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VAT refers to Value Added Tax. It is being introduced in the UAE starting 2018. Here’s all you need to know about it.
Value Added Tax (VAT) is a consumption tax applied on a good as its value is increased each stage of its production or distribution. It is an indirect tax that is related to a taxpayer’s consumption and not their income. The VAT is applicable in more than 160 countries.
VAT, at the rate of 5%, shall be introduced in the UAE and other GCC countries from 1 January 2018. Businesses can start registering for VAT three months before the launch date (1 October 2017).
A VAT would be applicable to non-essential consumer goods. Anything apart from basic food and essential commodities would fall in this taxable bracket. This would include automobiles, electronics, jewelry, restaurant services, and entertainment.
The Government of UAE has stated that about items in about 100 categories like food, education, health, bicycle, fuel, transport, and social services would be exempted from VAT.
The FTA on January 10, 2018, announced that 20 free zones in the UAE would be exempt from VAT. These are being referred to as ‘designated zones’. The areas included are largely fenced free zones with special controls on goods, rather than areas such as Dubai Media City or those dealing in financial services.
In addition, goods may be transferred between designated zones without being subject to tax if the goods are not used or altered during the transfer process, and the transfer is undertaken in accordance with the rules for customs suspension per Gulf Cooperation Council (GCC) Common Customs Law.
There is, however, an exception to this VAT exemption in the designated zones: a fee charged for services would be VAT-taxed. So, for instance, a business incorporation service availed in a designated zoned would still be levied with VAT.
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'Local sponsor' is a general term used in the UAE to refer to local service agents and nominee shareholders (sleeping partners) in mainland companies with foreign investment. A sponsor has to be an Emirati (UAE national) with a family membership card (Gincia). Operating a business in the Dubai Mainland area requires a local sponsor to be mandatorily appointed.
As per the UAE Companies Law and UAE Civil Law, to start a company with limited liability in a mainland, that is, a non-offshore company in a non-free zone, a minimum of 51% local equity is a must. Despite foreign equity in such a company not exceeding 49%, the profit distribution from it can be mutually agreed upon by concerned parties. Complete operational powers can also be granted to the foreign partner(s) or a third party on the memorandum of association. Only UAE nationals or companies owned wholly by UAE nationals may be considered for being nominee partner and paid a lump sum amount per year.
Branch of foreign companies and civil companies (single owner of a partnership) with foreign investments needs to have a local service agent appointed to comply with the regulations. These agents do not have any share in the firm also are not normally involved in the operations of the company and are paid a lump sum fee per annum - see what is the normal sponsorship fee
Sponsors normally do not interfere in any of the Company’s activities. Although operational powers are being vested with the managing director/manager; local sponsors still holds power to sign on Immigration and Labour related affairs of the company. As there is normally no limitation on the number of companies they can sponsor; some UAE nationals are the sponsors of hundreds of companies.
There are many business owners in the market who do not have access to the local sponsor directly but through and PROs/consultants/lawyers. In such cases, the relationship between the PROs/consultants/lawyers and the client is crucial.
There are sponsors works in busy schedules and not available when required.
Most of the company owners are not registered with the labor department thus sponsors e-signature card is required for applying for work permits.
Our corporate nominee sponsorship wipes out all the above issues.
We offer highly professional accounting services for a reasonable price in the UAE. Do try our sponsorship fee calculator on the right to get an estimate of the price of local sponsorship services.
Disclaimer: The rate is calculated not based on any official data but what we charge as sponsorship fee and what we have learned from the market.
We also offer corporate nominee services sponsorship for the same rate.
Corporate nominee sponsorship can be availed by all limited liability companies across the UAE. The sponsor in such a case should be a corporate entity instead of an individual.
Important benefits of the local partner being an entity and not an individual is that the difference of personal relationship based traditional sponsorship to agreement based new system. The entity that acts as the nominee is built with a board of directors and holds power of attorney to act on behalf of the Company.
Thus, from the standpoint of corporate governance, for transparency and other factors, this implies sundry benefits for a foreign party, one of the most important ones being succession planning. Companies, while entering the market, often worry about the accountability of a local partner – as to the ramifications of the local partner changing his/her mind. With a corporate entity, the contractual terms still hold, thus imparting more robustness to the arrangement vis-à-vis having an individual national as the local partner. A nominee arrangement shall be executed.
Note: Corporate nominee sponsors can work only for limited liability companies - and not for branches of foreign companies or civil partnerships.
We, at Dubai 2 Online , handle all your local sponsor related requirements proficiently, so you can concentrate on your business growth! Contact us today for our services in the UAE.