The United Arab Emirates (UAE) has been an enticing new world to explore with its boom in development over the past decades. The “gulf” as it’s commonly known as being part has been able to create an identity beyond that tag and used its resources to further technology, banking as well as the tourism sector. In 2017, there were 1, 31,000 registered businesses in the UAE. When you combine this with the fact that 80% of residents are foreign-born, it becomes clear that there is plenty of scope for foreign investment in the UAE.
The UAE although having a conservative history and ruled by the royal families, it still has a new scope for development. In recent times there can be seen an increase in the setting up of new businesses around the Emirates as the government in 2019 provided for 100% foreign ownership in 122 economic activities across 13 sectors. Prior to this rule it was essential that in order to set up a business in the UAE an Emirati must own 51% of the business. Doing business in the UAE, particularly in Dubai, can be an attractive option due to its strategic location, favorable business environment, and various economic incentives. Anyone in the world can start a business in UAE. However, it’s essential to understand the legal and regulatory requirements before setting up new companies, units, or sales offices in the region.
The following is an overview process of how to set up a business in the United Arab Emirates:
Legal Structures:
The UAE offers several legal structures for businesses, such as Limited Liability Company (LLC), Free Zone Company, Branch of a Foreign Company, and Representative Office. Each structure has its advantages and restrictions, so it’s essential to choose the most suitable option based on your business activities and objectives.
The Ministry of Economy specifies to such areas where you can commence your business, they are –
UAE Mainland – The UAE Mainland refers to areas outside the designated Free Zones in the United Arab Emirates. Unlike Free Zones, businesses established in the mainland are subject to the UAE federal laws and regulations, as well as the laws of the individual emirates (e.g., Dubai, Abu Dhabi, Sharjah, etc.) where they operate.
UAE Free Zones – UAE Free Zones are special economic zones set up to promote foreign investment, facilitate business setup, and offer various incentives for companies looking to establish a presence in the United Arab Emirates. These free zones are designed to attract both local and international investors and provide them with a business-friendly environment. Certain benefits offered here are 100% foreign ownership, Tax benefits, Full Repatriation of Profits and Capital and other such benefits.
1. Business Licensing: Depending on the nature of your business, you’ll need to obtain the appropriate licenses from the relevant authorities. The licensing process can differ based on the business activity, location (mainland or free zone), and government regulations.
2. Ownership and Local Sponsorship: In the UAE, there are restrictions on foreign ownership, especially for mainland companies. For many business activities, a UAE national or a UAE-owned company must hold at least 51% ownership. However, in some free zones, foreign investors can have 100% ownership without the need for a local sponsor.
3. Company Registration: The process of company registration involves submitting the necessary documents, such as a business plan, passport copies of shareholders, and Memorandum of Association. This process may vary depending on the legal structure and the jurisdiction in which you choose to set up.
4. Bank Account Opening: After company registration, you can open a corporate bank account in a local or international bank to conduct your business transactions.
5. Visas and Residency: Depending on your company’s setup and the number of employees, you may need to arrange for residency visas for yourself and your staff. The process involves obtaining work permits and residence visas.
6. Taxation: The UAE does not impose income tax on individuals or companies, except for certain specific industries like oil and gas. However, there is a Value Added Tax (VAT) of 5% on most goods and services.
According to the UAE Cabinet of Ministers Businesses will be liable to pay tax of 9% on taxable profits of more than AED 375,000, this will come into force from 1st June 2023. This was done with the motive of increasing and diversifying the income into the country while maintaining its consistent title as being a commercial hub.
7. Labor Regulations: Dubai has specific labor laws that govern employee rights and obligations. It’s essential to be aware of the labor regulations and provide proper employment contracts and benefits to your staff.
8. Consulting Local Experts: Given the complexity of business setup procedures and the legal landscape, it’;s advisable to engage local business consultants, lawyers, or PRO (Public Relations Officer) services to guide you through the process and ensure compliance with local regulations.
Article written by
Anoushka Coutto & Santanu Ghosh
Firm – Cygal Attorneys Ltd.
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