Dubai is a pole of attraction for foreign investors from all over the world. They achieved this by applying policies such as zero tax, capital and profits repatriation, a few days for registration, and others. But still, many challenges remain for all foreigners eager to do business in Dubai.
In this article, we will talk about the process of starting a business in Dubai, what opportunities are present, which issues require full attention, and how to achieve your goals. Specifically, we will address these points:
- Why is Dubai attractive for foreign investors?
- What is the process to start a business in Dubai?
- Which legal structures for businesses does the UAE offer?
- Is it relevant for the firms their specific location in Dubai?
- How can we help you as a foreign investor in Dubai?
1. Why is Dubai attractive for foreign investors?
Dubai has a world-class business environment. This was reflected by the World Bank when affirmed that the UAE is the easiest place to do business. Clearly, it could be said that all is about low taxation and high profits. But that would be an over-simplification.
We prefer a review more structural. Consequently, we recognize up to seven features that make the UAE a unique choice for starting professional businesses. Particularly, Dubai is characterized for getting a booming economy, with laws favorable to investment, tax policies promising to investors, an unbeatable location, a first-class infrastructure, excellent workers, and a friendly environment. Of course, this is a better and more useful explanation.
Yet, Dubai does not escape situations as any venture outside its own country. Risk is present due to a lack of knowledge about local practices, culture, language, and regulations. So, there is a continuous flow of people interested in investing in the UAE. But, equally, have appeared many companies specialized in giving support to foreign investors to avoid too many failures.
1.1 Are there still risks for foreign investors in Dubai?
Of course. First, drawbacks still exist because of the mishandling of differences in culture, language, economics, and public policies.
Certainly, starting a business in this region is indeed smoother than anywhere else. Even so, a foreign investor also has to face challenges. Happily, incentives and profits in Dubai are great.
In any case, you have to know that some economic sectors within the UAE, do not accept foreigners owning 100% of the property of such businesses in the UAE. Luckily, that situation has been changing. In 2020, nearly half of the business areas were open, allowing full foreign ownership.
Equally, be attentive in some areas legislation obliges to have a minimum capital invested.
1.2 What should a foreigner learn to start a business in Dubai?
First, any attempt to invest requires preparation and attention to the details. Even being Dubai, any investment will be hard. Thus, a foreigner must recognize the key points for working in the new country and focus on them, identify options, and seek expert advice.
And, keep in mind that the essential tasks common to all types of businesses are:
- Do some research and learn about the business industry in Dubai
- Register your company
- Apply for required permits (licenses, employment, immigration)
- Find a suitable commercial property
- Be aware of the laws that apply
2. What is the process to start a business as a foreigner in Dubai?
Previously, we have mentioned while passing some common processes when setting up a company. Now, here we describe the most relevant with a little more detail.
2.1 Selection of a name
If you are setting up a business in the UAE, you will first need to choose a professional business name. Thus, start by talking to the local administrative chief. In the case of the UAE, its laws state that trade names must be inside these parameters:
- Respect to public morality and order
- Follow the legal form of the firm
- Must be an unused name
- Associated to the business activity
- Without references to religion or government
If you want to use your name, must be complete.
2.2 Requesting your license
Once you have a name, the second big step is to obtain a license. Despite that there are several processes, they are often quick. There are four types of this document available in the Mainland of the UAE. In simple terms, they are commercial/businesses, professional, industrial, and tourist licenses.
If you work in a Free Zone, you must apply directly to the zone in question.
As can be seen, the types of businesses in the UAE that fit into each license category are self-explanatory. If you are buying and selling products, clearly you will need a business (commercial) license, for example.
As noted, registration and licensing are requested at the same time before the same authority. Just provide the following documents: application form, professional business plan, passport copies of shareholders, shareholder signature templates, and intention letter.
To conclude, you will receive your license when providing the resolution of your company board appointing a director, the photo of the director, and information on share capital.
In addition, you will need to register your legal business online before the Federal Tax Authority.
2.4 Special licenses and permits
In most cases, you can get your business license from the Department of Economic Development or your local Free Zone. However, certain businesses in Dubai may need a particular document. For example, manufacturing companies must obtain approval from the Ministry of Finance and Industry, while the Ministry of Health issues licenses to medical and pharmaceutical companies.
At this time, we will review the different legal structures of the business in Dubai. Later, we will review the types of territories designed by Dubai, and their impacts on legal businesses. Clearly, we will go into more detail about the specific procedures that you must know.
3. Which legal structures for businesses does the UAE offer?
As expected, there are many company types in the UAE. The most common are the ones described below:
- Sole Proprietorship
This type of company only belongs to an individual with total control of the operations and profits. Any investor, Emirati or not, can create this kind of company. The only restriction is that only Gulf nationals can be owners if the firm is involved in commercial or industrial activities.
- Professional or Civil Company
It is a specific type of company for professionals (doctors, lawyers, accountants, managers, and others). Their activities are considered professional services, not commercial businesses. Until 2020, an Emirati needed to own 51% of the business, but the law changed. Now up to 100%, foreign ownership is allowed in this type of company.
- Limited Liability Company (LLC)
These companies must have between two and 50 partners, each with responsibilities only for their portion of shares. The same criteria apply when calculating losses or dividends. LLCs must have 51% of its shares owned by a UAE citizen. But remember, in recent reforms more than 1,000 activities were open to full ownership for foreigners.
- Branch of a foreign company
A branch of an abroad company owned 100% by the foreigners. But they must import all their supplies through local commercial companies.
- Free Zone Companies
These companies are located in the free zones and require between two and five partners. Certainly, there are facilities to establish this type of firm, but there is a serious restraint. They cannot trade directly in the UAE market.
- One-person companies (Freelancers)
These are companies easier to set up. They are accepted in free zones and only require filling out an application, a CV, a bank reference, and a notarized registration.
4. Is it relevant for the firms their specific location in Dubai?
Obviously, each kind of economic territory has regulations that affect distinctively the businesses. Thus, there are three different territorial areas in Dubai (Mainland, Free Zones, and Offshore). Consequently, each offers a particular treatment to the businesses. To clarify, below we describe each case and highlight the advantages and procedures in each case.
4.1 Forming a firm in a Free Zone
Free Zones are economic areas where trade complies with preferential taxes. Naturally, they have the function of boosting the international business in Dubai by offering benefits (such as 100% ownership by foreigners). At this time, the UAE has over 50 free zones. Some of them provide generic activities for all industries, while others are industry-specific.
These are the documents required by the Dubai government to register funding in one of the free zones of that Emirate.
- An in-depth business plan that includes: Business activity, Number of employees, Investment made, Suppliers, and Offer to consumers
- A lease agreement
- Distribution of capital among shareholders
- Checking account with the deposit of the capital
Consequently, the government reviews the documentation, approves the registration, and immediately applies for the mandatory licenses and permits. Once received, the registration is considered complete. In all the free zones of Dubai, companies may be owned 100% by foreigners and are allowed capital and profits repatriation. Dubai free zones even have these other advantages:
- Easy entering
- Does not require physical space or offices
- Minimum restrictions for hiring
- There are not any taxes on imports or exports
- High-quality infrastructure
- Low prices for infrastructure and services
- 3000 legal business activities listed within the Free Zones in all the UAE
In contrast to all the facilities mentioned, is very important to know that a free zone firm must not conduct business activities with UAE residents. Their customers must be abroad. Therefore, it is usual to organize a service agent for distributing the firm’s goods into the UAE but under their name.
4.2 Mainland Company Setup
The Mainland is the area outside the Free Zones. In this case, the Department of Economic Development (DED) is the administrative unit for issuing consent on the mainland. Differing from Free Zones, mainland companies can conduct top business without any restraints within the UAE and abroad.
Additionally, a local sponsor is no longer required to get a Dubai Mainland license useful for around 1000 commercial and industrial activities. In this case, these are the advantages of a firm on the mainland:
- 100% foreign ownership
- Ability to hold out a good range of business activities (more than 3000 listed throughout the UAE)
- Option to trade anywhere within the UAE and internationally
- Freedom to rent commercial premises in any area
- No currency restriction
- Easy visa processing for workers and family
- Possibility of bidding for state projects
- Easy opening of corporate bank accounts
To clarify, this is the mainland company formation procedure:
- Choose your best business focus
- Find your ideal location
- Determine the legal structure of your company
- Get an Emirati sponsor or service agent
- Name your company
- Apply for a Mainland trade license
- Secure your office space
- Apply for the corresponding visas
4.3 Setting up an Offshore Company
Offshore firms can have accounts in banks of the UAE. However, they cannot issue work visas under the company nor have a physical office within the country. Usually, offshore firms are holding companies. Obviously, they do operations in foreign countries for financial and tax benefits.
These are the advantages of setting up an offshore company:
- Low costs for starting
- 100% tax-free
- 100% foreign ownership allowed
- Speedy incorporation process
- Multiple bank accounts
- No paid-up share capital
- Zero audits
As before, the registration process of an offshore company in the UAE is transparent:
- Choose your preferred top business activity
- Select a Company Name
- Incorporation procedures
- Issuance of Licenses
- Open company bank account
5. How can we help you as a foreign investor in Dubai?
This report has shown you the best information to find out about the situation of foreign investments in Dubai, their opportunities, and the obstacles. Surely, many new knowledge and tips on Dubai and how to invest over there are now part of your baggage. Now, it is time to make decisions to take the train.
Your first decision must be to access a leading company in business formation services. The best is our prime firm Connect Business Center, located in Dubai. In this field, we are your best option. We have assisted many projects reaching the leadership as PRO services providers and have the experience required to incorporate any company in Dubai.
Start your new venture in the UAE. Connect Business Center will help you navigate the complex procedures associated with establishing your business operations in Dubai. Additionally, we provide excellent office spaces to fit the needs of your company.
Would you like to get in touch with us to learn more about our excellent services? Please, write us an email to firstname.lastname@example.org where one of our representatives will be ready to assist you with any needs.