Through savvy legislation and tax policy, Dubai has established itself as an export and re-export base for foreign companies. For businesses based in countries like India -which must navigate complex taxation rules and high costs to move stock across borders- setting up a company in Dubai for export is the obvious choice. Let us look at the meaning of an export base, how to choose its jurisdiction, and why Dubai stands out as an export base location.
This article at a glance:
Selecting a strategic location for your export base is important to streamline your operations. Dubai has emerged as one of the premier locations to establish your export business -connecting Asia, Europe and Africa. Its low taxes and solid infrastructures are among the reasons exporters are using Dubai as their base. We have also included a summary of the steps to incorporate your business in Dubai for your reference.
Choosing an Export Base Jurisdiction
An export base is where you export your goods into (perhaps from your home country or region), store them and redistribute them. To choose the best export base location or jurisdiction for your export business, these are some of the factors that you should consider:
Location and Transport Costs
Regardless of the carrier type, shipping costs money. It is important to take the overall geographic location of your supplier location and sales area into consideration. Choosing an export base which is close to both supplier and target market reduces distribution costs and delivery time, leading to higher customer satisfaction.
After you have decided on the location for your export base, you need to store your export goods in a warehouse. A warehouse located in the outskirts of a city reduces your rent or purchase price. Ensure also that the warehouse is secure, accessible, has a good transportation network and sufficient space for your business operations.
Dubai the Export Hub: Diversification From Oil
Since its rulers decided in the 1970s the Emirate would need to diversify away from oil, Dubai has lived in the fast lane.
In place of dwindling oil exports came trade of everything else, as the city exploited its strategic positioning between east and west and promised foreign corporations simple rules, low fees, and the corporate infrastructure of lawyers, accountants, and consultants required to enable smooth sailing.
By 2019, less than 1% of GDP came from oil, according to the World Economic Forum. In the first six months of 2021, non-oil foreign trade surged to US$196.7bn, up from US$149.9bn the previous year, thanks to rejuvenated business with major trading partners China and India.
An active tweeter, Dubai Crown Prince Sheikh Hamdan bin Mohammed bin Rashid al-Maktoum said on Twitter last year that Dubai now owns 60% of the global re-export of tea thanks to best-in-class facilities for storing and processing it.
Why You Should Use Dubai As Your Base For Exports?
1. Low / No Taxes
Taxes, or the lack of, are Dubai's key drawcard for companies based in complex jurisdictions as well as favourable ones.
Companies incorporated in the Emirate do not pay VAT, import or export taxes, capital gains tax, withholding tax or corporate taxes.
Importers only pay a 5% customs duty on most goods, although the tariff on luxury items such as tobacco is as high as 50-70%, and it's signed double taxation treaties with 66 countries.
Crucially, there are no restrictions on repatriating profits, royalties, or interest and in many cases, no tax on those either.
2. COVID-19 Benefits
Before June 2021, a UAE-wide law meant foreigners could only own up to 49% of any company registered within the country; Dubai allowed 100% ownership and full access to those tax benefits for any foreign company registered within its more than 20 free zones.
But with COVID-19 causing supply chain problems around the world the UAE had to make changes and further sweetened its corporate laws for foreign companies by removing the 49% limit on company ownership throughout the country.
Dubai remained a step ahead to ensure it remains the most attractive Emirate for expats, saying it won't impose any capital requirements on those looking to take up more than 1000 commercial activities now open to foreign companies.
3. Strategic Location
Dubai is at the heart of both ancient and modern global trade routes, and a key port within China's new Silk Road network. On its East-West axis are Europe and Asia, and on the North-West it connects Iran, Russia and Africa.
4. Dubai FDI = New Markets
Dubai provides freight pathways to both east and west regions of the continent. Rising African economies such as Kenya, Uganda and Tanzania are demanding more capital goods, machinery and raw materials, and this demand is being facilitated and met by many Dubai-based enterprises. This paves the way and also opens new markets for Dubai exporters.
5. Solid Infrastructures
Dubai has more than 20 free zones that provide direct air, maritime and road connections with the region and world, and the government has invested heavily in infrastructure development. It was named one of the world's top five shipping hubs last year in the International Shipping Centre Development Index, thanks to advanced infrastructure, world-class maritime and logistics capabilities.
In addition, it has transparent, streamlined and mutually-beneficial tax, legal and corporate frameworks and strong telecommunications networks for foreign companies moving from around the region into Dubai to take advantage of a growing digital economy.
Incorporating a Company in Dubai
As a foreigner, if you have decided on Dubai as your export base, here are the steps to incorporate a company here:
1. Determine Your Business Activity
A single trade license would allow you to have multiple business activities. However, if you operate only a single trade activity, the type of business that you run may determine where your business can set up. This is because there are areas which limit the activity type to only certain sectors (e.g. healthcare and media free zones). As an exporter, a free zone near an airport or port would make most sense to you.
2. Name Your Entity
Be wary of the cultural and religious naming sensitivities in the UAE. If using your own name, only a company’s partner or owner's full name can be used, not their initials or abbreviations.
3. Prepare the Documents Needed
Trade and government authorities would require you to fill up application forms to register your company name and activity. Shareholders’ passport copies need to be submitted too. Sometimes additional documentation, such as a business plan or Non-Objection Certificate (NOC), is required.
After you have submitted your documents and if the application is approved, Dubai will issue you a company licence.
4. Set Up a Business Bank Account
With your company license, you can now open a local UAE bank account. There are many local and international banks to choose from, such as the Emirates NBD, Commercial Bank of Dubai, HSBC, Citibank and Barclays banks. Your Dubai company is now up and running, and ready for its first business operations!
For exporters, Dubai's ambition to be among the top re-exporters in the world as well as opening pathways to new markets, makes it a great export base choice. If you require online payments and business accounts solutions for your Dubai (or global) -based business, chat with us at here Silverbird.
Author: Syahirah Aiman
Illustration: Kate Faldina