Because many readers will read the UAE posts individually, much of the content will be the same or very similar.
Abu Dhabi is a subnational entity – an emirate – of the United Arab Emirates (or more commonly UAE). Together with Dubai, it is one of two emirates that have veto powers in the Federal Supreme Council.
The UAE is a federation of hereditary absolute monarchies called emirates, which are controlled by emirs.
Abu Dhabi is home to the capital of UAE, also called Abu Dhabi. It is the largest, wealthiest, and most populous of the seven emirates, and acts as the seat of the government and home of the presidential family.
There is an overall government, led by president Sheikh Khalifa (whose full name is Khalifa bin Zayed Al Nahyan), who is also the emir of the emirate Abu Dhabi. The emirs of the other six emirates join the president on the Federal Supreme Council.
As an international financial center (offshore jurisdiction), UAE is a complicated one. Taxes are almost unheard of but forming a business is unfortunately not always easy and banking, although of high quality, is difficult to arrange.
Addressing the topic of incorporation and running a business, numerous free-trade zones have been set up and each emirate is sufficiently independent to set up its own laws on incorporation.
Compared to Dubai, Abu Dhabi is more conservative both socially and fiscally. The Abu Dhabi government has saved the Dubai emirate from financial problems on a number of occasions. You won’t find as wild and extravagant luxury as in Dubai, but there is more money in Abu Dhabi.
Geography and Demography
|Full Name:||Emirate of Abu Dhabi (إمارة أبو ظبي)|
|Other major languages:||None|
|Type of government:||Absolute monarchy|
|Legal system:||Mix of civil and Islamic law|
|Population:||2.2 million (of which 1.5 million in the city of Abu Dhabi)|
|GDP per capita:||65,000 USD|
|Currency:||United Arab Emirates Dirham (AED), pegged at 1 AED = 3.6725 USD|
Incorporation and Business
UAE is a true zero-tax jurisdiction. Resident and non-resident companies are taxed the same: not at all.
Many jurisdictions simply don’t tax non-resident companies and couple this with an easy regulatory framework to attract non-resident companies; for example Cyprus and Gibraltar. The accounting gymnastics utilized for those structures can look worse than incorporating in a jurisdiction that taxes neither residents nor non-residents. While it may be intuitive to bundle Cayman Islands and Bermuda into this group of jurisdictions, neither of them have big companies operating locally (aside from a barely-staffed office here or there to qualify for tax residence).
UAE does. UAE has some of the world’s busiest ports and a lively commercial sector, spanning everything from financial services to manufacturing.
As a whole, UAE enjoys a strong international reputation. It is known that its FTZ and subnational divisions don’t always live up to international standards but this is more or less tolerated. UAE is a necessary ally in the region to many western (and eastern) governments. It does enough to get by without any major reputational backlashes.
Many compliance officers and risk managers fail to look beyond the country stated in the registered office address of a company, not realizing that there can be a big difference within the UAE.
Of all UAE jurisdictions (emirates and FTZs), Abu Dhabi is generally perceived as the most prestigious. While Ras al-Khaimah is mostly unknown or seen as average, Dubai is known for its extravagance and easy-going business dealings – some of them shady – Abu Dhabi has a clean reputation.
Based on that most readers of STREBER Weekly, who are looking to form a company, are start-ups or freelancers, Abu Dhabi is likely not the right jurisdiction. You are most likely going to find Ras al-Khaimah more interesting. In RAK, you can incorporate what is essentially an IBC but with the reputational advantages of the UAE.
However, if you are curious about setting up an actual office and presence somewhere without paying a dime in tax, it can be worth looking into Abu Dhabi. With costs being higher in Abu Dhabi than Dubai, the latter is usually where most new businesses are formed.
Because UAE is not a signatory to the 1961 Apostille Treaty, it can be very tedious to open bank account for UAE companies on your own outside of UAE. Unless using a corporate service provider which can place you with overseas banks through their long-standing strong relationship with partner banks, getting documents certified can be a huge time and money sink as it needs to be legalized by an embassy to be valid.
Because of UAE’s peculiar standing and unique conditions, many service providers offer full director services for a relatively modest fee to make companies appear resident in UAE. This can sometimes be successfully deployed to make a UAE company satisfy foreign tax authorities’ tax residency rules and not be deemed a local company. Your mileage may vary. As always, be very careful and seek professional advice.
Free Trade Zones
Abu Dhabi is home to numerous Free Trade Zones, the most famous perhaps being Twofour54, whose focus is media and entertainment.
Incorporating, getting an office, hiring staff, and handling immigration are easy across the FTZs. Since each FTZ is designed for a set of specific purposes, it’s important to pick the right one.
Considering that licenses and premises are required, costs are comparatively low, but too high for those seeking just to form an entity somewhere and operate remotely. As I mentioned earlier, Ras al-Khaimah is likely a better option.
Each FTZ has its own regulator which is answerable to the Abu Dhabi authorities which in turn are answerable to the Supreme Council.
Aside from the oil sector and branches of foreign banks, there is no corporate tax rate anywhere in the UAE.
Required but need not be submitted. Audits are usually optional.
Varies but generally very secretive.
While Dubai might be the commercial center of UAE, Abu Dhabi is the financial center.
As in RAK and Dubai, banks are licensed on a national level. Many have head quarters in Abu Dhabi or the Dubai International Financial Center.
UAE has adopted the IBAN standard. This can be of a tremendous advantage to entrepreneurs with business partners in the EU. UAE is not a member of SEPA, though.
Cards are often available in multiple currencies, with USD being the most common aside from AED.
The banks are generally easy-going once an account is opened but the banks are more inquisitive than for example Europeans, Americans, and Canadians might be used to from banking at home.
The UAE culture is very personal. It’s important to establish a personal relationship with your contacts at the bank in order to build trust. The same could be said about for example banking in Switzerland, but the difference is that the Swiss banker will be very unlikely to deviate from the policies even after trusting you whereas a banker in the UAE will waive through transactions that perhaps should have been looked at closer.
Open a Bank Account in Abu Dhabi
Opening a bank account is theoretically not different from opening a bank account in UAE. Banks in Dubai can be more easy-going than in Abu Dhabi, even branches of the same banks.
A personal visit is practically always required. Exceptions occur but are rare and usually reserved for persons or corporations of substantial wealth. Personal relationships are very important in UAE and the Middle East as a whole; far more so than in for example Europe or the Americas.
Assuming you’re not just open a small savings or investment account, you will get a personal contact at the bank. This person will be the first point of contact for any queries you may have to the bank. This can make banking take longer (for example if your contact is away or unavailable), but it’s how business is done the region.
Paperwork is not different from most other jurisdictions. Non-resident and foreign companies are welcome but anything more alien than a RAK IC may face a lot of questions about why they are banking in UAE. An introducer is effectively required for any such account opening.
Due diligence is taken fairly seriously. It would be a huge detriment to the kingdom’s finances if it were to become blacklisted by FATF, OECD, US, and the EU for money laundering.
During the Lebanese banking crisis, a lot of capital flowed to UAE, where investors were drawn not just by the financial stability but also the relatively strong banking secrecy. UAE was known as a country that did not give in to international pressure easily.
Today, UAE has signed up for both FATCA and OECD AEOI. Outside of that, secrecy remains strong. The banks are very diligent to satisfy FATCA but OECD AEOI is not taken at all as seriously.
Banks in UAE
As of writing, there are 46 commercial banks in UAE:
- ABN Amro Bank NV
- Abu Dhabi Commercial Bank
- Abu Dhabi Islamic Bank
- Al Ahli Bank of Kuwait
- Al Rafidain Bank
- Al Hilal Bank
- Arab African International Bank
- Arab Bank For Investment And Foreign Trade
- Arab Bank PLC
- Bank Melli Iran
- Bank of Baroda
- Bank of Sharjah
- Bank Saderat Iran
- Blom Bank France SA
- Banque Du Caire
- Calyon Bank
- Al Khaliji France
- BNP Paribas Bank
- HSBC Bank Middle East
- CitiBank NA
- Commercial Bank International
- Commercial Bank of Dubai
- Dubai Islamic Bank
- Dubai Bank PJSC
- El Nilein Bank
- Emirates NBD
- Emirates Islamic Bank
- First Gulf Bank
- Habib Bank Limited
- Habib Bank AG Zurich
- Invest Bank
- Janata Bank
- Lloyds Bank TSB
- Mashreq Bank
- National Bank of Abu Dhabi
- National Bank of Bahrain
- National Bank of Fujairah
- National Bank of Oman
- National Bank of RAK
- National Bank of UAQ
- Noor Islamic Bank PJSC
- Sharjah Islamic Bank
- Standard Chartered Bank
- Union National Bank
- United Arab Bank
- United Bank Limited
There are eight branches of foreign banks:
- Bank of Bahrain & Kuwait
- Barclays Bank
- Doha Bank
- ED & F Investment Products Ltd.
- ICICI Bank
- Korea Exchange Bank
- Standard Bank London Ltd.
- Union Bancaire prive’e (CBI-TDB)
- Westdeutche Landesbank
The UAE Central Bank does a commendable job declaring ownership and making financials on banks it supervises easy to find (for those banks that do publicly share their financials):
- Licensed Banks & Other Financial Institutions’ Ownership
- Links to Banks’ Published Financial Data
- Links to Banks’ Charges in the UAE
Living in Abu Dhabi
It can get very, very hot in UAE. Temperatures well over 40°C (104°F) are common in summer and it rarely dips below 20°C (68°F) at the peak of winter.
Compared to Dubai, Abu Dhabi is more conservative and offers a lot less glitz and glamour. Life in Abu Dhabi is more quiet, akin to Ras al-Khaimah.
Non-GCC expats in Abu Dhabi either last shorter or longer than in Dubai. Most people either get settled in and stick around, or don’t stay particularly long.
Infrastructure in Abu Dhabi is top notch and it is generally very safe.
While not entirely as easy as Ras al-Khaimah , it is nonetheless fairly trivial to obtain residence permit in Abu DHabi for investors and entrepreneurs which are starting a business.
There are a myriad of ways to accomplish this. All in all, a budget of tens of thousand of AED should be expected for all the paperwork.
All in all, the process takes a couple of weeks to complete. It’s not as fast, cheap, and convenient as Panama, but it is truly tax free.
Residents can apply for citizenship after 30 years (7 years for those of certain Arabic descent), provided that they speak Arabic, have a stable income, and have no criminal record.
Taxation is on consumption and usage and not income.
This can make Abu Dhabi incredibly attractive and totally tax free.
UAE is one of the finest jurisdictions in the world and Abu Dhabi is the financial center of this kingdom.
While not a suitable option for those seeking something akin to an IBC or typical LLC, Abu Dhabi can be an excellent jurisdiction for setting up a business with physical premises in a tax free and business-friendly environment.
For most readers of this blog, I would imagine that RAK is preferred over Dubai which is preferred over Abu Dhabi for incorporation.
Banking in the UAE as a whole is very good, but one should plan a visit to the bank.