The legal issues of investing in Dubai explained

Investing in real estate in Dubai

...requires a thorough understanding of the legal aspects to ensure a safe and compliant transaction.

Here's a complete overview of the most important legal information you need to know.

Legal structure of the investment

Free trade zones

Dubai boasts a number of free zones where foreign investors can own 100% of their company without the need for a local partner. Each free zone is specialized in certain sectors, such as technology, finance or media, and offers various tax advantages, including theabsence of corporate income tax and simplified administrative procedures. These zones are particularly attractive because of their flexibility and the ease they offer international companies.

Continent (non-free zone)

Outside the free zones, companies generally require a local Emirati sponsor who holds at least 51% of the company's shares. However, recent reforms allow 100% foreign ownership in certain cases, notably in strategic sectors or under certain conditions, making the continent even more attractive to foreign investors.

Types of company structure

Limited liability company

This is the most common structure for investors wishing to operate on the continent. An LLC generally requires a local partner to hold 51% of the shares, except in specific cases where 100% foreign ownership is permitted. This structure limits partners' liability to the amount of their investment in the company.

Free zone company

This structure is common in free trade zones, and allows foreign investors to own 100% of the company. Advantages include theabsence of corporate tax,exemption from customs duties and the possibility of repatriating profits in full.

Branch

Foreign companies can open a branch in Dubai without a local partner, but the branch must be registered with the Department of Economic Development(DED). The branch is not a separate legal entity and operates directly under the name of the parent company.

Single establishment

Sole proprietorship in which the investor is solely responsible and assumes unlimited liability. This structure is common for professional activities in which the owner seeks to exercise total control.

Business registration and licensing

Companies must be registered with the relevant authorities, such as Dubai's Department of Economic Development (DED ) or the relevantfree zone authority. The registration process involves obtaining business licenses, which vary according to the company's activities (commercial, industrial, professional). Each license is renewable annually and must be updated to reflect changes in the company's activities.

Taxation

Dubai imposes nopersonal income tax orcapital gains tax, which is a significant advantage for investors. However, a 5% VAT has applied to most goods and services since 2018. As far ascorporation tax is concerned, companies registered in free trade zones often benefit fromexemptions for a set period (generally 15 to 50 years), but those operating on the mainland will be subject to a 9% corporation tax on net profits above a certain threshold from 2023.

Work regulations

Labor law in Dubai is governed by the Federal Labor Law of the United Arab Emirates. Employers must provide clear employment contracts that comply with regulations on wages, working hours, vacation pay and dismissal conditions. Contracts must be registered with the Ministry of Labor. Employers are also required to provide health insurance for their employees, and to comply with strict workplace health and safety regulations.

Real estate

Foreigners can invest in Dubaireal estate on a freehold basis in areas designated as"freehold". Property transactions must be registered with the Dubai Land Department (DLD), with registration fees generally representing around 4% of the purchase price. For"off-plan" properties, which are under construction, buyers' funds must be placed in escrow accounts to protect the investment in the event of construction delays or default.

Resident visa

Dubai offers residency visas to investors. A residency visa can be obtained by investing a certain amount inreal estate (usually from AED 1 million) or by setting up a business. The duration of the visa varies from 2 to 10 years, depending on the amount invested and the nature of the business activity. There are also special visas for entrepreneurs and investors in certain strategic sectors.

Intellectual property

Dubai has strict legislation for the protection of intellectual property, covering patents, trademarks, copyrights and industrial designs. Companies must register their intellectual property rights with the Ministry of Economy to benefit from legal protection in the event of infringement. Protecting intellectual property is crucial for companies operating in innovative or creative sectors.

Dispute resolution

Commercial disputes can be resolved by Dubai' s local courts or, for international companies, by the courts of the DIFC(Dubai International Financial Centre), which apply English common law.Arbitration is also a popular option, with institutions such as the Dubai International Arbitration Centre (DIAC) offering mediation andarbitration services, often preferred for their speed and confidentiality. It is essential for investors to understand the arbitration clauses in their contracts, which determine how disputes will be resolved.

Access to financing

Investors can obtain financing from local and international banks operating in Dubai. Banks offer a variety of financial products tailored to the needs of businesses, including corporate loans, credit facilities and specialized financing for the acquisition of real estate orassets. Understanding loan conditions, applicable interest rates and required collateral is essential to minimize financial risk.

Compliance and regulations

Companies based in Dubai are required to comply with local regulations, in particular the Anti-Money Laundering(AML) and Combating the Financing of Terrorism(CFT) laws. These regulations require companies to implement due diligence procedures to verify theidentity of customers, monitor transactions and report any suspicious activity to the relevant authorities. The Central Bank of the United Arab Emirates and the Ministry of Finance oversee these aspects to ensure a secure business environment.

Licensing

The nature of thebusiness activity determines the licenses required. Some specific activities, such as financial services,education or healthcare, require additional licenses orapproval from other relevant government authorities, such as the Dubai Financial Services Authority(DFSA) for financial services or the Real Estate Regulatory Agency(RERA) for real estate.

Transfer of funds

Foreign investors in Dubai enjoy considerable freedom when it comes to transferring funds. They can freely repatriate their profits and capital without exchange control restrictions. This freedom to transfer funds is a major advantage for international investors, enabling them to manage their cash flow flexibly.

Consumer protection

Dubai applies strict consumer protection laws to ensure that companies provide products and services that meet quality standards. Companies must deal with consumer complaints fairly and transparently, and ensure that sales and service contracts are clear and respect consumer rights.

Environmental regulations

Dubai imposes strict environmental regulations, particularly on companies operating in theindustrial, construction andenergy sectors. Companies must comply with laws on emissions, waste management and water and energy conservation to minimize their impact on the environment and contribute to the emirate's long-term sustainability.

Investing in Dubai offers numerous opportunities within a favorable regulatory framework. However, it is essential to understand local laws and seek professional advice to navigate the emirate's complexlegal and businessenvironment, to ensure compliance and investment security.

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