This guide was written in November 2009.
The market for IT products and services in the United Arab Emirates (UAE) was worth approximately US$3.1 billion in 2008. It is no surprise, therefore, that the majority of global players in the IT market have already established a presence in the UAE and others continue to look to do so.
The obvious choice of location for information technology companies looking to locate in the UAE is in the regional hub of Dubai and more particularly within Dubai Internet City.
See also: Doing business in the United Arab Emirates: key considerations, an OUT-LAW Guide
What is Dubai Internet City?
Dubai Internet City (DIC) is an information technology park set up by the government of Dubai as an economic free zone and a strategic base for information technology companies targeting regional emerging markets.
DIC is one of three initiatives making up the Dubai Technology and Media Free Zone, the others being Dubai Media City (for media-related companies) and Knowledge Village (for academic institutes and training centres).
What are the benefits of locating in DIC?
The benefits of locating within Dubai Internet City include the following:
- 100% foreign ownership is permitted;
- companies are exempt from all taxes, including personal income and corporate taxes, for a guaranteed period of 50 years;
- companies are also exempt from customs duty for goods and services and reasonable operating costs; and
- DIC has a pre-existing infrastructure geared towards information technology companies.
Who can locate within Dubai Internet City?
DIC will license both businesses and individuals to carry out certain categories of activities within DIC. The licence categories permitted in DIC are as follows:
- Software – Activities related to developing, installing and/or modifying software products of the company or of a third party.
- Internet and Multimedia – Activities related to developing and/or distributing internet or multimedia content. Other activities may include distributing goods or services via the internet, such as by providing an online platform and acting as an intermediary between multiple companies or multiple individuals. Additional activities may include providing different applications through a network.
- Telecommunication and Network – Activities related to developing, installing, modifying, and/or operating networks or providing relevant services designed for operating network-based applications or services for self or for third parties.
- IT Service – Activities related to developing and/or providing standardised repeatable IT-based services, which may also include security solutions, localisation, training and corporate learning.
Each licence category is then further broken down into segments for Consultancy, Developer, Solution Provider, Customer Service or Support Service Provider activities. Companies must obtain a licence for a particular segment within their chosen licence category.
What company structures are permitted in DIC?
Companies looking to establish in DIC have the following options:
- Branch of a UAE Company;
- Branch of a Foreign Company; or
- Free Zone Limited Liability Company (FZ-LLC).
FZ-LLCs can be owned by a single individual or corporate shareholder or by up to 50 individual or corporate shareholders. DIC currently prescribes a minimum share capital for a FZ-LLC of AED 50,000 and a minimum share value of AED 1,000. Branch offices do not have any capitalisation requirements.
What laws apply to companies located within DIC?
Companies located in DIC will be subject to all of the laws of the UAE along with any specific legislation or regulations which apply in DIC.
DIC currently has its own laws in relation to licensing, dispute resolution and employment issues.
Can a company located in DIC trade outside of DIC?
DIC is considered to be an offshore area which is separate from the mainland UAE. Strictly speaking therefore, companies located within DIC are only permitted to trade within DIC and not within the UAE generally unless specific consent is obtained from the relevant authorities.
In practice however, most, if not all, companies located in DIC trade with and contract freely with companies located outside the free zone and the UAE authorities do not, at present, actively police the companies' activities in such regard.
What is the procedure for obtaining a licence and establishing in DIC?
A step-by-step guide to the process and documents required to obtain a licence and establish in DIC is set out below:
Step 1: Application submission
Applicants must initially submit the following:
- An Application for Licence (available on the DIC website)
- A proposed Business Plan (using the DIC pro forma on the DIC website)
- Passport copies for the manager, directors and shareholders
Step 2: Review of application
DIC will review the application and may request additional information or clarifications.
Upon approval a Provisional Approval Letter is sent to the applicant along with a checklist of legal documents required.
Step 3: Acceptance of Provisional Approval Letter
The applicant must sign and stamp the Provisional Approval letter and submit this to DIC.
Step 4: Submission of legal documents
The applicant must submit the following legal documents within 15 working days of acceptance of the Provisional Approval Letter:
If the applicant is a corporate body:
- Certificate of Registration of the applicant company (original or notorised copy)
- Certificate of Good Standing of the applicant company (original or notarised copy)
- Memorandum and Articles of Association of the applicant company (original or notarised copy)
- A list of current directors of the applicant company
- A board resolution of the applicant company calling for the establishment of the FZ-LLC, appointing a negotiator or legal representative (optional) and awarding the manager a power of attorney (original or notorised copy)
- Proof of capital from a bank within the UAE showing that the FZ-LLC's minimum share capital will be AED 50,000 and the minimum share value is AED 1,000 [is this the FFZ-LLC or the company]
If the applicant is a branch of a foreign company or of a UAE company:
- Certificate of Registration of the parent company (if a foreign company) (original or notorised copy)
- Certificate of Good Standing of the parent company (if a foreign company) (original or notorised copy)
- Copy of Valid Trade Licence (if a UAE company)
- Copy of Commercial Registration (if a UAE company)
- Memorandum and Articles of Association of the parent company (original or notorised copy)
- A board resolution of the parent company calling for the establishment of a branch in DIC, providing a financial guarantee of the liabilities of the branch, appointing a negotiator or legal representative (optional) and awarding the manager a power of attorney (original or notorised copy)
If the applicant is an individual:
- A document setting out the personal details of the individual shareholder(s) of the FZ-LLC
- A bank letter of recommendation for each shareholder (original)
- A power of attorney appointing the manager as attorney for each of the shareholders
- Proof of capital from a bank within the UAE showing that the FZ-LLC's minimum share capital will be AED 50,000 and the minimum share value is AED 1,000
Step 5: Legal document review
Upon the submission of all required legal documents DIC will assess whether the required office space is available and if so will send to the applicant a Customer Confirmation Letter.
Step 6: Customer Confirmation Letter
The applicant should sign and stamp the Customer Confirmation Letter and return it to DIC.
Step 7: Initial payment
Once the signed Customer Confirmation Letter is received DIC will issue an invoice for the licence and registration fees plus 34% of the total annual lease rental.
Step 8: Lease Agreement and Personnel Sponsorship Agreement
Upon receipt of the initial payment DIC will issue the Lease Agreement for office space and the Personnel Sponsorship Agreement.
Step 9: Trade Licence Issuance
Once the signed lease and Personnel Sponsorship Agreement are received, DIC will issue a trade licence and the company can begin trading.
Step 10: Balance payment
After issuing the trade licence DIC will issue and invoice for the outstanding amount of the total annual lease rental to be paid in two instalments:
- 33% first instalment payable 4 months from the date of initial payment; and
- 33% second instalment payable 4 months from the date of payment of the first instalment.
If you have any further queries about setting up your company in Dubai Internet City, or elsewhere, then please contact one of the following in our Dubai office: