Setting up a company in a free zone in Dubai and handling taxes and invoices to Germany

Dubai has developed into an international business and trade center in recent years. Its rapid expansion and reputation as a business hub is attracting more and more entrepreneurs to set up a company in one of Dubai's many free zones. These special zones offer numerous benefits, including tax exemptions, easy company registration and a favorable business environment. This article explains how to set up a company in a free zone in Dubai, what tax aspects to consider and how to properly handle invoices to Germany.

1 What is a free zone in Dubai?

A free zone in Dubai is a geographical area established by the government of the Emirate of Dubai or a special authority to provide a favorable business environment for international companies and investors. In these zones, there are special tax incentives and trade benefits that help entrepreneurs run their businesses efficiently. Freezones usually offer 1001TP3 ownership for foreign investors and easy business incorporation processes.

Some of the most famous free zones in Dubai are:

• Dubai Multi Commodities Center (DMCC) - Known for trade and raw materials
• Dubai Internet City (DIC) - Ideal for IT and technology companies
• Jebel Ali Freezone (JAFZA) - one of the largest and best-known free zones
• Dubai Silicon Oasis (DSO) - for technology start-ups
• Dubai Design District (d3) - for creative industries

2. steps for setting up a company in a free zone

Setting up a company in a free zone in Dubai is a multi-step process. The process is generally faster and less complicated than setting up a company on the mainland, as there are fewer bureaucratic hurdles.

2.1 Selecting the right freezone

The choice of freezone depends on the type of company and the desired activity. Each free zone has its own specific requirements and focus. It is therefore advisable to choose a freezone that suits the planned business activity.

2.2 Defining the corporate structure

In a free zone, the company can be established in various legal forms, including:

• Sole proprietorship - A sole proprietor who is solely responsible for the business.
• Limited Liability Company (LLC) - A limited liability company in which the liability of the shareholders is limited to their contributions.
• Branch Office - A branch of an existing company.

2.3 Registration and licenses

Registration of the company in a free zone requires the submission of certain documents, including

• Passport copy of the company owner and partners
• Proof of residential address
• Business plan (required in some zones)
• Freezone application form

Depending on the type of business, you will need to apply for a business license authorizing your company to operate in the Freezone. The type of license varies depending on the business activity (e.g. trade, services or industry).

2.4 Open a bank account

After registration, a bank account must be opened for the company. Dubai has a large number of banks that cater specifically to the needs of international companies. Various documents must be submitted to open an account, including the business license and the company's certificate of incorporation.

2.5 Employees and visas

Another important element of starting a business in Dubai is applying for work visas for employees and residence visas for the business owner. In a free zone, as a business owner, you can usually obtain a visa for yourself and a certain number of employees. The visa is linked to the company and allows employees to work legally in the UAE.

3. tax benefits and obligations

Dubai and the United Arab Emirates (UAE) offer a range of tax benefits for companies in the free zones. Here are the most important tax benefits:

3.1 Tax exemptions

Most free zones in Dubai offer a 100%ax exemption on company profits, which means that your company does not have to pay income tax. In some freezones, this tax exemption is granted for a period of 15 to 50 years, which gives entrepreneurs planning security.

3.2 No value added tax (VAT) for export

Companies that export goods or services are exempt from value added tax (VAT) if they operate from a free zone. This is particularly advantageous for companies that operate internationally and export their products to other countries, such as Germany.

3.3 Income tax on dividends

The UAE does not levy tax on dividends or capital gains, which is a great advantage for entrepreneurs who wish to reinvest profits in their business or distribute them to shareholders.

3.4 Tax on wages and salaries

In general, Dubai does not levy income tax. However, companies must pay social security contributions for their employees. These contributions vary depending on the free zone and the employment status of the employees.

3.5 Tax returns and accounting

Although Dubai does not levy income tax, companies still have to pay a Annual accounting and a Financial reporting carry out. Companies operating in Dubai must regularly submit their financial data and accounting documents, especially when applying for visas and licenses.

4. invoices to Germany - handling of tax and accounting obligations

If your company is based in a free zone in Dubai and maintains business relations with Germany, there are several important aspects to consider, particularly with regard to Invoicing and the Tax obligations.

4.1 Value added tax (VAT) in Germany

For invoicing to Germany, you must use the German value added tax (VAT) must be taken into account. If you run a business in the UAE and supply goods or services to Germany, you may be exempt from VAT under certain conditions if it is a intra-Community acquisition deals.

4.2 Sales tax identification number

In order to handle VAT on invoices correctly, you need a Value added tax identification number (VAT ID). You can order these from the Federal Central Tax Office in Germany. You can use this number to ensure that your transactions with German companies are treated correctly for tax purposes.

4.3 Tax registration in Germany

Companies from Dubai that regularly supply goods or services to Germany may have to register for tax in Germany. This means that you as a company must comply with German VAT laws and file a German tax return, even if your head office is in Dubai.

4.4 Invoicing and documentation

When invoicing German customers, you must ensure that your invoices comply with the German Invoice requirements fulfill. These include:

• The full address of the company in Dubai and the customer in Germany
• The German VAT identification number of the German customer (if applicable)
• A detailed breakdown of the products delivered or services provided
• The VAT rate applied, if VAT is charged

4.5 Tax advice

As the tax requirements are complex, especially for international transactions, it is advisable, Tax advice to take advantage of this. An experienced tax advisor can help you to ensure that you fulfill all tax obligations correctly both in the UAE and in Germany.

Setting up a business in a free zone in Dubai offers many advantages, particularly tax benefits and a favorable business environment. However, entrepreneurs operating internationally from Dubai should carefully consider the tax requirements and invoicing regulations for their business relationships with Germany. With sound planning and the use of professional advice, companies can efficiently meet their tax obligations while maximizing the benefits of using the free zone.

Business Rocket