In the United Arab Emirates (UAE), companies are classified into different categories based on their activities and ownership structure. One such category is Category 2 companies. In this article, we will explore what exactly a Category 2 company is in the UAE and what it entails.
Definition of Category 2 company
A Category 2 company is a type of company that is licensed to conduct business in the UAE but is not eligible to trade within the UAE local market. These companies are mainly established for holding purposes, international trading activities, and asset ownership.
Characteristics of Category 2 company
Here are some key characteristics of Category 2 companies in the UAE:
- They are wholly owned by non-UAE nationals or entities.
- They have a minimum share capital requirement, which varies depending on the Emirate where the company is registered.
- They cannot engage in business activities that involve importing/exporting goods or providing services within the UAE local market.
- They are allowed to own real estate properties in the UAE, subject to certain regulations and restrictions.
- They can conduct international trading activities with entities outside the UAE.
Advantages of establishing a Category 2 company
There are several advantages to establishing a Category 2 company in the UAE:
- Taxation benefits: Category 2 companies enjoy tax exemptions on income, capital gains, and dividends, making it an attractive option for individuals and corporations looking to minimize their tax liabilities.
- Asset protection: Owning assets through a Category 2 company provides an additional layer of protection against potential liabilities.
- Access to double taxation agreements: Category 2 companies can leverage the UAE’s extensive network of double taxation agreements to minimize the impact of taxation on international business activities.
Process of establishing a Category 2 company
Establishing a Category 2 company in the UAE involves the following steps:
1. Consultation and planning:
Engage with a reputable business consultancy firm that specializes in company formation in the UAE. They will assist you in understanding the requirements, procedures, and costs involved in setting up a Category 2 company.
2. Company name approval and registration:
Submit the proposed company name to the relevant authorities for approval. Once the name is approved, proceed with the company registration process, which involves preparing the necessary documents and obtaining the required licenses.
3. Share capital deposit:
Deposit the minimum share capital required for the Category 2 company into a bank account in the UAE. This demonstrates the company’s financial capacity and commitment.
4. Obtaining licenses:
Apply for and obtain the necessary licenses for your Category 2 company based on its intended activities. This may include trading licenses, import/export permits, or any other specific licenses required for your business.
