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Dubai too pricey for new companies |
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9/9/2006 8:57:47 AM |
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Dubai: Dubai's tax-free status and liberal trading conditions have seen businesses scramble to set up their regional and international headquarters in the booming emirate.
But some legal consultants have criticised high costs associated with company formation, the barrier of complex bureaucracy, and legal requirements for 51 per cent ownership by UAE nationals.
They warn that Dubai's mission to become a global business hub could falter unless the emirate follows through on plans to allow greater foreign ownership.
Mark Lazell, marketing and media director at Healy Consultants, thinks Singapore (where approximately 7,000 foreign corporations have set up) and Hong Kong see Dubai as a growing source of competition, but will continue to have an edge over their Middle Eastern rival.
"The process of company formation in Singapore is a quick and fairly simple process and much cheaper than in Dubai. Full foreign ownership is also permitted," he said.
"We are presenting companies with alternatives, and they are choosing Singapore."
Healy Consultants said it charges $2,100 for company formation in Singapore, which includes Government license fees, legal company secretary fees for 12 months, and legal registered office for 12 months.
The cost in Dubai varies between $8,900 and $53,100 depending on the corporate structure of the company and services required, the company said.
Dubai-based chartered certified accountants AGN Mak admit that some procedures need to be "refined", but argue that Dubai's tax-free status more than makes up for high fees and a trend of escalating rental costs in free zones. "There has been a substantial increase in the rents in free zones, which can have big impact on small companies," said Khalid Maniar, managing partner at AGN Mak. "But corporations are still willing to establish their regional and global headquarters in the UAE as the tax benefits create substantial potential savings."
Maniar said Dubai is considering revisions to the Company Law which would relax or even abolish the 51 per cent UAE-ownership requirement. Certain companies with a capital base over Dh5 million have already been freed of the restrictions, he said.
Despite the costs associated with company formation in Dubai, the current system does not seem to be hindering direct foreign investment, with those companies eager to trade in the region seeing Dubai as an essential centre for operations.
And as Lazell admitted, "Dubai is making moves to remove restrictions and become increasingly investment friendly. It is not scared to do to the things which are needed to attract investors." |
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