The Dubai International Financial Centre (DIFC) took a significant step on July 15th, 2024, with the enactment of a new amendment in the existing Prescribed Company (PC) Regulations. This amendment expands and simplify the current regime in the DIFC, and the changes ensure that the companies are used as true holding company vehicles, rather than operational entities.
This landmark regulatory change aims to streamline investment processes and provide greater clarity for businesses operating within the DIFC. By strictly limiting PC activities to holding company functions, the center is ensuring a more focused and efficient investment environment.
To accommodate existing PCs and businesses seeking alternative structures, the DIFC has introduced transitional arrangements and a new commercial package, named “Active Enterprise” which provides flexible options and reduced fees for qualifying applicants seeking alternative structures with the option to have employees.
Let’s explore more about the DIFC Active Enterprises.
Understanding DIFC Active Enterprises
Previously, the DIFC’s Prescribed Company (PC) structure was primarily for passive holding companies. With the evolving business landscape, the DIFC recognized the need for a more versatile entity. Active Enterprises were introduced to fill this gap with the implementation of the new regulations.
An Active Enterprise is a private company that can be established by a qualifying applicant. Unlike PCs, Active Enterprises can:
- Can employ staff.
- Engage in proprietary investment activities.
- Function as a holding company or managing office.
This broader scope allows for a wider range of business operations within the DIFC including activities across various sectors such as real estate, agricultural enterprises, management, and healthcare.
Key Benefits of DIFC Active Enterprises
Cost-Effective Setup: Establishing an Active Enterprise is relatively affordable. The DIFC charges a one-time application fee of US$ 100 and an annual commercial license fee of US$ 1,000. Additional costs may include Corporate Service Provider (CSP) fees for registered addresses and related services.
Flexible Address Options: An Active Enterprise has various address options. It can have its own DIFC office space, a co-working desk, share office space with a DIFC affiliate, or use an appointed DIFC corporate service provider, such as 10 Leaves, to provide a registered address.
Ability to Hire Employees: An Active Enterprise can hire employees, provided it secures office space. Visa allocations are generally calculated at 80 sq. ft. per visa.
Common Law Jurisdiction: The DIFC is a financial free zone with its own civil and commercial laws. It offers access to DIFC Courts, where proceedings are conducted in English under Common Law principles.
Quick Registration: In-Principal Approvals may be granted within three business days from the application submission. Establishing the legal structure of an Active Enterprise with the DIFC Registrar of Companies typically takes 3-5 working days.
Globally Competitive and Attractive Tax Regime: An Active Enterprise may qualify for zero tax, with the maximum tax liability being 9%.
Transfer of Domicile: The DIFC allows for the domicile of incorporated companies to and from the DIFC.
Other Advantages: No attestations are required for corporate documents, there are zero currency restrictions, 100% foreign ownership is permitted, and there are no restrictions on capital repatriation.
Types of Activities Allowed in DIFC Active Enterprise
Active Enterprises can be structured in three primary ways:
- Holding Companies: These entities primarily hold shares or equity in other companies to exert control or influence over their management.
- Managing Offices: Acting as strategic and organizational decision-makers, managing offices oversee other company operations. They can also provide services to their group, such as treasury, IT, and administration.
- Proprietary Investment Companies: These companies invest their funds in various commercial activities like transport, contracting, and financing. They can also manage subsidiary companies.
Who Can Establish a DIFC Active Enterprise?
- A DIFC Registered Entity other than a Prescribed Company, Foundation and a Non-Profit Incorporated Organization
- Controlling shareholder or UBO of a DIFC Registered Entity, other than a Prescribed Company, Foundation and a Non-Profit Incorporated Organization.
3. A Government Entity – which means any of the following:
(a) the Federal Government, the government of Dubai or the government of any Emirate.
(b) a person in which a government entity listed above owns (directly or indirectly) an interest of at least twenty-five percent (25%) (or such other percentage approved by the Board of Directors of DIFCA).
(c) Controlled by a government entity listed above.
- A Family Operated Business.
Setting Up a DIFC Active Enterprise
The process involves:
- Document Preparation: Comprehensive Know Your Customer (KYC) verification of shareholders and directors is conducted, along with the compilation of necessary documentation.
- Registered Address: This can be a physical address at the DIFC or can be provided by a CSP and Registered Agent. Do note that Active Enterprise will not be able to apply for visas if it uses a registered address provided by a CSP.
- Initial Submission: Submission of the completed application to the DIFC Registrar of Companies.
- Regulatory Review: Evaluation of the submitted application by the DIFC, including potential requests for additional information or clarifications.
- Legal Documentation: Drafting of essential legal documents such as resolutions and articles of association.
- Final Approval: Receipt of final approval from the DIFC, officially establishing the Active Enterprise.
DIFC is Ready. Are You?
The introduction of Active Enterprises marks a significant step forward for the DIFC. By offering greater flexibility and reduced barriers to entry, the DIFC aims to attract a wider range of businesses and solidify its position as a leading international financial center.