Doing business in the UAE and Turkey

The United Arab Emirates attracts entrepreneurs with low taxes, ease of registering a business, innovations, and government support for entrepreneurship.

Companies can be registered in Free Zones and Mainland, the rest of the country.

If a company is registered in a Free Zone, it can only operate within these zones or abroad. Foreigners can be 100% owners.

Special conditions apply to such companies. For example, they are exempt from corporate tax for up to 50 years and aren’t required to pay VAT and customs duties.

To register a company, you need to select an emirate and a suitable Free Zone by activity. For example, Dubai Media City and Dubai Industrial City are suitable for related companies.

A licence is required to open a business. Its price, the authorised capital and other conditions vary depending on the Free Zone.

Mainland companies can do business throughout the UAE. Previously, foreigners could own up to 49% of a mainland company, but they were allowed to open companies without partnering with UAE citizens in 2020.

The list of activities for mainland companies that foreigners can wholly own is limited and varies by the emirate. Nevertheless, it includes more than a thousand fields in Abu Dhabi and Dubai. For example, in Dubai, foreigners can own construction companies, trade products and equipment, and even get contracts in the oil and gas industry.

Taxes for businesses. As of July 1st, 2023, companies’ profits are taxed at 9% in the UAE. It only affects businesses with an annual profit of at least AED 375,000 ($102,100).

The standard VAT rate is 5%.

High taxes apply only to certain business areas in the UAE. For example, branches of some foreign banks and companies engaged in oil and gas production pay a 20 to 55% corporate tax.

An excise tax of 50 to 100% is imposed on goods that the UAE government has recognised as harmful to people or the environment: for example, alcohol, soda, sweets, and tobacco.

The UAE residence visa equals a residence permit and is available to those who register companies in the country. The visa is valid for 3 years. Foreigners can also get a 5-year residence visa if they propose an idea for an innovative start-up and get approval from the emirate’s government and the business incubator.

Buying a property is an alternative way to get a UAE residence visa. If you purchase real estate for AED 750,000 ($204,000), you can qualify for a 2-year visa. Properties worth more than AED 2,000,000 ($545,000) are suitable for 10-year Golden Visas.

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Turkish companies benefit from exporting goods abroad thanks to government support and duty-free trade with the EU. In addition, it is possible to register a business in a free economic zone and optimise taxes.

The limited liability company (LLC) is Turkey’s most popular type of company. It can be registered remotely with a power of attorney for a Turkish agent; in this case, the procedure takes at least three weeks.

There are no formal residency requirements for directors. But in practice, companies appoint at least one resident director to make interacting with the tax service and local banks easier. For example, a bank may request an identity card or a Turkish passportfrom one of the directors as part of the Customer Due Diligence.

The minimum authorised capital of an LLC is TL 10,000; in February 2023, it is about $530. It can be set within two years from the registration date.

The enterprise’s liability to third parties is limited to the company’s assets, but the founders are liable for state debts, such as tax debts.

Taxes for businesses. The standard corporate tax is 20% in Turkey. But it can change by presidential decree depending on the state of the economy: for example, in 2022, the rate was 23%.

The standard VAT rate is 18%.

Some products are subject to the Special Consumption Tax, which changes annually. In addition, the gambling business pays an additional gambling tax.

One can register a company in a free economic zone (FEZ) to optimise taxes. There are 18 such zones in the country. They were created to support the export of goods.

Companies registered in a FEZ are exempt from corporate tax on exported goods and don’t pay taxes on property within the FEZ and stamp duty. VAT doesn’t need to be paid for goods delivered to the FEZ from Turkey.

If a company exports more than 85% of its products, its employees are exempt from personal income tax.

Turkey citizenship can be obtained by investment, for example, in a business. You need to invest at least $500,000 in a company to get a passport.

Other investment options are buying real estate or securities and opening a bank deposit.

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1. Registering a company in the UAE or Turkey allows businesses to enter new markets and, in some cases, optimise taxes.

2. One can open a company in a Free Zone and Mainland in the UAE. In both cases, foreigners can own 100% of the company, but there are restrictions on the activities outside Free Zones.

3. Registering a company in a UAE Free Zone allows a business to reduce the tax burden: for example, not to pay VAT and to get an exemption from corporate tax for up to 50 years.

4. The UAE residence visas are available to those who register companies in the country or on other grounds like purchasing real estate.

5. Opening a company in Turkey can be profitable if the business is export-oriented. Such companies can be registered in a free economic zone and get tax benefits. Besides, Turkey has a duty-free trade agreement with the European Union.

6. On paper, there are no residency requirements for LLC directors in Turkey. But in practice, at least one resident director is often appointed to simplify work with the tax service and banks.

7. Turkey citizenship can be obtained by investing $500,000+ in a business.