|09 October, 2019

Dubai's new low-cost virtual license to draw foreign businesses, freelancers

New license offers wide range of benefits in a simplified environment, PwC told Zawya

Men walk past buildings at the Dubai International Financial Center in Dubai. Image for illustrative purposes.

Men walk past buildings at the Dubai International Financial Center in Dubai. Image for illustrative purposes.

REUTERS/Ahmed Jadallah

The Dubai government is keen to attract more investments in its innovative and consultancy sectors, and the recently launched virtual license will result in a more simplified business environment for foreign investors and entrepreneurs, according to global consultancy PwC Middle East.

“Those eligible to apply for virtual licenses will benefit from a simple, fast and low-cost solution to conduct business in the UAE, without the need to reside in the country,” Darren Harris, Legal Services Leader at PwC Legal Middle East told Zawya.

“Ongoing benefits include the ability to manage the business online, including the digital execution and submission of documents,” he said. “In addition, all businesses operating under a virtual license will get access to DubaiStore.com, an online marketplace for the promotion of products and services with online shoppers and interested customers.”

The initial setup fees will be in the range of $250, and licenses will need to be renewed on an annual basis.

The license covers 21 services in three business sectors: computer programming, design, and services related to printing and advertising. (See Appendix below)

To obtain the license, there are four primary conditions that an applicant must satisfy as part of the eligibility assessment.

“Individuals interested in setting up their virtual license must be verified, reside outside the UAE, be the nationals or tax residents of approved countries, and propose to operate in one of the three business sectors,” Harris said.

Foreign businesses planning to operate in the UAE currently require either the establishment of an appropriately licensed entity in the UAE or a contractual arrangement between the foreign person (be it an individual or a legal person) and an appropriately licensed UAE entity, i.e. a third party, according to PwC’s Harris.

“Both options offer distinct advantages and limitations from a legal, commercial and tax perspective, to name a few. A foreign business wishing to set up a local entity is subject to several considerations, such as the legal form and jurisdiction suitable for the proposed operations, which will also determine whether the compulsory participation of a UAE national is required,” he said noting the simplicity of the virtual license in contrast.

FREELANCERS

As per the UAE’s current regulations, those residing in the country and working as freelancers need to obtain a freelance permit.

“One of the eligibility criteria for a freelance permit is that the freelancer must hold appropriate credentials or certificates related to their chosen field (being media, technology or education). There is no similar requirement for virtual license holders,” Harris said.

“Freelance permit holders are generally subject to local entity governance requirements, including the need to maintain a UAE residency visa and registered office address, which is not applicable to virtual license holders,” he said noting that virtual licenses are specifically only offered to individuals based abroad.

Like virtual licenses, freelancers can also only operate across a limited number of sectors, and there is some overlap between the permitted activities of each, according to him.

“Businesses operating under both regimes do so as a ‘sole proprietorship’, rather than a ‘company’. This means that there is no legal separation between the license holder and the business, which has liability implications in absence of the ‘corporate veil’,” he noted.

As for whether the virtual license can facilitate obtaining a visa to the UAE, Anir Chatterji, PwC Middle East Immigration and Employment Leader said: “No. Currently, a virtual company license does not - and will not - automatically guarantee residency status (be that a UAE residency visa or business visitor or otherwise) to any of the company’s partners, directors or employees,”

“However, we understand that the Dubai Government is working on putting into place a simplified visa process for holders of a virtual company license, although the terms, conditions, criteria and timelines for such a visa is presently unclear,” Chatterji added.

(Writing by Nada Al Rifai nada.rifai@refinitiv.com, editing by Seban Scaria)

Appendix:

The twenty-one service license activities currently offered within virtual license are as follows:

 Computer programming, consultancy and related activities

  • Computer Systems & Communication Equipment Software Design
  • Electronic Chips Programming
  • Web-Design
  • Social Media Applications Development & Management
  • Cyber Security Architecture
  • Public Networking Services
  • Cyber Risk Management Services
  • Auditing, Reviewing and Testing Cyber Risks
  • Managed Cyber Security Services Provider
  • Marketing Services Via Social Media

Design activities

  • Fashion Design
  • Jewelry Design
  • Design Services (interior design, garden design)
  • Calligraphers & Painters
  • Product Design

Service activities related to printing and advertising

  • Books Binding
  • Typesetting Services
  • Color Separation Services
  • Design & Artwork Services
  • Greeting Cards Production & Distribution Services
  • Promotional Gifts Preparing

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© ZAWYA 2019

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