Establishment of a joint venture in the UAE

05.04.2024

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Main characteristics of joint ventures in the Arab Emirates

Members of the joint venture

Inaugurating a joint venture in the UAEis a procedure that encompasses the genesis of an exceptional commercial configuration wherein two or more enterprises amalgamate their assets to attain mutual objectives. This might encompass venturing into novel markets, fostering innovative commodities, or exchanging technology and erudition. A noteworthy aspect of registering joint ventures in the UAE is that they can exclusively be constituted by juridical entities, precluding the involvement of individuals as associates. It is further imperative to select the jurisdiction that most aptly befits the intention and essence of the conjoint endeavor. There exist numerous free economic zones each endowing singular tax enticements.

It is pivotal to observe that collaborative enterprises in the UAE are likewise susceptible to particular hazards, encompassing the potentiality of managerial discord amidst associates and hurdles linked with assimilating disparate corporate ethos. Consequently, it is imperative to meticulously select collaborators and explicitly articulate all the conditions of collaboration in the collaborative enterprise pact.

Forming a joint venture in the UAE embodies a sagacious maneuver for myriad global enterprises seeking to broaden their footprint in the Middle East. By adopting the appropriate methodology and adhering to all requisite protocols, it has the potential to serve as the cornerstone for a prosperous and gainful enterprise.

Urgency and purpose of creation

Starting a joint venture company in the UAE is a process that is driven by the desire of companies to join forces to achieve specific goals. These objectives can range from developing new products to accessing new markets or sharing unique technologies and knowledge. A feature of joint ventures in the UAE, as in many other jurisdictions, is their term nature. This means that such ventures are usually established for a fixed period of time, after which they are either reorganised or cease operations.

The process of formalising a joint organisation in the UAE begins with the precise definition of the project's objectives and timeline between all participants. This juncture is pivotal as it establishes the rudimentary parameters for subsequent endeavors and concords. This is succeeded by the formulation and ratification of a collaborative enterprise compact, which ought to lucidly embody all facets of the collaboration, encompassing the contribution of each of the involved parties, the allocation of gains and detriments, as well as the governance protocols and the resolution of conceivable conflicts.

It is meritorious to remark that registering a joint venture in the UAE necessitates meticulous groundwork and comprehension of both indigenous decree and intercontinental commerce propriety. Considering the considerable multitude of alien investors and proprietors prevalent in the UAE, it is likewise crucial to heed cultural sensibilities and endeavor to forge reciprocally advantageous and deferential associations with commerce cohorts.

Procedure for establishing a joint venture in the UAE

Registration of a joint venture agreement

Registering a joint venture firm in the UAE begins with a key step, which is to register a joint venture agreement. This process involves several steps that ensure that the arrangements between the partners are legal and officially recognised.

Step 1:

Preparing and negotiating the agreement

The first step is the preparation of the joint venture agreement, which should contain all key aspects of the partnership, including the objectives of the joint venture, the responsibilities and rights of each party, the management structure, the distribution of profits and losses, and the terms of termination.

Step 2:

Legal review of the agreement

It is important that the joint venture agreement in the Arab Emirates is thoroughly vetted by lawyers specialising in UAE corporate and commercial law. This will ensure that the agreement complies with local laws and regulations and minimises the risk of future disputes between the partners.

Step 3:

Registration of the contract

Once the agreement has been drafted and approved by all parties, it should be officially registered with an authorised UAE government agency. Registration of a partnership enterprise in the UAE may include submission of the document to the Economic Department or to the administrative body of a free trade zone, if the business is planned to be set up in such a zone.

Step 4:

Obtaining the required permits and licences

According to the direction of the joint venture, certain licences and permits may be required. This also covers obtaining any additional permits required to do business in the UAE.

Registering a partnership in the UAE is a task that requires detailed pre-planning and strict adherence to legal regulations. Careful application of these procedures provides a sound basis for conducting business legally in this jurisdiction.

Selection of trade name

The paperwork for a joint organisation in the UAE begins with a particularly important step - the selection of a business name. This choice should not only accurately reflect the core business of the company, but also be in harmony with the cultural and legislative framework of the UAE. When selecting a name for a business alliance, it is essential to adhere to certain fundamental principles.

First of all, the chosen name should be unique, standing out among the already registered names in the UAE to avoid any possible confusion and subsequent legal proceedings. During the process of drawing up the documentation for joint activities, it is important to ensure that the name not only has no analogues, but also does not include terms that may be legally restricted or prohibited in the UAE.

Another critical aspect of setting up a joint venture in the Arab Emirates is to accurately and clearly reflect the scope of the company's business in its name. This makes it easier for potential clients and business partners to understand what the firm does and complies with local legal requirements. A conscious approach to choosing a name helps to create a positive first impression of the company and simplifies the process of branding and marketing.

In addition, it is important to take into account the cultural sensitivities of the region. A name that may seem appropriate or neutral in other cultures may be interpreted very differently in the UAE, sometimes even causing a negative reaction.

List of mandatory documents

To launch a joint venture in the UAE, it is necessary to follow established procedures and provide a specific package of documents required for official registration. The important elements of this package are:

A completed application for the registration of a joint venture, which must fulfil all the requirements set by the Department of Economic Development. This document must contain all the basic information about the future venture, including its proposed name, line of business, and details of all the founders.
A formalised UAE Joint Venture Agreement signed by all project participants.
Up-to-date copies of passports of each of the company founders.
Confirmation of name reservation for the future company.
A No Objection Certificate (NOC) from the local sponsor, provided that it is required for a particular business activity or where the business is to be set up outside free trade zones. This document certifies that the local sponsor or business partner has no objection to the registration of your foreign company.
Minutes of a resolution of the board of directors from each of the founding companies confirming their agreement to participate in the joint project and to appoint representatives to manage the company's affairs, if applicable.

Providing all of the above documents is key to facilitating and expediting the process of registering a joint venture in the UAE. This ensures a smooth flow of all the necessary steps and helps avoid most of the potential obstacles or delays that may arise in dealing with the regulatory authorities.

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Advantages of joint ventures in the UAE

Exchange of technologies and expertise

Forming a joint venture in the UAE is frequently a pivotal contemplation for enterprises seeking to partake technology and erudition. This facet of cooperation is notably precious in contemporaneous economics, wherein novelty and technological preeminence may ascertain triumph in the market sphere. In formalizing a coadunate endeavor, associates merge their singular aptitudes, erudition, and technologies to engender synergies that expedite the evolution of unprecedented commodities, amenities, or ameliorated manufacturing methodologies.

Establishing a joint venture in the UAE also entails reciprocal comprehension and deference for cultural disparities in commercial methodologies and procedure oversight. Alliances may prove notably fruitful if they are constructed upon a substratum of reliance and receptiveness to erudition dissemination, enabling both factions to optimize the advantages of cooperation. To realize these objectives, the procedure of amalgamating technology and proficiency must be meticulously strategized, guaranteeing their efficient implementation within the joint undertaking.

Upon commencing a joint business in the UAE, the cohorts may encounter myriad dilemmas pertaining to the orchestration of exploration and advancement endeavors, alongside the imperative to educate personnel for adeptness with nascent technologies. A pivotal determinant of triumph lies in erecting efficacious project oversight and communicative apparatuses amidst partner cohorts, thereby optimizing the capacity for synergistic labor.

Increase in capital and resources

Establishing a joint venture in the UAE is often seen by companies as a strategic move to increase capital and resources. This decision is attractive to organisations looking to expand their operations, explore new markets or develop innovative products and services. In the context of the UAE, with its favourable business environment and economic policies open to foreign investment, a joint venture can offer unique opportunities for growth and development.

When two or more companies come together to register a joint business in the UAE, they can invest in project development, which significantly increases the capital available compared to what each participant could offer separately. This co-operation not only enhances the financial strength and expansionary capabilities of the joint venture, but also allows risk to be shared among all participants. Thus, if the venture encounters difficulties or failures, the damage is shared among all partners.

Moreover, erecting a joint venture firm in the UAE enables firms to congregate and refine their riches. This may encompass tangible assets, akin to machinery and technology, as well as incorporeal riches, like specialized erudition and adeptness in a distinct realm. Disseminating these riches confers upon an enterprise a pole position, enabling it to function more proficiently and inventively than would be feasible for every contributor separately.

A vital facet of augmenting capital and resources through initiating a joint venture in the UAE is the capacity to ingress novel markets. The jurisdiction functions as a portal to markets in the Middle East, Africa, and South Asia, proffering enterprises a stage for magnitude and worldwide proliferation. Collaborative enterprises can employ the indigenous acumen and networks of their Emirati counterparts to maneuver regulatory prerequisites, cultural subtleties, and commercial customs, thus hastening the process of penetrating novel markets.

Thus, opening a joint venture company in the UAE is an effective strategy for companies looking to maximise their capital and resources. This approach not only facilitates financial growth and business expansion, but also provides greater opportunities for innovation and strategic positioning in the global market.

Tax system

Initiating a joint business in the United Arab Emirates implies the need to take into account the peculiarities of the local tax system, which is among the key elements of the country's economic atmosphere.

Advantages of not having a corporate tax

The Emirates does not levy corporate tax on most companies, which creates a favourable environment for business activities. However, from the first of June 2023, a new provision for corporate income taxation at a rate of 9% came into effect for businesses whose annual revenue exceeds the AED 375,000 (≈102,000 USD) threshold, which has an impact on high-income joint ventures.

Value Added Taxation

With the start of 2018, VAT was introduced at a rate of 5 per cent, which is considered quite low on the scale of the global economy and helps to maintain an attractive tax environment for all types of businesses, including joint ventures. VAT applies to the bulk of goods and services, with exceptions and exemptions for certain categories.

Double taxation treaties

The UAE has signed a number of treaties with different states directed at preventing double taxation, which facilitates international business transactions and investments, including joint ventures. These measures are directed at minimising tax liabilities for companies operating globally.

The process of setting up a bank account for partner companies in the UAE

Launching a partnership business in the UAE implies the mandatory organisation of a bank account, which is a fundamental aspect for launching operations and effectively managing corporate finances.

Step 1:

Determining the choice of bank and account category

It is necessary to carefully select the bank and type of bank account, taking into account the bank's services, fees, minimum required balance and other terms and conditions to determine the best option for the company's needs.

Step 2:

Collection and preparation of documents

Opening an account will require a set of documents including the official papers of the organisation, passport copies of all managing persons, and proof of the firm's registered office in the UAE.

Step 3:

Making an application to open an account

With the collected documents and the selected bank in hand, delegates of the partner company should apply to the selected bank to initiate the account opening process, some key figures of the company may need to be present.

Step 4:

Verification of the data by the bank and approval of the application

The bank will verify the documents submitted and may ask for clarifications regarding the company's activities. After verification and approval, the bank will set up an account in the name of the company.

Step 5:

Account activation and issuance of financial instruments

Once the account opening process is completed, the company will have access to online account management and can also use cheque books, debit cards and other instruments for financial transactions.

The time required to open a bank account for partner businesses in the UAE varies from a few days to a few weeks depending on the bank and the accuracy of the documents provided. It is crucial to note that banks' requirements for minimum account balances and fees may vary, so it is advisable to familiarise yourself with the terms and conditions of several banks in advance.

Conclusion

Initiating a coalition endeavor in the United Arab Emirates is a strategically propitious maneuver for enterprises aspiring to broaden their sway in the worldwide market. This is attributable to a plethora of benefits proffered by the indigenous economic milieu - steadfast economic circumstances, enthralling fiscal protocols, thoroughly cultivated infrastructure, and an accommodating posture towards alien investment render the UAE a propitious locale to foster coalition enterprises.

Forming a joint venture in the UAE involves several critical steps, from selecting a worthy partner and determining the appropriate legal form for the future business to formally registering the company, obtaining all required licences and opening a corporate bank account. Each of these steps requires special care in pre-planning to ensure success.

Our team of experts is at your disposal to provide detailed information and comprehensive support at all stages of registering and launching your joint venture in the UAE. We invite you to contact us by filling out our contact form.

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