Why Set up a Business in Dubai?

During the last 3 decades, Dubai has grown at tremendous speed and shifted from an oil-exporting economy to an innovation-led business economy. Dubai has become the first choice of all business owners and foreign investors. There are multiple reasons for this choice.

Primarily, Dubai attracts foreign investment due to its strategic location and business-friendly government policies. These are the two biggest driving forces behind business owners wanting to set up their business in Dubai. Moreover, an open economy and sector-oriented free zones compel entrepreneurs to invest their fortune and set up a company in Dubai.

1. Ease of Doing Business

Setting up a business in the U.A.E is simple and straightforward. Perhaps, this is why U.A.E has earned 16th place on the Ease of Doing Business rankings issued by the World Bank. If a business owner has all the documents approved, setting up a business in Dubai will not take more than 1 week. Another reason that the U.A.E ranks so high in Ease of Doing Business rankings is the number of free zones that the U.A.E government has established in Dubai. The free zones in Dubai allow 100% foreign ownership, complete repatriation of profits earned, and large tax exemptions.

1. The Open Market and Low Taxes

The government and regulatory bodies do little interference in the activities of the private sector in Dubai. There are zero taxes on personal income. Dubai has a free-trade economy. It has insignificant import duties in place. As far as labor policies are concerned, Dubai has imposed liberal labor policies. This allows companies in Dubai to hire an employee from anywhere in the world regardless of their nationality. Moreover, Dubai has implemented strict measures to end fraud and money laundering. This allows foreign investors to invest in a clean place with little worries.

1. World-Class Infrastructure

Dubai holds significant importance due to its highly modernize infrastructure in the entire world. There are numerous free zones in Dubai of international standards. A world-class airport and modern seaports that handle thousands of passengers daily. Moreover, Dubai has a modern and vast network of highways that allow easy travel. The reliable telecommunication infrastructure, uninterrupted power supply, and loads of amenities are enough to attract business owners from all around the world and set up their company in Dubai.

1. Highly Accessible Location

Dubai is located at a strategic location. It is at the center of Africa and the Commonwealth of Independent States (CIS). Dubai falls at the center between the Far East and Europe. More than 85 airlines are operating in Dubai at the moment. These airlines fly passengers to more than 130 destinations globally. Moreover, Dubai is connected by more than 120 shipping lines. To put it simply, Dubai is the most easily accessible location from anywhere around the world.

1. High Standard of Living

The residents of Dubai live in a comfortable city. Dubai has a large number of foreign residents which makes it one of the most diversified cities on the face of the earth. Dubai leads the world in real estate, housing facilities, educational institutions, and recreational activities. Moreover, due to its low crime rates, Dubai has become one of the safest cities in the entire world.

Where to Set up a Business in Dubai?

Another critical decision that one has to make while setting up a business is the location. There are a few different aspects that you need to consider:

• You get 100% ownership of your organization.

• You can avail tax benefits.

• The location is both convenient and economical.

• The location meets your business’s strategic goals.

Company Setup in Dubai Free Zone & Mainland

The business locations in Dubai are categorized into two major zones:

• Free Zone Company Setup

• Dubai Mainland Company Setup

Setting up a Company in Dubai Free Zones

There are certain areas in Dubai designated as free zones. These are the ideal areas where foreign entrepreneurs can set up their businesses. The free zones are divided into various categories based on the specific area of operation.

Pros and Cons of Free Zones:

The two major benefits that the free zone offers are ownership and taxation.

Cons:

• Some businesses, particularly those related to the service industry, perform better in the city markets. Common examples include eateries, retail stores, etc.

• Some spaces in the trade zone may end up costing you more than renting space within the city market.

Dubai Free Zone Areas:

There are about 45 free zones spread throughout the U.A.E. The demarcation of these is based on the particular area/sector of operation:

• Academics

• Aviation

• Investment

• Media

• Information technology(ICT)

• Information and Logistics

• Automotive

• Technology

• Energy

Setting up a Company in Mainland Dubai

This geographical jurisdiction targets commercial businesses and offers exciting opportunities. Entrepreneurs working in the following sectors can consider renting space on the mainland:

• Real Estate

• Hospitality

• Education

• Retail

However, in contrast to the free zones, it is mandatory for foreign owners to hold only 49% equity of the business. Exceptions to this rule are in case of business activities with GCC ownership and partnership of GCC companies with an Emirati.

Popular Business Locations in Mainland Dubai:

• Shaikh Zayed Road

• Business Bay

• Jumeirah

• Al Qusais

• Al Quoz

• Deira

• Bur Dubai

• Al Karama

Selecting a Location Based on Strategic Goals:

Before you finalize the location, you need to ensure that it meets your business goals. You need to devise a location strategy based on your objectives and then find out which space fits best. These objectives can include but are not limited to the following:

• Convenience

• Cost-Effectiveness

• Sustainability

• Profitability

For instance, if you are steeping in the service industry, you will have to make sure that your office is easy to reach. This will be more profitable than saving up on rent but shifting to a distant location. Retail chains and other businesses of similar nature need to stay around their competition so, they need spaces based within the market. Whereas a manufacturing organization will consider labor costs, logistics, and taxes & regulations while making the final choice.

Analyze the nature of your business, product, and your target market. After an in-depth analysis, you can choose whether or not the free zones will be beneficial for you.

Once that decision has been made,  you can begin looking for places. After finalizing one, you will need to have a tenant contract in place. For the free zones, the processes are fairly simple and take up lesser time on average.

Types of Companies in Dubai:

Before setting up your company in Dubai, you need to know the categories of business incorporations in the Emirates. For each type of company, there are certain requirements that you need to fulfill. Therefore having an in-depth knowledge of the type of conditions will enable you to make an informed decision.

Following are the major categories of business establishments in Dubai:

1. General Partnership:

A general partnership business requires to be set up by two or more partners. The partners have to be Emirati nationals and will be equally liable for the company’s debts. Conditionally only the partners’ names can be part of the entity’s name.

Each partner’s interest can be recorded in the partnership agreement. The partnership dissolves in cases such as:

• The death of one member

• Bankruptcy of a partner

• Withdrawal of a partner

• Insanity of a partner

Partnership businesses in Dubai are categorized into 3 types:

• General partnership

• Simple limited partnership

• Partnerships-en-comandante

2. Public Shareholding Company:

These business establishments are also known as Public Joint Stock Companies. The capital is divided into equal shares. To open a Public Shareholding Company, it is mandatory to have at least 10 founders, in most cases. The minimum capital requirement for PSCs is AED 10 million. The company needs to have a minimum number of 3 directors on the board. Another prerequisite is that the Chairman of the board along with the majority of directors be Emirati nationals. Only 35% of the share capital will be held by the founders whereas, the rest has to be offered to the public. Each member in a PSC is liable for only the share value he holds.

3. Private Shareholding Company:

A Private Shareholding Company in Dubai is similar to the public type. You need to have at least 3 shareholders to open a PrSC. However, the shares are not offered to the public. It is mandatory to express in the paperwork if any shares will be made available to the public.

4. Limited Liability Company:

The LLC is the most common type of business incorporation in Dubai. These companies can be set up in the Dubai mainland area. An LLC license allows you full operating rights within the U.A.E. There is a requirement of minimum capital for these entities which depends on the type of business. To establish an LLC, you must have physical offices in the country. Foreign owners can hold no more than 49% of the shares of an LLC.

5. Free Zone Companies (FZC and FZE):

There are two main types of companies in Dubai free zones:

• Free Zone Companies

• Free Zone Establishments

Both sorts of companies can be opened in any one of the allotted free zones. FZCs and FZEs are quite similar to each other. Both allow 100% foreign ownership and provide a license for doing business in the Emirates. The only difference is that FZEs can only have a single shareholder.

6. Branch Office:

These establishments can include branches of foreign organizations operating with the same name in Dubai. Branches of free zone companies, GCC companies, and civil companies also fall under the same category.

Types of business licenses in Dubai:

Setting up a business in Dubai is extremely advantageous. But in order to reap these amazing benefits, you need to have a business license.

How to Obtain a Business License in Dubai

The business license is a document that legally permits you to carry out business in Dubai. It also acts as evidence of your skill and expertise. The license in Dubai is issued by the Department of Economic Development (DED).

To encourage business development in the region, the DED has made the procedures easy and fast.

Categories of Business Licenses in Dubai

There are three types of licenses offered in Dubai, these are:

• Commercial License

• Industrial License

• Professional License

Commercial License:

Entrepreneurs who wish to conduct trading activities in Dubai need to obtain a commercial license. The business activities in Dubai that fall under this license category are:

• Importing & exporting goods

• Selling electronic products

• Real Estate

• Commercial brokerage services

• Selling of construction material

• Retail stores

• Rent-a-car services

Legal Liability Companies (LLCs) are the most common type of organizations that are set up under a commercial license. The license can be used whether the organization is set up on shore or in a free zone.

How to Obtain a Commercial License in Dubai?

• The first step in applying for a commercial license in Dubai is to make a list of activities that you will undertake. However, keep in mind that you can’t take up more than 10 activities (main and tertiary combined) on one license.

• The next step is to draft an MOA listing the activities.

• The third step is to register the organization with the DED.

• Once the registration is done, you can then pay the fee and obtain a commercial license in U.A.E.

Industrial License:

This type of license is provided to industries that undertake manufacturing activities. These are companies that transform raw or semi-formed material into the final product. The business activities for industrial license include:

• Production

• Segregation

• Accumulation

• Packaging

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Professional License:

The third and final type of license is granted to individuals based on their skills and expertise. The biggest advantage of a professional license is that it allows 100% foreign ownership.  The only condition is that you need a local as your service agent.

Cost of Setting up a Business in Dubai:

A major factor that entrepreneurs need to consider is the total cost of setting up their business in Dubai. You need to have a realistic calculation in mind to enable you to plan effectively. Having a clear cost breakup will also save you many undesirable overheads and expenses.

As discussed above, there are two areas in Dubai to set up businesses. The costs for both these locations vary considerably. Other factors that affect costs are:

• The type of business license you obtain

• The type of business you set up/ company you form (LLC, FZE)

Other charges for LLC formation in Dubai may include:

• Rental charges for setting up an LLC in Dubai

• The fee paid to the Department of Economic Development

• The fee to acquire a mainland trade license

• Administrative fee

• One-time Contracting license fee

• Fee for a real estate broker

Other charges depend upon the type of company formation. For LLC companies, you may have to incur investor visa charges and employee visa fees as well.

How much does it cost for Investor Visa?

The investor visa costs approximately 3200 AED including basic insurance, medical, and Emirates ID.

How much does it cost for Employee Visa?

The average cost for hiring an employee is between 7000 to 7500 AED approximately including insurance, medical, and residency card.

To sum it up, Dubai is a business hub with exciting investment opportunities. Setting up a business in Dubai has never been easier. However, if you feel difficulty in performing the process, you have the option of hiring a reliable consulting firm. In case you need any assistance in setting up a business in Dubai, you may also contact us!