Setting up a business in Dubai? Check this out!
If you’re seeking to establish a business internationally, Dubai stands out as an optimal choice. Renowned as a prominent trading hub in the Middle East and North Africa (MENA) region, Dubai offers a plethora of advantages for businesses aiming to flourish, succeed, and establish global connections.
In 2022, Dubai achieved a notable 7.6% growth in its real GDP. Looking ahead to 2023, the projected real GDP growth is expected to reach 3%. Moreover, the United Arab Emirates (UAE) is acknowledged as a low-risk business destination, ranking 10th among 153 nations in the GlobalData Country Risk Index. This positioning underscores Dubai’s stability and appeal for initiating business endeavours. If your aspirations involve establishing a business in Dubai, the process is relatively streamlined, especially through the UAE’s free zones.
Essential Considerations Before Business Setup
Before embarking on the journey to establish your business in Dubai, several key aspects necessitate comprehension. Here’s an overview of these vital elements:
Selecting the Right Economic Zone: Free Zones vs. Offshore
As an initial step, you’ll need to determine whether you wish to operate within a Free Zone or Offshore entity. Each option boasts distinct advantages and specifications, allowing you to tailor your decision to your unique requirements.
Free Zone Companies
For those aiming to secure complete ownership of their company, opting for a license and location within one of Dubai’s free zones is recommended. The free zone concept was introduced by the Dubai government to attract foreign investment and stimulate business setup. These zones offer entrepreneurs full ownership, a corporate tax rate of 9% (applied to UAE businesses with profits exceeding AED 375,000), and zero personal income tax.
However, it’s important to note that conducting direct trade with the local UAE market is restricted for companies operating within free zones.
Presently, Dubai is home to over 30 operational free zones, each tailored to specific industry categories and offering licenses to companies within those sectors. Notable examples include:
- Dubai Multi Commodities Centre (DMCC)
- Dubai International Financial Centre (DIFC)
- Dubai Airport Freezone
Offshore companies can also be registered within free zones, reaping similar benefits. Nonetheless, they aren’t a direct substitute for free zone companies. The key distinction between these two lies in their business operations. Offshore companies are permitted to engage in business activities outside the UAE, whereas they are prohibited from operating within the country. Moreover, offshore companies aren’t subject to a minimum capital deposit requirement upon incorporation.
However, unlike free zone enterprises, offshore companies necessitate sponsorship, which in turn limits foreign ownership to 49%.
Diverse License Types
Apart from the choice of zone, you’ll also need to determine the type of license that aligns with your business pursuits. The Department of Economic Development (DED) is responsible for issuing business licenses, encompassing three primary categories:
- Commercial License This license category accommodates businesses engaged in trading activities, involving the buying and selling of goods. It covers a wide spectrum, including import and export, sales, logistics, travel and tourism, general stores, and real estate.
- Industrial License Businesses focused on manufacturing activities, converting raw materials into finished products manually or mechanically, fall under this license category. It encompasses industries such as textiles, metal manufacturing, and paper manufacturing.
- Professional License Businesses providing services, artisanal endeavours, or craftsmanship fall within the scope of the professional license. Medical services, beauty salons, and repair services are typical examples of such businesses.
Navigating Sponsorship Setting up within a free zone like DMCC eliminates the requirement for a local sponsor. A major advantage of free zone incorporation is the ability to establish an entity with 100% foreign ownership, without the need for a UAE national as a partner or sponsor.
Streamlined Process for Dubai Free Zone Company Setup
Setting up a business in Dubai’s free zones is particularly favoured by foreign entrepreneurs due to the array of benefits they offer, including zero personal tax, low corporate tax rates, full company ownership, repatriation of capital and profits, and currency flexibility.
Outlined below are the seven fundamental steps to establish your business within a Dubai free zone:
- Define Your Business Activity – The initial crucial step involves identifying the nature of your business venture. Whether you’re launching a small-scale enterprise in Dubai or a cryptocurrency-focused business in the UAE, you’ll encounter over 2,100 available business activities. These activities are categorized across industrial, commercial, professional, and tourism domains. The complete list can be accessed on the DED website.
- Choose the Appropriate Free Zone – With a multitude of over 30 free zones in Dubai, the proximity to businesses in your sector often influences the optimal choice of zone. Your business’s nature and objectives will play a significant role in determining the ideal free zone for your setup.
- Select a Company Name -Selecting a business name necessitates adherence to the UAE’s naming conventions. Offensive language or references to sensitive topics must be avoided. Naming your business after a person requires documentation proving their partnership or ownership in the company, with initials or abbreviations disallowed. Given the intricacies of this process, consulting experts for guidance can save time and ensure compliance.
- Apply for Initial Approval -Securing preliminary approval from the Dubai DED is essential to avoid impediments when initiating your business. Application can be made online, in person, or through a third party like a law firm. Required documents vary based on your business’s nature, generally encompassing:
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For assistance during the application process, our experts can guide you to ensure accurate filing and documentation preparation.
- Establish a Corporate Bank Account Once approval is granted and the necessary documents are received, opening a corporate bank account becomes feasible. Dubai hosts numerous local and international banks, including HSBC, Citibank, Barclays, Abu Dhabi Commercial Bank, and Commercial Bank of Dubai. Refer to our blog for an in-depth guide to successfully open your Dubai bank account.
- Set Up Your Office Space All Dubai businesses are obligated to possess a physical address. The advantage of setting up in a free zone is the ease of securing office space. DMCC offers a diverse selection of commercial properties, office buildings, and business centre accommodations catering to businesses of all sizes and types. These offices are well-equipped with amenities such as Wi-Fi, meeting room access, support services, and utilities. The array of 68 towers ensures you’ll find the ideal office space.
- Attain Final Approval To finalize your setup, compile your documents, location details, and legal information for submission. In some instances, licensing approval from additional authorities may be required. The submission package typically includes:
- Initial approval receipt and previously submitted documents
- Lease contract from the Real Estate Regulatory Agency (RERA)
- Duly attested service agent contract (for civil establishments and companies wholly owned by non-GCC nationals), if involving a local service agent
- Approval from relevant government entities
Subsequently, license payment is made through approved channels, marking the culmination of your business establishment process.
Ready to Launch Your Dubai Business?
Though it may seem like a multi-step endeavour, correctly executed, the business setup process can be completed in a matter of weeks. Contact us, and we will facilitate the establishment of your business within the world’s premier Free Trade Zones or on the Mainland. Our comprehensive assistance encompasses document drafting, submission management, translation services, bank account setup, regulatory approvals, and general advisory support. Reach out today to explore how we can guide you on this transformative journey.