United Arab Emirates (UAE), but more in particular Dubai, are well-know for its excellent business atmosphere. Many foreigner entrepreneurs come to Dubai to benefit from its legal and tax framework offering a zero taxation (for further details see our post) and magnificent business opportunities.
One of the key indicators is than more than the 80% of the current residents in Dubai are foreigners, a large portion of them run their own business in or from Dubai.
Advantages of creating a company in Dubai
- Stable economy: Dubai has one of the fastest growing economies worldwide.
- Tax-efficient: Despite the latest tax reforms, the UEA continues offering one of the most competitive and attractive tax regimes in the world, including low-income tax rates and low taxation on cash repatriation, among others.
- Strategic location: Dubai offers a strategic location with access to emerging economies and markets in Europe, Asia and Africa.
- Safety and amenities: Dubai ranks as one of the most save destinations worldwide and offer high-quality services.
- Business-friendly government: Dubai is business-friendly, offering quick processes and a clear commitment to continue reducing the timing with respect to paperwork with authorities.
It is clear that if we ponder the benefits vs the challenges of starting a business in Dubai, benefits win by far. Foreigner entrepreneurs looking at Dubai should not be afraid of coming to Dubai to start a business. Dubai actively welcomes entrepreneurs from all over the world.
Due to the attractiveness of Dubai as a place to be for foreign entrepreneurs, this article addresses the main items to consider at the time of starting a business in Dubai.
Steps a foreigner should follow to register and run a business in Dubai
1. Corporate structure
The first thing to consider is the type of UEA corporate structure to use at the time of establishing and running a business in and from Dubai. The type of company depends, in practice, on several factors, like the nature of the business and the purpose of the company. The most common types are the Limited Liability Company (LLC) and the Sole Establishment.
The LLC is the most common type of corporate structure used by foreigners. It admits a minimum of 2 shareholders and a maximum of 50 shareholders. LLCs are attractive to entrepreneurs since their liability is limited to their contribution into the share capital of the LLC, what derives into a full personal protection of the entrepreneur’s wealth with respect to liabilities entered by the LLC.
The downside is that a local partner must participate in the LLC holding the majority of the share capital, unless the LLC is located in a free zone allowing foreigners keeping the full ownership of the LLC. Running costs may be high compere to other alternatives.
The Sole Establishment refers to a business that is solely owned by one person. Being that person fully liable for the debts of the business with all its personal assets. This option does not require the participation of a local partner and their operating costs are much lower.
The entrepreneur must select the location of its business. The business may be located in mainland Dubai or in one of the many free trade zones. The establishment in mainland Dubai will offer the entrepreneur the chance to trade locally and internationally. Same would be offered by free trade zones but other benefits and advantages may be found, like 100% ownership, free income taxation and reduced VAT rates, long term visas, easy cash and profit repatriation, magnificent infrastructures, among others.
3. Trading name
Entrepreneurs should come up with a trading names. Trading names already registered cannot be used. The trading name cannot violate public principles and sentiments.
Ruining a business in Dubai requires getting a business license from authorities. The type of license depends on the type of business (i.e., commercial, professional, industrial, tourism, etc.). Said license can be obtained directly from the competent authority either in mainland Dubai or in the free zone through the filing of the corresponding form and supporting documentation, and after paying the applicable fee (e.g., a trade license may cost c. AED 20,000).
Note that some type of business may require specific approvals from government agencies.
5. Registration and incorporation
The business should be formally registered and incorporated either as LLC or as Sole Establishment. The business will have legal effects only as from registration.
6. Corporate Bank Account
A bank account should be open in Dubai.
7. Getting a business visa.
A business visa would provide the visa holder with free movement at the time of entering and exiting the country for businesses. The fact of establishing a business in UAE allows to apply for residency in the UAE. Locating the business in a free zone may allow getting long term visas.
Is the paperwork burdensome?
Paperwork in Dubai should not be a problem. Dubai offers a quite simple and quick process at the time of establishing a business and it has committed to improve any process as from 2023. Some of the key documents which would be required to proceed with the license request and registration are: passport copy; visa; business plan describing objectives, strategy and financial projections; letter of intent from a local partner; a certificate of good conduct; and a financial statement to support the financial and economic capacity to run a business.
Other documents may be required based on the specific requirements related, in particular, to the business license and location.
What are the key steps to get a visa?
One of the main steps at the time of registering a visa in a foreign country is to get a visa. In fact, getting a visa is one of the most complex matters at the time of moving abroad. The UAE are not exempt from criticism and complexities on this matter. Getting a visa in the UAE requires:
- First, getting an entry permit after registering the business. The entry permit allows the holder to enter the UAE for work; with a validity of 60 days and with the option of having it extended twice for 30 days each.
- Second, adjusting the status from entry permit to resident, what can be done either by exiting and reentering the country or by doing a status adjustment during the stay in the country before the competent authorities.
- Third, undergoing a medical testing.
- Forth, ID registration to get an identification card which is required for all residents in the UAE.
- Fifth, stamping the passport with the residency visa. Generally, this visa is valid for two years for mainland companies and three years for companies located in a free zone.
May a foreigner become tax resident in the UAE as a result of registering and running a business locally?
A foreign individual would become tax resident in said country if any of the following conditions is met:
- He has his usual or primary place of residence and his center of financial and personal interests in the UAE; or
- He was physically present in the UAE for a period of, at least, 183 days in a consecutive 12-month period; or
- He was physically present in the UAE for a period of, at least, 90 days in a consecutive 12-month period and is UAE national, holds a valid residence permit in the UEA, or holds the nationality of any Gulf Cooperation Council member State where the individual has a permanent place of residence in the UAE; or carries on a business in the UEA.
How to take the first step?
At Relocate&Save, we have been assisting foreign entrepreneurs in registering businesses of any type in Dubai.
Our presence and connections in Dubai make us an ideal partner to help you with the establishment and registration of your business in Dubai.
Relocate & Save is an official partner of IFZA, one of Dubai’s leading Free Trade Zones, offering world-class infrastructure, state-of-the-art facilities, and business-friendly regulations, making it an ideal destination for foreign entrepreneurs looking to establish and develop their business locally.
If you have any doubts and would like assistance with the visa application process, please write to us at [email protected] or through the contact form.