The federal government of the UAE consists of the seven emirates of Dubai, Abu Dhabi, Sharjah, Ajman, Umm Al Quwain, Ras Al Khaimah and Fujairah. Each of the seven emirates has its own laws and guidelines for certain industries which sit outside the UAE’s federal laws. There are also free economic zones (often referred to as “offshore UAE”) in each emirate, which are independent of government and federal law to a limited extent. Some of the free zones, such as the Dubai International Financial Center (“DIFC”), Abu Dhabi Global Market (“ADGM”) and the Dubai Multi Commodities Center (“DMCC”) have established their own legal frameworks.
COMPANY FORMATION IN DUBAI AND ABU DHABI
Dubai, a city of superlatives, offers businesses and individuals the valuable advantage of 100% tax exemption. Dubai is currently tax-free; it has neither corporation tax for companies nor income tax for individuals. The only exception is 5% VAT for mainland companies. Dubai and Abu Dhabi have similar conditions for company formation. There are two types of company; one is established in the free zones, the other on the mainland, if it serves customers within the UAE.
ESTABLISHMENT OF A CRYPTO COMPANY IN THE DMCC FREEZONE
The DMCC Freezone provides a licence for certain activities related to “crypto” which are not regulated:
Activities other than the 5 defined above are not yet available in the DMCC. These are standalone licensing activities that are only permitted for new businesses and cannot be conducted alongside other activities by the same company. The DMCC Crypto Licence will only be granted to companies that are legally registered with the DMCC and have an established and experienced track record in trading, investing or developing blockchain technology. The minimum share capital is AED 50,000.00 and the licence takes approximately four weeks to obtain.
The DMCC has been awarded “Global Free Zone Of The Year” for the sixth year in a row. It is centrally located with easy access to two airports, road networks and transport. The DMCC has established a new centre for cryptocurrencies to serve as a central point for all blockchain-related activities in Dubai.
ESTABLISHMENT OF A CRYPTO COMPANY IN THE ADGM FREEZONE
A company can be established at the ADGM with a virtual asset activity licence. The following asset activities can be conducted at ADGM:
purchase, sale or exercise of rights in recognised crypto-assets
management of recognised crypto assets belonging to another person
marketing of recognised crypto assets
advising on the merits of the purchase or sale of recognised crypto assets or rights arising from such purchase or sale; and
operating an exchange for cryptoassets or acting as a custodian of crypto-assets.
The ADGM is one of the world’s leading jurisdictions for the regulation of virtual asset activities. It also promotes itself as the first jurisdiction to develop a comprehensive set of rules for virtual assets.
The UAE is well on its way to becoming a modern pioneer in business and industry, with a very close focus on the cryptocurrency industry. The framework and laws for cryptocurrencies in the Dubai and Abu Dhabi Free Zones encourage crypto entrepreneurs to set up exchanges while setting standards for ethical trading and consumer protection. In conclusion, the UAE holds great promise in the crypto space as a country with favourable tax regimes, dedicated financial free zones and government support for blockchain and DLT technologies.