UAE Law and Practice Contributed by: Duncan Pickering, Nicola de Sylva, Sean Cope and Marta Almeida, DLA Piper Middle East LLP
(ie, qualifying income), provided specific criteria are met. The regulations with respect to the free zone tax regime are relatively complex, but in essence, in a real estate context, only income from commercial properties located in the free zone may qualify for the 0% rate, provided the transaction is conducted with an entity regis - tered within a free zone (ie, a free zone person). Conversely, revenue from residential properties does not qualify for the 0% rate. It is important to note that properties such as hotels, motels, bed and breakfasts, serviced apartments and similar establishments are not categorised as commercial properties for the purposes of the free zone tax regime. 5.3 REITs While the UAE is not traditionally recognised as a funds jurisdiction, the development of offshore jurisdictions such as the DIFC and ADGM, with evolving legislation aimed towards the develop - ment of a funds market, has made these finan - cial free zones a more attractive jurisdiction for the establishment of such real estate funds. UAE REITs can apply for corporate tax exemption if they meet certain specified criteria. 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 published guidance in this regard. In practice, a notary public currently accepts a min - imum 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 vehicle for overseas inves - tors wishing to establish a vehicle 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 man - age the company. The general manager can be of any nationality, but, in practice, rejection of a proposed general manager does occur with - out reason from time to time. An LLC must also appoint a UAE-certified financial auditor before the end of its first year of business. JAFZA Offshore Companies A JAFZA offshore company must appoint a reg - istered agent, to whom notices are served. It must also have at least two directors, a general manager and a company secretary at all times. PJSC Since a PJSC is required to be listed, it has to comply with the governance requirements of the relevant stock exchange, which include vari - ous disclosure requirements, the publication of accounts and other statements, as well as man - datory compliance with the Emirates Securities and Commodities Authority’s corporate govern - ance code.
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