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The professional license: a license too often ignored

While we are waiting for the implementation decrees of the federal law No. (26) - 2020 of 23.11.2020 on the liberalization of 100% of the capital of 'on-shore' companies for the benefit of foreign investors, it is worth remembering that the legal arsenal in the UAE already allows to have a license to carry out a business without a 'sponsor' or local partner. It is the professional license whose advantages deserve to be reminded and highlighted.

For professional activities, a professional license is issued to the companies. This article shall focus on the main features of the Department of Economic Development (DED) professional license in Dubai.

A DED professional license is for operators engaged in service-oriented activities and holding a professional degree or having significant experience in a particular profession. This license covers the following range of services activities that appears in practice to be reasonably large and capable to address most of the service areas:

  • Accountants, Auditors, lawyers, legal, architectural and medical consultants
  • Financial Advisors
  • Business consultants such as management of projects and business, technical services, restaurants, sports and arts
  • Advertising professionals
  • Entertainment artists
  • Teachers and educational professionals (musique, etc.)
  • Artisanal activities (carpentries, gastronomy, etc.)
  • Printing and publishing

And has been extended to the areas of digital services:

  • Internet and web design services
  • Information technology services.

The professional licensee is authorised to manage Intellectual Property Rights (IPR) that it owns or for the account of the IPR owners, or franchise agreements and collect the royalties, etc. He may as well remotely manage business activities performed outside the country.

A DED professional license in Dubai is granted on the basis of a documented application which is rather light. There is no obligation to pass exams or tests showing the ability to speak Arabic or to demonstrate the applicant’s professional skills. The first incomers in Dubai will have to submit the following documents:

  • Application form
  • Passport copy(s)
  • Visit visa copy(s), if the applicant is not a resident of the UAE 
  • Additional approvals listed by the DED depending on the type of activities as the case may be
  • Certified translations of diplomas for legal, medical, etc. practitioners.

The professional license is usually issued within less than a week from completing the application.

At the time of application of the professional licence, additional documents are required like for the commercial license: a tenancy contract for the office given that a domiciliation is acceptable which allows to work from home or from any business center. However, an agreement with a registered agent who is dedicated to fulfil all the formalities with the DED and other public organisations is mandatory and must be submitted to the DED.

The professional license allows to carry out activities in Dubai (onshore and free zones) with no sponsor or local partner and outside the UAE.  This license is not subject to the 49/51% rule. There is no equity capital to pay up which implies that the liability of the license holder is unlimited, but this is easily neutralised by an adequate professional liability insurance cover. The DED professional license is not subject to record annual accountings and to have the accounts audited. The only constraint is to appoint a registered agent or local service agent in consideration of an annual fee.

The license validity is one year for a cost of circa: AED 10-12,000 and must be renewed every year but at a reduced cost (circa: AED 8,000).

It offers the possibility to obtain residency visas with three years validity for the holder(s) of the license and work permits for the employees to be renewed every year.

All the activities solely performed in Dubai are tax free. However, for the IPR business or for the management of activities located in a foreign country, some tax implications must be considered on the basis of the relevant provisions of the applicable double tax treaty (e.g. withholding tax with respect to royalties).

Last but not least, being located onshore and not in a free zone or outside the Emirate of Dubai, the holder of a professional license is well positioned to open professional (and private) accounts with local banks. KYC (‘Know Your Client’) requirements are processed by the compliance department of the banks more easily considering that the DED has already approved the application.

As we can see, the professional license opens important perspectives for economic operators working in the field of services. It allows a serene establishment in Dubai whether it is for an activity in the UAE or from the UAE in the whole world.

By Pierre-Yves LUCAS, Of-Counsel at BONNARD-LAWSON (Dubai Office)

www.bonnard-lawson.com

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