Company Formation in United Arab Emirates

The United Arab Emirates has become one of the most frequently considered destinations for companies based in Turkey seeking a single hub for Gulf, East African and South Asian markets.

The attractions are concrete: a federal corporate tax rate that remains among the lowest in the world, no personal income tax on salaries, a currency pegged to the US dollar, and a free zone incorporation process that can be completed without the shareholders leaving their desks. Trade between the two countries has deepened since the comprehensive economic partnership agreement came into effect, and the re-export infrastructure makes the country a natural staging point for Turkish manufacturers and service exporters reaching the wider region.

The structuring, however, deserves more attention than the incorporation. A company set up correctly in Dubai but managed from Istanbul can end up fully taxable in Turkey, and profits repatriated without planning can carry a higher effective burden than expected. This guide covers both sides.

How to Set Up a Company in the UAE?

The first decision is the incorporation environment, and it constrains everything that follows. Mainland, free zone and offshore are not tiers of the same thing; they serve different commercial purposes.

Main types of structures

Once the free zone route is selected, the structure follows from two questions: whether a separate legal entity is wanted, and who the shareholder will be.

Establishment Process

Free zone formation runs through the zone’s online partner portal in a fixed sequence. Nothing in it requires the shareholders to be in the UAE. Travel becomes necessary only once the electronic visa has been issued: the visa holder enters the country for the medical examination and biometrics and remains until residency is completed. Some shareholders leave once residency is approved and return when the identity card is issued for the bank account process; completing both in a single trip is generally more efficient.

1. Submit the licence applicationCompleted and submitted through the portal. Saved drafts are held for a limited period only — commonly around fifteen calendar days — after which the entry has to be rebuilt. Two constraints apply: all business activities must be drawn from a single licence type, and certain activities require third-party approvals.
2. Verification and paymentThe file does not advance until payment is settled in full. Card payment usually carries a surcharge, commonly around 2.5% of the invoice amount, which a pre-funded wallet arrangement avoids. The payment receipt should be retained.
3. Identity verification of every memberEach member receives a verification link and completes identity, liveness, telephone and e-mail checks personally. Passport pages must be scanned; a photograph of a passport is rejected. Copies must be clear, close up, legible and show all four corners. Face verification is required from every member without exception, and one outstanding member holds the entire file.
4. Licence summary issued for signatureOnce all members have cleared the checks, the licence application summary is sent to the shareholders for signature.
5. Company name verificationThree name options are submitted in order of priority. Availability is checked in that order and the licence is issued automatically in the first available name, so the ordering is a decision rather than a formality. No word may be shorter than three characters, and an Arabic rendering is required; if none is supplied, a system-generated translation is applied. If all three are rejected, two further options are requested and a new licence summary is re-issued for signature.
6. Initial resolution and memorandum of associationBoth are issued for electronic signature. The general manager and the shareholders sign the initial resolution; the shareholders alone sign the memorandum. A step that regularly stalls files: after signing the resolution, signatories must return to the original verification link to open the memorandum — it does not appear on its own.
7. Licence approvalThe signed documents go for final verification. Where the selected activities require third-party approvals, this stage extends by a period outside the zone’s control.
8. Licence issuanceIssued once all checks are complete.

The sequence above is broadly common across the free zones, though individual figures — draft retention periods, payment surcharges, visa quotas — are set by each zone authority and should be confirmed for the zone actually chosen.

Who has to be appointed

The officer structure is fixed and narrower than most investors expect: exactly one general manager, exactly one secretary and at least one director. All of those roles may be held by the same individual, or distributed across several people. The secretary is secretary to the board — if no separate person is named, the first director listed is automatically appointed secretary as well, a default worth checking rather than discovering later.

For members who are not resident in the UAE, a unique identification number is requested where the person has visited or resided in the country within the previous five years; where a member has never entered the UAE, that has to be stated explicitly on the form.

Documents Required for Company Formation

For individual shareholders

• A clear colour copy of the passport, full spread, valid for more than six months
• A digital photograph in passport format
• Proof of residential address
• The residence visa and identity card, if the applicant is already resident in the UAE
• Three proposed company name options, in order of priority
• Contact telephone number and e-mail address

For corporate shareholders

The corporate route requires an incorporation resolution prepared strictly in the form required by the zone authority, signed by all directors and clearly naming the appointed authorised representative. Circulating the draft for review before attestation begins removes the most frequent cause of rejection, because a resolution that has already been notarised and legalised cannot be amended without repeating the entire chain.

The constitutional documents of the corporate shareholder are also required, legally translated into English where applicable:

• Trade licence or equivalent registration document
• Memorandum and articles of association
• Certificate of incorporation or formation
• Registry extract or certificate of incumbency

Alongside these: the completed licence application form signed by all members, full-spread colour passport copies and passport-format photographs of all owners, and the same for the appointed representative. Where any of these individuals is resident in the UAE, copies of the residence visa and both sides of the identity card are required as well.

Share capital in the resolution

The application states a proposed share capital divided into shares of a stated value — commonly a minimum of AED 10,000 in total, in denominations of AED 10 or multiples. The amount does not have to be deposited or blocked before the licence is issued, but the resolution generally records that the corporate shareholder guarantees full financial commitment for the shares subscribed. The obligation is therefore real even though the cash movement is not immediate, and the figure should be set deliberately rather than defaulted to the minimum.

Attestation requirements

How long a legalised document stays usable

This is the constraint that most often forces a file to be rebuilt, and it is invisible until it bites. Legalised documents carry maximum ages, measured from the date of notarisation or attestation rather than from the date of submission.

The ninety-day resolution window is the binding constraint. The clock starts at attestation, and the legalisation chain in Turkey consumes part of it before the document ever reaches the UAE. The correct sequence is therefore: settle the activities, name options, capital figure and appointments first, then take the board decision, then legalise, then file. Legalising early and deciding afterwards is how a resolution expires while the file is still open — and a fresh resolution means the entire notarisation, embassy and ministry chain again.

Is a Local Partner or Local Manager Required?

No. Foreign investors may hold the entire shareholding in a free zone entity, and for most activities on the mainland as well, without a local partner. There is no requirement to appoint a national of the UAE as a director or general manager, and the officers named on the application may all be resident outside the country at the point of incorporation.

What does become necessary is presence rather than nationality. Residence visas are issued within a quota attached to the licence, and the identity card obtained through that process is what makes an individual able to sign at a bank, sponsor employees and hold a lease. A structure with no resident officer at all is workable on paper but slow in practice.

UAE Tax System and Tax Comparison with Turkey

Corporate tax

Federal corporate tax applies to financial years beginning on or after 1 June 2023. Every taxable person must register and file a return within nine months of the end of the tax period, including entities whose effective rate is zero. Registration is not optional and is not waived by free zone status.

The free zone rate is conditional

A free zone licence does not by itself produce a 0% rate. The 0% applies only to the qualifying income of a Qualifying Free Zone Person, and the status depends on maintaining adequate substance in the zone, deriving qualifying income, complying with transfer pricing requirements including documentation, preparing audited financial statements, and keeping non-qualifying revenue within a de minimis limit — the lower of 5% of total revenue or AED 5 million.

The consequence of breaching those conditions is severe and often underestimated: the entity loses the status for that tax period and for the following four tax periods, and all of its income, qualifying and non-qualifying alike, is taxed at 9%. A registered address or a flexible desk arrangement on its own is generally not accepted as adequate substance.

Reliefs and the top-up tax

A temporary small business relief allows a resident person with revenue not exceeding AED 3 million to elect to be treated as having no taxable income, available for tax periods ending on or before 31 December 2026. Separately, a domestic minimum top-up tax of 15% applies to entities belonging to multinational groups with consolidated annual revenue of at least EUR 750 million, for financial years beginning on or after 1 January 2025.

Side by side with Turkey

The double taxation agreement

The agreement signed in Abu Dhabi on 29 January 1993 remains in force. Its ceilings matter mainly for payments flowing from Turkey to the UAE, since the UAE itself levies no withholding tax on outbound payments. Applying a treaty rate requires a tax residency certificate issued by the UAE tax authority for the relevant period; without it the domestic withholding regime of the source state applies, and the certificate cannot generally be produced retroactively for a payment already made.

A point that is frequently missed: the agreement permits a source-state charge on branch profits at the dividend rates when those profits are transferred abroad.

Accounting System and Operational Compliance with Turkey

The reference framework is International Financial Reporting Standards, with a simplified basis available to smaller entities. Investors familiar with Turkish accounting practice will find the structure broadly comparable, while the chart of accounts, documentation and filing formats differ and require local handling.

• Corporate tax registration for every taxable person
• Annual return within nine months of period end
• Audited financial statements where required
• Transfer pricing documentation
• Value added tax registration and periodic returns
• Beneficial ownership declaration and registers
• Wage payment through approved channels
• Annual licence renewal

The beneficial ownership declaration is filed on incorporation. The applicant either certifies that the members are the ultimate beneficial owners in proportion to their shareholdings, or sets out full details for each beneficial owner. Any change must be notified by amended declaration within fifteen days of the company becoming aware of it, and registers of beneficial owners and of shareholders must be maintained. Inaccurate information can lead to suspension or termination of the licence.

Bank Account Opening and Turkey-Related Companies

Bank onboarding is generally the least predictable step for a group structured from Turkey. The determinant is the compliance file rather than the deposit. Points that set the timetable are:

• Transparency and documentation of the ultimate beneficial ownership chain
• A clear and evidenced description of the business model and expected flows
• Source of funds documentation for the capital contribution
• Sanctions and compliance screening of the group and its counterparties
• Availability of a resident officer able to attend and sign

Structures with several intermediate holding layers, or with counterparties in higher-risk jurisdictions, are reviewed in more detail and take longer. A structure that cannot be explained commercially will encounter difficulty at this stage regardless of how quickly the licence was issued.

Tax Residency and Permanent Establishment Assessment

This is where most of the real risk sits, and it is the part a service provider in the UAE is not positioned to assess.

Where the company is actually managed from

Under Article 3 of the Corporate Income Tax Law, a company whose place of effective management is in Turkey is treated as a full taxpayer in Turkey on its worldwide income, irrespective of where it is registered. A UAE entity whose directors sit in Istanbul, whose decisions are taken there and whose contracts are negotiated there is exposed to exactly this assessment.

The agreement does not resolve this automatically. Under its residence article, a company with its registered office in one state and its place of effective management in the other is not simply allocated to one side; the competent authorities determine residence by mutual agreement. In practice that is a procedure, not a safeguard. Substance in the UAE — decisions taken there, directors present, and a documented record of it — is what prevents the question from arising.

Controlled foreign company exposure

Article 7 of the Corporate Income Tax Law taxes the profits of a controlled foreign company in the hands of the Turkish shareholder even when no dividend is paid. Control means holding at least 50% of the capital, dividend rights or voting rights, and three conditions must then be met together:

Because the tax burden and revenue conditions are effectively always satisfied in a UAE context, the whole analysis turns on the first test. A genuine trading or service company with staff, premises and operations proportionate to its activity falls outside these rules. A holding vehicle collecting dividends, interest or licence fees generally does not.

Dividends coming back to Turkey

This is the point most often overlooked at the structuring stage. The full participation exemption for foreign dividends requires, among other conditions, that the profits have borne a total income and corporate tax burden of at least 15% in the country of the subsidiary. A UAE subsidiary taxed at 9%, or at 0% as a Qualifying Free Zone Person, does not meet that test, so the full exemption is generally unavailable.

A second route exists. Where the Turkish company holds at least 50% of the paid-in capital and the profits are transferred to Turkey by the deadline for filing the corporate tax return of the period in which they were derived, a 50% exemption applies without the other conditions — no minimum holding period and no minimum tax burden. For a wholly owned UAE subsidiary this is usually the applicable regime, and the repatriation deadline becomes a hard date in the compliance calendar.

Transfer pricing between the two entities

Where a company in Turkey and its UAE entity transact — management services, licence fees, intra-group financing, goods sold through the UAE company — those are related-party transactions under Article 13 of the Corporate Income Tax Law and must be priced at arm’s length and documented. Given the rate differential, this is a natural focus of any tax audit. The UAE side has its own transfer pricing requirements, and compliance with them is one of the conditions of the free zone 0% rate, so documentation prepared for one side should be consistent with the other rather than drafted independently.

Social Security and Labor Legislation

Employment relationships are governed by the federal labour framework, under which contracts are concluded for a fixed term and renewed. There is no personal income tax on salaries. Social security contributions apply to nationals of the UAE and other Gulf Cooperation Council states; for expatriate employees the corresponding entitlement is the end-of-service gratuity, accrued by reference to length of service and paid on termination. Employers should provide for this liability as it accrues rather than treating it as a termination-year cost.

Mainland companies above certain headcount thresholds are subject to nationalisation quotas for skilled roles, with financial contributions payable for shortfalls. Free zone entities are generally outside that regime, which is one of the practical considerations in the mainland-versus-free-zone decision for businesses expecting to employ substantial numbers of staff.

Company Formation Timeframe in the UAE

The registry steps are fast. The two elements that actually set the date are document legalisation at the start and bank account opening at the end.

Where document preparation in Turkey is started in parallel with the portal steps, a straightforward free zone entity is typically licensed within three to five weeks from the first instruction and operational, with a working bank account, within eight to twelve weeks.

Common Timing Mistakes Made by Investors

• Treating the free zone rate as automatic. The 0% is a conditional regime with substance, documentation and audit requirements, and losing it affects five tax periods rather than one.
• Sending documents with an apostille. The UAE requires the full consular legalisation chain; documents sent with an apostille alone are rejected and the process restarts.
• Legalising before deciding. A shareholders’ resolution is generally accepted for 90 days from attestation. Legalising before the activities, name and appointments are settled wastes that window.
• Signing the resolution without reading the power of attorney. The standard template grants broad, delegable authority over shares, capital, appointments and banking.
• Managing the entity from Turkey. Where decisions are taken in Turkey, the entity risks being treated as a full Turkish taxpayer, which removes the rationale for the structure entirely.
• Assuming there are no filing obligations. Registration and annual filing are mandatory even where the effective rate is zero.
• Repatriating dividends without a calendar. The 50% exemption in Turkey depends on transferring the profits by the corporate tax return filing deadline.
• Planning around the licence date. Commercial commitments should be planned around the date the bank account becomes operational.

Frequently Asked Questions