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Dubai is a country that is very friendly to visitors. It’s great for tourists, as our many walking tours can attest. Doing Business in Dubai is also equally great. Starting up a business in Dubai can be hugely beneficial – you have a prime location in the crossroads of Asia, Europe and Africa, access to a talented workforce and the attraction of working in a country with limited to no taxation. In this post, we’ll give you an overview of what’s involved in setting up a business in the UAE.
There are two main types of businesses that foreign investors and entrepreneurs can set up in Dubai – an LLC or a Freezone
For small business, an LLC (also referred to as a mainland company) is the most common and the easiest choice. With an LLC, you will only own 49% of the business. The other 51% will be owned by an Emirati national or a company that is wholly owned by Emirati nationals. And yes, Emirati partners are actually required to show their family book, to prove their heritage.
Through an LLC, the foreign investor will have the opportunity to obtain UAE residence visas for themselves, their family members and a certain number of employees.
There are multiple business setup consultancies within the UAE, who help with the paperwork and logistics of setting up a business in the country. These consultancies are often the best way to get connected with an Emirati sponsor. Most of them are likely to already have a list of Emiratis who they work with. In most cases, you will have to pay the Emirati partner an annual fee in return for their sponsorship. This fee will vary based on the sponsor, so feel free to ask around to see where you can find the rate that is right for you. Generally, the partner does not demand a percentage of your company’s profits, nor is he likely to involve himself in your business decisions. So in exchange for paying this annual sponsorship fee, you get 100% of the profits and a silent partner.
Setting up an LLC also requires that you have a physical office. You will need to pay 5% of that space’s market rent to the government as part of your licensing cost, so be sure to factor that in when choosing a space. The office requirement exists even if you plan to work virtually from home. If that’s the case for you, a consultancy can help you find an appropriate office space to lease, in order to meet the licensing requirements.
We also recommend taking some time to fully think through the name of your LLC. There are certain rules you’ll need to follow. The name cannot reference God/Allah, cannot be obscene and cannot include parts of existing brand names. The name also needs to reflect the company’s business activity. So you can’t just choose a generic name. For instance, if you start a contracting company, the name will need to be along the lines of “‘XYZ’ Contracting”. Additionally, including certain words in your trade name, like ‘Emirates’, ‘Gulf’, ‘East’, ‘West’ or ‘International’ will lead to an additional license charge, so make sure you’re willing to pay that.
There is no minimum capital requirement to set up an LLC. However, there are costs associated with the initial set up of an LLC company. This number can vary drastically based on a variety of factors, including the name you choose, the rent of your office space, the agreement you make with your local sponsor, whether you are working with a business set-up consultancy and even the type of activity you are getting a license for. As an example, setting up an LLC to carry out General Trading could cost approximately AED 30,000, but it could be half that for a different business activity. In general, incorporating an LLC takes about 4-6 weeks.
Instead of setting up an LLC, foreign entrepreneurs also have the option of setting up a company in one of the UAE’s designated Free Zones. A Free Zone company is often an attractive option for foreign entrepreneurs. This is so because it does not require partnering with an Emirati sponsor. You can own 100% of your business. Through setting up a Free Zone company, you also have the option of obtaining residence visas for yourself, your family and a certain number of employees.
The Free Zones have a special tax, customs and imports regime. They are governed by their own framework of regulations (with the exception of UAE criminal law). Companies set up in a Free Zone receive 100% import and export tax exemptions, so this is a great option for any business involving the movement of goods in and out of the UAE. These companies also receive corporate tax exemption for up to 50 years.
There are more than 37 different Free Zones in the UAE, including some that are currently under construction. Each Free Zone centers on one or more particular business industries. If you want to set up a business in a particular Free Zone, your business activity needs to match the industry of that Free Zone.
DMCC – Dubai Multi Commodities Centre – This is the UAE’s largest and fastest-growing Free Zone. It focuses on the trading of commodities like gold, diamonds, pearls and tea. Furthermore it also offers licenses for businesses trading in other goods.
DAFZ – Dubai Airport Free Zone – This Free Zone offers three types of licenses – Trade (imports, exports, storage and distribution of goods), Service and Industry (light industrial activities, packaging and assembling).
DIFC – Dubai International Financial Center – This Free Zone focuses on banking, financial services, insurance, and wealth and asset management.
DSO – Dubai Silicon Oasis – This Free Zone focuses on companies operating in the tech space, including IT, telecom, engineering, software, biotech and green energy. Consulting companies can also operate here.
D3 – Dubai Design District – This is a trendy Free Zone dedicated to the design community, both established brands and start-ups.
Dubai Internet City – This Free Zone is for companies operating in the ICT space. Companies like Microsoft and Oracle have set up in this Free Zone.
twofour54 – Located in Abu Dhabi, this Free Zone is aimed at companies operating in the media space. It includes television, print and public relations companies.
Masdar City – This is another Free Zone located in Abu Dhabi. Its focus is on companies operating in the renewable energy space. Interestingly, the entire city was designed to run on solar power, making it a one of a kind spot.
Choosing the right Free Zone company is important. The minimum capital requirement of your Free Zone company will depend on which Free Zone you choose. Setting up in twofour54, for instance, requires no capital requirement. On the other hand DMCC requires AED 50,000 per company and AED 10,000 per shareholder. Additionally, the name you can choose, the set up fees you have to pay and the time needed for incorporation will all depend on the Free Zone.
Dubai by Foot can help you get the lay of the land as you are deciding whether to launch your business in the UAE. If you contact us, we can arrange a private tour showing you some of your mainland and Free Zone options, to help you make the right decision for yourself and your business.