Getting authorised in the UAE – which regulatory environment is right for you?
Learn more about getting set up, authorised and licensed in the DIFC/DFSA and the ADGM/FSRA.
The UAE has emerged as one of the world’s leading financial centres and there are now many benefits to setting up in the UAE. The establishment of the Dubai International Financial Centre (DIFC) was a catalyst for this and subsequently, the addition of the Abu Dhabi Global Market (ADGM) has added to the benefits. The local UAE market, however, also has its own benefits and may prove a better jurisdiction for those wishing to penetrate the UAE investor base.
The UAE is strategically located between the East and West, providing a platform for businesses and financial institutions to reach into and out of the emerging markets of the region.
The UAE is an excellent base from which to take advantage of the region’s rapidly growing demand for financial and business services. It also fills the time-zone gap between Europe and the US in the west and Asia and India in the east. There are several options open to you on how and where in the UAE you establish your business.
Key considerations for establishing a business in the UAE
Outside of the Financial Free Zones, you will need to consider the requirement that you may need a local sponsor to help you establish your legal entity. However, if you set up within the Financial Free Zones of the DIFC and the ADGM, your company can have 100% foreign ownership. This is also true of a Central Bank Representative Office and, as such, these tend to be the more popular structures. Whether or not you are part of an already established business could impact your choice of either a branch or a subsidiary or whether or not you can set up outside the Financial Free Zones as a Representative Office.
Are you seeking to provide purely advisory services or will you be managing assets, providing credit or even accepting deposits? The lower the regulatory risk of your business, the more options you will have as to where to locate your business. There are, however, some restrictions on certain types of business being provided in or from the Financial Free Zones including dealing in the UAE Dirham or insuring risks within the UAE. You must also consider whether your need to be regulated for the types of activities your business is planning to undertake and whether or not this is affected by where in the UAE the business is based.
Whilst a license to do business from a Financial Free Zone allows you to do business in or from that Financial Free Zone you should also be aware that there are no passporting arrangements in the GCC as well as within the UAE. As such, you must ensure that the business you are undertaking is allowed to be marketed/provided to clients under the regulations applicable in the jurisdiction in which the client is based. This may be more relevant if your client base is mainly retail, where few exemptions to the local regulations are available.
Both the DIFC and the ADGM operate their own civil and commercial laws which are based on the laws of England and Wales. In addition, they have their own financial services regulators whose rules are based on the UK FCA rulebook. This may be more relevant to those who already have an internationally-based business who may be more familiar with this environment, whereas a more regional-based business may find that the UAE local market regulations are designed more for their type of business.
The UAE has, over the years, attracted many experienced professionals, as well as investing heavily in the education and training of the local population. This provides an ideal balance of junior, senior, local and international staff who can operate in a culturally diverse environment. The UAE has also attracted many of the larger law firms, accountants, auditors, fund administrators and other financial professionals. In addition, an abundance of new properties, both residential and commercial, should meet your requirements, although the price of property will vary depending on where the business is established. If you wish to incorporate your business in the DIFC, the ADGM or in the UAE outside of the Financial Free Zones you will be required to establish premises in that location from which to provide your financial services.
The UAE is a tax-free environment and the Financial Free Zones were given a guarantee regarding zero taxes on corporate income and profits for 50 years from 2004. This, as well as the UAE’s wide network of double taxation avoidance treaties with regulators and central banks, makes the UAE a tax-efficient environment. In addition, as a financial services firm you will be required to establish a premises from which to operate and you must consider that the cost of compliance may vary depending on the regulatory environment within each differing jurisdiction.
For specific information of the regulatory jurisdiction options in the UAE, visit the following pages:
- Setting up in the DIFC
- Setting up in the ADGM
- Getting authorised by the Securities & Commodities Authority (SCA)
- Setting up a Rep Office with the UAE Central Bank.
Waystone Compliance Solutions can help you to consider all your options before you launch any regulatory authorisation application, in order that you choose the right jurisdiction for you.