UAE Law and Practice Contributed by: Duncan Pickering, Nicola de Sylva, Sean Cope and Marta Almeida, DLA Piper Middle East LLP
5. Investment Vehicles 5.1 Types of Entities Available to Investors to Hold Real Estate Assets Various types of corporate vehicles are capable of holding real estate assets in the UAE. If the holding company of a real estate asset has for - eign shareholders, the company may only hold the real estate asset within a designated invest - ment area. 5.2 Main Features and Tax Implications of the Constitution of Each Type of Entity Limited Liability Company (LLC) Onshore LLCs established in the UAE (outside the free zones) have historically been subject to foreign investment laws which required at least 51% equity participation by a UAE nationals. The UAE’s new Commercial Companies Law, which came into force on 2 January 2022, contains no general requirement for equity participation by UAE nationals; however, certain activities have been designated as having strategic impact (for example, in the security and defence sec - tor) and continue to require prescribed levels of local ownership. JAFZA Offshore Companies An offshore/free zone company can be 100% foreign-owned. If the asset is to be wholly owned by foreigners (and therefore in a desig - nated area), a DLD Direction in 2011 confirmed that the shareholders are permitted by the law to use a JAFZA offshore company only to pur - chase and register the land interest (regulated by the Jebel Ali Free Zone Authority in Dubai and “accepted” by the DLD), and foreign com - panies in other jurisdictions are no longer per - mitted to register land ownership interests. The issue becomes more complicated if the intention is for the company to develop the land and sell
units, villas, etc. Specific advice must be sought in such circumstances. Public Joint Stock Company (PJSC) Share capital is divided into negotiable shares of equal value. The nominal value of each share cannot be less than AED1 or more than AED100. Shareholders have liability limited to the value of their shares. A PJSC must have at least five founder members. Subject to implementation of the recent amend - ments to the Companies Law, UAE nationals must own at least 51% of the shares in the PJSC, and the founding members must sub - scribe for between 30% and 70% of the issued share capital. Private Joint Stock Company (Private JSC) A private JSC is similar to a PJSC but with cer - tain differences, including: • the minimum share capital is AED5 million; • the shares cannot be offered publicly; and • only two founder members are required. The Companies Law provides that, unless spe - cifically stated, all requirements that apply to a PJSC apply to a private JSC as well. Tax Implications Under the new CIT regime, income from immov - able property derived by a legal entity, whether derived from sale or through leasing, will typi - cally be subject to a 9% tax rate for “regular taxpayers” who are subject to the standard tax regime (taxable income up to AED375,000 is taxed at 0%). Under the free zone tax regime, entities that are considered qualifying free zone persons are eligi - ble for a 0% CIT rate on certain types of income
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