Jurisdiction
Abu Dhabi Global Market
A financial free zone on Al Maryah Island applying English common law directly, with its own courts and registry. Three to five business days to incorporate, filed directly to the registry, and the readiest of the three UAE options when the people behind a structure need residence as well as ownership.
- Law
- ADGM Companies Regulations; English common law as applied in ADGM
- Regulator
- Registration Authority; Financial Services Regulatory Authority
- Common vehicles
- Special purpose vehicle, tech startup licence, foundation, operating company
- Formation
- About three to five business days
- Register of members
- Publicly searchable
- Visas
- Available
- Corporate tax
- UAE CT applies; 0% on qualifying income as a Qualifying Free Zone Person, otherwise 9%
- Nexus
- Gulf connection expected through substance or ownership
What it is good for
Speed and operational simplicity. Formation runs to three to five business days, filings are made directly to the Registration Authority, and banking is materially easier than for a Caribbean vehicle.
Residence. An ADGM entity can sponsor visas, which matters when the people behind a structure need to be somewhere as well as own something.
Directness of law. ADGM applies English common law as it stood at a stated date, rather than a local statute modelled on it. For a lawyer used to English company law, very little needs translating.
What it asks of you
A Gulf nexus. The special purpose vehicle regime expects a connection through substance or ownership, and a client with no Gulf residency, ownership or assets will not clear it. This excludes more international clients than people expect.
Public filings. The register of members is publicly searchable, which is the price of the regulatory credibility.
An authorised signatory, and attention to the corporate tax position below.
The tax position, stated carefully
UAE corporate tax applies to ADGM entities. Zero per cent is a relief, not a default: it is available on qualifying income to a Qualifying Free Zone Person, and nine per cent applies otherwise.
The conditions are cumulative. The entity must maintain adequate substance in the free zone, derive qualifying income, comply with transfer pricing rules, satisfy the de minimis limb, and prepare audited financial statements to IFRS. That last one is easy to overlook on a holding vehicle that would otherwise never have been audited.
The de minimis limb is the one most often misread. Non-qualifying revenue must not exceed the lower of five per cent of total revenue or AED 5 million. It is not a choice between the two and it is not an allowance of AED 5 million: at AED 20 million of revenue, the binding figure is AED 1 million.
Failing any condition is not a one year problem. The entity is taxed at nine per cent on its whole income for the year of the breach and the four years following, and can only be tested again in the sixth. A consequence that long attaching to one bad year is the reason substance is worth designing at formation.