Starting a business in the UAE

In the space of several decades, the Emirates has had an incredible transformation. From a nation of fishing and pearls, it has become a financial powerhouse with diverse, thriving industries. Furthermore, the country has a stable political system, strong capital flow, business-friendly taxation, and liberal trade restrictions. As a result, the country has become an increasingly popular choice for investment.

This article includes the following information on setting up a business:

Business culture in the UAE

So, you want to start a business in the UAE? That may not be a bad idea. The local government is encouraging investment and startups in many ways, therefore this is a good time to get on board. The Emirates is also comparatively easy for foreigners to do business in. It is easy to set up a company and, coupled with the fact that the government now offers long-term visas for investment, business in the UAE is booming.

In 2017, there were 131,000 registered businesses in the UAE. When you combine this with the fact that 80% of residents are foreign-born, it becomes clear that there is plenty of scope for foreign investment in the UAE.

Further, the UAE announced in 2019 that it was allowing 100% foreign ownership in 122 economic activities across 13 sectors. Most notably, these include growth sectors such as renewable energy, logistics, hospitality, food services, and manufacturing. Despite this, it is important to note that each Emirate can impose its own restrictions.

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The business culture in the UAE

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Although conservative and hierarchical, the local business culture in the UAE is quite easy to navigate. Personal relationships are key, and face-to-face communication is greatly valued. As a result, anyone who behaves appropriately can succeed in business in the country.

If you are thinking about setting up a business in the UAE, there are several things to consider. To begin with, look at what sectors are popular. You will also want to see what services are missing or what goods people are looking for. At the moment, the automotive and aerospace industries are doing well, as is oil and gas. Similarly, there is scope for growth in food and beverage, as well as marketing and advertising.

Who can start a business in the UAE?

Starting a business in the Emirates is quite easy. In fact, almost anyone can do it. This is because the government offers many incentives for setting up a business there.

The main thing you should know is that most types of companies – apart from a sole proprietorship – require an Emirati partner that owns 51% of the business. After that, you must just go through the process of registering and licensing your business. In some cases, you may also need to meet minimum capital requirements.

The best part of starting a business in the UAE is Free Zones. These are unique areas that are popular with foreign investors. This is because they offer 0% corporation and personal tax, along with 100% foreign ownership and import and export tax exemptions.

Legal structures for businesses in the UAE

If you’re planning on starting a business in the UAE, you must first consider the type of company you will form. Like in any other country, the Emirates has many different legal corporate structures. Below are a few of the most common and some of their requirements.

Sole Proprietorship

This type of company is 100% owned by one individual. Because of this, that person has full control over operations and profits. Although all nationalities can create a sole proprietorship company, only UAE and GCC nationals can have a commercial or industrial company.

Civil Company

Professionals such as doctors, accountants, and lawyers can open a civil company business in the UAE. An Emirati national must own 51% of the business.

Limited Liability Company (LLC)

In an LLC, there must be between two and 50 shareholders. As such, each one is liable only for their percentage of shares. Additionally, profits and losses are divided between shareholders according to their holdings. Again, 51% of shares must be owned by a UAE national. Furthermore, an LCC with more than seven partners must appoint a board with at least three shareholders.

Foreign Company Branch

A foreign company may establish a branch in the UAE. In this case, the company is 100% owned by the parent company. However, any goods must be imported through a local trading firm.

Free Zone Company

Businesses operating in a Free Zone need two to five stakeholders. While there are many benefits and incentives for setting up in the UAE Free Zones, you should know that these companies cannot trade directly with the UAE market. Therefore, there might be different requirements for setting up a business there. For example, twofour54 Abu Dhabi does not require any capital. However, the Dubai Airport Free Zone requires a minimum share capital of AED 1,000, while a KIZAD LCC will need AED 150,000.

Freelancers

It is surprisingly easy to set up a freelance business in the UAE. You will need to register in a Free Zone with an application form, CV, bank reference, and notarized Registry Identification Code Form. You will also be able to apply for a visa.

How to start a business in the UAE as an expat

If you are looking to start a business in the UAE, there are a few things you should know. Below is some practical advice on getting set up.

How to obtain a business visa in the UAE

If you are going to start a business in the UAE, you will need to get a visa to live and work in the country. For entrepreneurs, there are two types. Both a five-year and a 10-year visa are available without the need for sponsorship.

To get a five-year visa, there are two options. Firstly, you must have links to an existing project with a minimum capital of AED 500,000. Secondly, you must have the approval of an accredited business incubator within the UAE.

The 10-year visa can be more difficult to get. Again, there are two options. With the first, you must deposit at least AED 10 million in a public investment. Alternatively, you could also set up a company with at least AED 10 million in capital or invest AED 10 million in an existing company.

There are exceptions for people with special talents. For example, a 10-year visa may be granted to creative individuals with the approval of the Ministry of Culture and Knowledge Development.

Registering your business in the UAE

If you are setting up a business in the UAE, you will first need to choose a trading name. Start by talking to your local Free Zone authority or the Department of Economic Development; they will be able to tell you if your name is acceptable. UAE laws state that trading names must not violate public morals, should not be previously registered, and must comply with the business’ required activity and legal status.

Once you have a name, you will need to apply for a business license. There are four types available on the UAE mainland, such as commercial, professional, industrial, and tourism.

If you work in a Free Zone, you will need to apply directly to the zone in question. This will depend on your business activity. For example, Abu Dhabi’s twofour54 deals mainly in creative industries such as graphic design, advertising, and app development. Conversely, Dubai’s DMCC focuses on energy, commodities, gold and diamonds, construction, healthcare, and shipping.

Registration and licensing are done at the same time. To register your business, you will need to apply to the relevant local authority or Free Zone. In addition, you will have to provide the following documents:

• Completed application form
• Business plan
• Passport copies of shareholders/directors
• Specimen signatures of shareholders/directors
• Letter of intent

To complete licensing, you will also need to provide the following:

• Board resolution appointing a company manager/director
• Power of attorney given to manager/director
• Memorandum and articles of association
• Specimen signature of manager/director
• Photo of manager/director
• Share capital information

Additionally, you will need to register your business online with the Federal Tax Authority.

Licenses and permits

For the most part, you can get your business license from the Department of Economic Development or your local Free Zone. However, certain companies may need specialized licenses. For example, manufacturing companies must gain approval from the Ministry of Finance and Industry, while the UAE Health Ministry issues licenses for medical and pharmaceutical companies.

Starting up an online business in the UAE

If you are planning to start an eCommerce venture, you will have a different experience in the UAE. Firstly, you will need to apply to the Department of Economic Development in your Emirate.

Secondly, you will have to get an eTrade license from the Telecommunications Regulatory Authority. In Abu Dhabi, this is the Tajer Abu Dhabi; in Dubai, it is known as a DED Traders License. Afterward, you will follow the same steps to setting up a business in the UAE as any other company.

Foreign companies opening up a branch or subsidiary in the UAE

Legally, there is a big difference between a branch and a subsidiary of a foreign company. A branch is tied to the parent company, who is therefore responsible for the branch’s actions. However, a subsidiary operates as a legally independent company. As such, a subsidiary will operate under a UAE business structure. However, it can also benefit from protection from double taxation and can operate in a Free Zone.

Like any other business in the UAE, a branch or subsidiary must register with the Ministry of Economy. Similarly, you will need to provide documentation such as a memorandum and articles of association, power of attorney. Record-keeping for foreign branches or subsidiaries are the same for any other business in the UAE.

Starting up a non-profit company in the UAE

While starting a business in the UAE is relatively easy, setting up a non-profit company or charity can be a little more difficult. UAE nationals have the option of registering a charity online directly through the Ministry of Community Development.

Expats, on the other hand, must submit their application to the ministry through their embassy or consulate in the UAE. Like any other company, a non-profit must fill out an application form. Additionally, they need to supply information about the founders, register a trading name, and show a memorandum and articles of association.

Setting up an offshore company

If you are considering setting up an offshore company, there are several major pros and cons you should bear in mind.

Offshore incorporation is a straightforward process in all of the popular offshore financial centers and tax havens around the world. They can provide a wide range of benefits to the company and company principals.

You can read more about the pros and cons of setting up an offshore company, including privacy and reduced tax liability, in our helpful guide. This also explains how to register, establish, or incorporate your business outside of your country of residence.

Administrating your business in the UAE

If you have a business in the UAE, you must keep detailed records of everything relating to your company. Of course, the most important part of this is keeping up to date accounting records in line with the UAE’s laws. Specifically, this includes annual accounts, general ledgers, purchase day books, tax invoices, credit notes, debit notes, and VAT ledgers.

Together, these should show all business transactions and offer an accurate financial overview of the company at all times. In addition, the accounts should be kept at the company’s head office for at least five years. After that, you can retain digital copies.

However, there are some caveats. For instance, capital asset records, such as those relating to machinery and furniture, must be retained for at least 10 years. Similarly, real estate records should be kept for a minimum of 15 years. If you operate in a Free Zone – such as the Dubai International Finance Center (DIFC) – you may also have additional requirements.

You will also need to pay attention to creating your invoices. This is because businesses in the UAE must include specific details on every invoice. These include:

• The name, address, and tax number of the recipient
• A unique invoice number
• An issue date or date of supply
• Price per unit and supplied quantity/volume
• Rate of tax and the payable amount in AED
• Payable gross value in AED

When setting up a business in the UAE, it can be helpful to use an administration or accounting software. Some of the most popular software in the country include Quickbooks, SAP, Sage, Tally, and Reachaccountant. For invoice-specific software, you can try SmartInvoice or TaxPay.

Business banking in the UAE

Setting up a business bank account is important. However, to do this, you first have to register your business and get your license.

To open a bank account for your business, you will need to attend an in-person interview at your bank of choice. You will also need to submit documents, including:

• Completed application form
• Resolution from the board of directors to the sanction opening of the account and appointing signatories
• Certificate of incorporation
• Trade license
• Share certificates
• Memorandum and articles of associations
• Passport copies of all partners/directors

In addition, some banks may ask you to submit business plans, contracts and invoices, and reference letters. They may also ask that all shareholders prove visa and residency status. When you have all your documentation in order, you will attend the meeting at the bank. If everything is approved at this stage, the account will be open within two weeks.

Corporate bank accounts must usually maintain a minimum balance. This could be up to AED 1 million, but it could also be as low as AED 20,000. In addition, business accounts can have multi-currency facilities.

Locally, some of the most popular business banks are First Abu Dhabi Bank, Emirates NBD, and Dubai Islamic Bank. However, you could also opt for bigger international banks such as HSBC and Standard Chartered.

Taxation for businesses in the UAE

When starting a business in the UAE, you have to remember to register for tax, too. The country normally levies two types of taxes on companies: excise tax and VAT.

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The tax system in the UAE

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Excise tax is levied on carbonated drinks, energy drinks, tobacco, and tobacco products. It can also apply to products that are considered harmful to the human body. You can register for this online at the FTA website. After this, you will have to file returns within 15 days of the tax period. There are different tax rates for different types of products:

• Carbonated drinks: 50%
• Tobacco: 100%
• Energy drinks: 100%
• Electronic smoking devices: 100%

Businesses in the UAE also attract 5% VAT. The VAT applies to all tax-registered businesses in the UAE mainland and Free Zones. If your company’s taxable supplies and imports are more than AED 375,000 per annum, you have to register for this. Otherwise, it’s optional. Again, this can be done through the e-service section of the FTA website. Afterward, you must submit a return within 28 days of every tax period.

There are two types of tax periods for VAT. Businesses operating below AED 150 million must file returns quarterly. On the other hand, businesses operative above that level should file returns every month.

In either case, all companies must retain all documentation relating to VAT invoices and costs. Once you receive your return, you should pay the taxes by the due date. This must be done through the FTA website. However, you can choose to pay by eDirham or credit card, or even through bank transfers.

Business insurance in the UAE

To protect your company, you should think about getting insurance while setting up a business in the UAE. There are different types of insurance available in the Emirates and these relate either to the business or its employees.

These are the most useful types of employee insurances:

• Worker’s compensation – this protects your companies in the case of work-related accidents and injuries;
• Personal accident insurance – while not required, this is useful for covering non-work-related injuries and accidents;
• Health insurance – all businesses in the UAE must provide employee health insurance;
• Travel insurance – if your employees travel for work, this can be very useful for travel delays and missing luggage, for example

Additionally, there are insurance options that can be useful to specific businesses. These are as follows:

• Marine insurance – if your business relates to shipping or anything to do with the sea, this is crucial for protecting your cargo and investments;
• Motor fleet insurance – for companies that operate vehicle fleets, this will protect all your cars in case of damage and accidents;
• Property insurance – for businesses that own property, you will be covered in case of fires or other damage to your property

It is equally important that all businesses have liability insurance. This is because many things can go wrong in the day-to-day running of a business. This insurance covers your company in case of mistakes, accidents, and misconduct.

Employing staff when starting a business in the UAE

Once your business is off the ground, you may want to start employing staff. You should know that many industries must meet local employment quotas. For example, some industries must employ a certain number of local staff. In banking, there is a 4% minimum, while insurance has a 5% minimum.

If you plan to employ UAE nationals, there are a few things you should note. Firstly, you must notify the labor department within 15 days of the employee’s start date. Moreover, you have to provide the same social security and pension that government employees receive. Additionally, if you have more than 100 employees, you must employ a UAE national to act as a go-between between the company and the MHRE.

Many mainland-registered companies choose to hire expat employees. To do so, you must apply through the MHRE and the General Directorate of Residency and Foreigner Affairs in your local emirate. They must meet certain qualifications and provide a signed employment contract.

To apply foreign staff in a Free Zone, you have to apply directly to the local authority in the zone. Although visas are widely available, candidates must meet certain requirements. For example, they should be between 18 and 60 years of age. Importantly, free zones have visa quota limits – although it is possible to apply for additional visas.

To get a visa for a foreign employee, a company must also show:

• Business license
• eSignature card
• Color photo of the employee
• Copy of the employee’s passport

If you hire an employee, there are certain things you must provide. Firstly, health insurance is mandatory. Additionally, it is common to offer 30 days of annual leave and 90 days of sick leave. Foreign employees might also be given a housing allowance, return flights, and education for their children.

Support and advice when starting up a business in the UAE

The government offers several schemes for financial support for starting a business in the UAE. However, these are only available to Emiratis, so your company’s local partners or shareholders will have to apply for this. Most of the programs come under the umbrella of the Khalifa Fund for Enterprise Development.

Similarly, the Dubai SME offers financing as well as advisory and incubatory services for small and medium enterprises. In addition, the Intelaq program offers financial support for start-ups, along with legal, marketing, and technical advice.

Venture capital and angel investors are also becoming a popular way to fund businesses in the UAE. You could look for some that are interested specifically in the type of activity your business operates in. Of course, many banks offer loans for starting a business in the Emirates. If you can meet their credit requirements and repayments, this could be a good option.

Finding office space in the UAE

There are many types of office spaces available in the UAE. However, traditional offices are not especially popular because these can be expensive and hard to customize.

For those just starting a business in the UAE, coworking spaces are a good choice. These allow you to have total flexibility and many even offer certain business functions such as printing and faxing or receiving mail. In Dubai, for example, popular coworking spaces include Nook, NEST, Our Space, and Letswork. You will also find global coworking brands such as WeWork.

If you have several employees, a serviced office might better suit your needs. These feel more like a traditional office space. However, they come with many perks that can be useful. Often, there is staff on hand – like receptionists and assistances – that you can use without employing them yourself. Additionally, you could have cleaners to keep everything spick and span and an IT team to help with any technical issues. Keep in mind that serviced offices are especially popular within Free Zones.

Business training courses in the UAE

The UAE has a wealth of training courses available to help you get your business to the next level. Zabeel Institute offers training in everything from languages and logistics to marketing and human resources.

Similarly, Promise offers a huge range of corporate training courses ranging from financial management and contract administration to sustainability and warehouse management. Alternatively, the KPMG Business Academy offers more advanced financial courses such as Advanced Financial Statement Analysis.

Additionally, certain government departments provide specialized training for Emiratis. For example, the MHRE has a dedicated National Human Resources Training Sector to provide specific training to help locals succeed in private companies. Similarly, the Ministry of Finance offers detailed financial education.

Useful resources

• VAT
• Excise tax
• How to pay VAT and excise tax
• Setting up a charity
• eCommerce
• Long-term residence visas in the UAE