers a variety of advantages for holding companies: exemption from taxation (providing availability of a tax residence status), reliable protection of international assets, and the possibility of entering local exchanges.
What is a Holding Company?
A holding company is a set of businesses or companies that have the same management structure or are related legally. The main feature and advantage of holding companies is the maximum protection from economic volatility, possible takeover, and other challenges of the external environment. Besides, holding companies give an opportunity to fully control the available assets and distribute monetary resources effectively.
The main purpose of establishing a holding company in the UAE refers to owning shares and/or controlling the assets of a subsidiary company. The owners of a holding company can be natural persons, however, most of the time, other companies have a substantial interest in registering such entities with the purpose of controlling one or more businesses. Usually, the holding company will engage in commercial activities, will not sell or produce any goods, or deliver any services.
Setting Up a Holding Company
Every company based in the UAE should follow the rules under the Company Law. Holding companies should first set a management board that will take charge of the creation of policies for the regulation and organization of the subsidiaries. This management board should oversee the activities of the subsidiaries. The holding companies’ shareholders should have a director in each subsidiary firm. The company should make sure that the subsidiaries have the required capital to operate successfully. The company should set limits in terms of the risks subsidiaries can take such as foreign currency and other industry risks. The holding makes the decisions in terms of arrangements and contracts of the subsidiaries.
Types of Holding Companies in the UAE
We have two main types of holding companies here in the UAE:
- the free zone holding company, and
- the onshore holding company.
If you’re going for the free zone holding company, you can enjoy 100% foreign ownership. For onshore holding companies, foreign investors should have a local partner that owns 51% of the company. It’s important to choose the type of holding company you want to operate before you register a holding company.
Benefits of Setting Up a Holding Company in the UAE
Setting up a holding company can be a great way to own property in the UAE – it allows you to reduce administration, hold assets in a secure and private manner, allow flexibility to plug into a trust or foundation, and make life easy for yourself. The UAE’s complete absence of corporate, capital gains and dividend taxes can be extended to those who set up a holding company – even if the individuals in charge of them are resident abroad. By housing assets under a UAE holding company, it’s possible for anyone to significantly reduce their tax liability and pay much less than if each asset was registered in an individual’s name. Let’s take a look at some more advantages of setting up a holding company in the UAE:
1. Gain UAE Residency Visa
Live in your own UAE property without worrying about visas. Owning a property in the UAE is easier than you might think. The government has introduced a new five-year tourist visa, 100 percent ownership of companies for non-Emiratis, and some people can potentially reside here for up to ten years on a single visa. This new visa is finally being made available for normal people, should they qualify.
2. Benefit from Different Ownership Options
Split your shares or own 100 percent of the company. Another big attraction of buying a property through a holding company is that it allows you to own shares or other assets in different companies. This means your holding company can be used for property owners as well as investing in other companies. With more ownership options, you have more flexibility in the investment decisions you wish to make in the UAE. Moreover, it can reduce your personal exposure to risk. This is because the assets are held by the company, not the individual. Thus, you have an increased level of protection from risks such as debt liabilities and lawsuits.
3. Reduced Risks and Anonymity
On the surface, the prospect of being a single director and managing a holding company in the UAE can be daunting – particularly if you’re a high net worth individual who has a lot of assets invested in various enterprises. What if something goes wrong? Would you personally be liable for damages? Also, you might not want to let the entire world know how much you have invested (or what you or your family are ‘worth’) or make it publicly known that you’re a named shareholder. Again, holding companies are a solution to this issue.
4. Save on Taxes
Benefit from no taxes, even if you live abroad. Huge tax breaks are one of the biggest draws for entrepreneurs and investors in the UAE, especially those buying a property through a holding company. As well as benefitting from no corporate, capital gains and dividend tax, those who set up a holding company have a distinct advantage over individual property owners, as this structure can plug into a wider structure globally.
5. Easy banking
Opening a corporate bank account in the UAE can be particularly challenging for newcomers. If you have a residency visa and you hold a UAE business license through JAFZA, it should be far easier to open a corporate bank account. Furthermore, with internet banking, you can access funds at will from anywhere in the world, offering greater control over company finances wherever you reside. With the UAE becoming more and more popular with ex-pats as a place to live and work, owning a property through a holding company makes good business sense in more ways than one.
Why Choose Riz and Mona Consultancy
When you are in the UAE market for business, you need to be careful in your whole approach because the region has special rules as other countries have. In fact, here laws are quite complex. For instance, if you are looking for a holding company license registration in the UAE, then you must find the right spot. In fact, if you want 100 percent ownership, then you should be choosing the free-zone. The laws are complex and certainly, it is not advisable to handle the legality of the company licensing process on your own. You should find the expert organization or consulting firm for the job and that should be us.