Expanding a Dubai-based business abroad: legal and tax implications

Nov 25, 2023

The United Arab Emirates (UAE) serve as a magnet for global enterprises, yet many aim to broaden their reach beyond borders. This expansion poses critical legal and tax considerations for entrepreneurs venturing into international growth from Dubai.

Legal obligations for international operations

Understanding the legal aspects of conducting business abroad while being rooted in Dubai is paramount. Compliance with local laws and regulations holds immense importance, considering specific activities may necessitate varying permissions across different countries. Recognizing these differences becomes crucial as the UAE regulations might diverge from those in other regions.

Strategic approaches for expansion

Venturing abroad encompasses diverse strategies: establishing a new entity, creating a subsidiary, or leveraging an existing UAE-based company. Each strategy has distinct advantages and disadvantages based on business objectives and operational nature.

Legal and tax risk assessment

Legally, crafting contracts in line with the law remains crucial, incorporating jurisdiction allocation and choice of applicable law clauses to mitigate potential disputes. Furthermore, adherence to specific regulations in individual countries remains essential.

From a tax perspective, distinct analyses are required concerning the implications when a UAE-based company establishes a foreign subsidiary or operates directly from the UAE in another country: 

  • Foreign subsidiary: diligence and declaration responsibilities 

In the former scenario, meticulous attention is warranted for annual declaration obligations, encompassing corporate tax, VAT, and social contributions. Ensuring secure inter-company relations, including compliance with transfer pricing regulations, establishing fair market prices, managing services rendered, and meeting customs obligations for imports and exports, holds paramount importance. 

  • Direct operations from the UAE: Compliance with VAT norms and permanent establishment risks

In the latter case, strict adherence to VAT regulations and appointing a representative for services provided in another country is imperative. Precautions to prevent inadvertently establishing a permanent establishment abroad are critical, as this could lead to significant fiscal repercussions. 

In summary, methodical planning of the company structure during international expansion is crucial. Our seasoned team stands ready to provide tailored guidance and support for a seamless and secure transition

You might also like