My client based in the UK resells hardware and software to mainly Middle east and Africa. The problem is they distribute the goods from the UK which involves logistic issues as well as costs
I have recommended to them to have a UAE office for tax reasons as well as making it easier for them to dispatch the goods. The goods originally are acquired from China. However, perhaps having a representative or distribution company may help too when sending the goods to Middleast and Africa. I am not sure what the custom duties or issues would be when importing into middle east from China
Would welcome any flaws in my recommendation or any other suggestions
According to UAE laws, a foreign company (establishing outside of the free-zones) MUST have a sponsor, meaning they get 51% local ownership and you have 49% of the shares.
There is the option to appoint a sales agency, many times though there are difficulties when you decide to terminate the contract. It’s pretty hard because you need to present valid reasons in order to proceed with termination.
Instead, there are many big, medium and small IT distributors covering many regions (UAE, Qatar, Saudi Arabia, etc) with a very wide product mix. Depending on your products, you should consider finding a VAD (Value Added Distributor) who can provide additional support services as well.
The big advantages of distributors are their established channels of resellers, their logistics facilities, they can be your sales representatives, you can create joint marketing activities gaining better exposure and eliminating at the same time any cultural and language barriers.
Establishing an office in the UAE would not be my first option, instead I would prefer to find a distributor. Besides, if everything goes well and you have a decent market penetration you are in a better position to justify such an investment. Don’t forget, you should always make contracts and put qualitative and quantitative targets to the distributor. You need their commitment!!!
I hope I helped a little bit.
Anaptyxis Consultants Ltd
International Market Entry &
Business Development Services
Either a UAE company (ideally in a tax free zone) or in a jurisdiction that doesn’t tax offshore profits (like Hong Kong) would work well.
China does not impose export duties generally, and export duties are only imposed on a few resource products (like coal, crude oil, iron ally) and semi-manufactured goods like fertilizers. UAE has generally 5% import duties, unless the company is located within a tax free zone, in which case the import duty is zero.
The major issue is cost. An UAE company (even in a tax free zone) isn’t cheap to set up, and costs from USD 15,000 upwards. It is much cheaper to use a HK company, which would be up to 75% cheaper. HK does not tax trades executed and concluded offshore.
It certainly seems your client should re-position themselves for this trading. If you would like further info or discussion on this do please drop me an email.
Meridian Marketing International