UAE Law and Practice Contributed by: Duncan Pickering, Nicola de Sylva, Sean Cope and Marta Almeida, DLA Piper LLP
not categorised as commercial properties for the pur - poses of the free zone tax regime. 5.3 REITs The development of offshore jurisdictions such as the DIFC and ADGM, with evolving legislation aimed towards the development of a funds market, has made these financial free zones a more attractive jurisdiction for the establishment of real estate funds. UAE REITs can apply for corporate tax exemption if they meet certain specified criteria. If the exemption is granted, there is not taxation at the level of the fund. 5.4 Minimum Capital Requirement LLC There is no prescribed minimum capital amount for an LLC, but share capital must be adequate. This can be decided by the shareholders, and there is no pub - lished guidance in this regard. In practice, a notary public currently accepts a minimum share capital of AED10,000, divided into equal shares with a minimum value of AED1,000. JAFZA Offshore Companies No fixed minimum share capital requirements are applicable to JAFZA offshore companies. In practice, AED1,000 applies for such companies, and shares must have a minimum value of AED1 each. PJSC AED30 million applies for a general company, and this amount increases in the case of banks and insurance companies. Given the substantial capital requirement and the fairly restrictive rules of establishment and management, it is often not a suitable corporate vehi - cle for overseas investors wishing to establish a vehi - cle for investment purposes. Private JSC AED5 million applies for such companies. 5.5 Applicable Governance Requirements LLC An LLC must appoint a general manager to manage the company. The general manager can be of any nationality, but, in practice, rejection of a proposed general manager does occur without reason from time to time. An LLC must also appoint a UAE-certified
financial auditor before the end of its first year of busi - ness. JAFZA Offshore Companies A JAFZA offshore company must appoint a registered agent, to whom notices are served. It must also have at least two directors, a general manager and a com - pany secretary at all times. PJSC Since a PJSC is required to be listed, it has to com - ply with the governance requirements of the relevant stock exchange, which include various disclosure requirements, the publication of accounts and other statements, as well as mandatory compliance with the Emirates Securities and Commodities Authority’s corporate governance code. Private JSC A private JSC must have a board of directors consist - ing of between three and 11 directors, and each direc - tor’s term must be no more than three years (subject to re-election). There must be a chairman from among the directors, and such chairman must usually be a UAE national. 5.6 Annual Entity Maintenance and Accounting Compliance The annual compliance costs for an entity investing in real estate vary in line with the needs of each indi - vidual company. 6. Commercial Leases 6.1 Types of Arrangements Allowing the Use of Real Estate for a Limited Period of Time In Abu Dhabi, the law does not provide a clear distinc - tion between a lease (a personal right) and a usufruct (a right in rem). The law states that long leases (ie, those with a term of 25 years or more) are property rights, but it does not clearly define the characteris - tics of leases with terms shorter than this. In practice, the DMT has deemed leases for a term of more than four years granted in favour of a non-UAE national (or a company owned in whole or in part by a non- UAE national) in relation to land outside an investment zone, and which contain rights to sublet, to be usu -
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