Starting a business in the UAE is quite simple, and many organizations and foreigners are eager to take advantage of the opportunity.
The UAE has undergone a remarkable shift during the last many decades. It has evolved from a fishing and pearling nation to a financial powerhouse with a diversified range of booming sectors. In addition, the country has a stable political structure, a strong capital flow, business-friendly taxation, and trade regulations that are liberal. As a result, the government is becoming a more popular investment destination. Let’s discuss below Why Forming a New Business In UAE Can Be Beneficial For Entrepreneurs?
Forming a New Company in the Emirates
It’s possible to start a company onshore or offshore in the United Arab Emirates. But the free zones are the most popular choice among foreign entrepreneurs and for a good reason.
Why do so many entrepreneurs from around the world prefer to do business in the United Arab Emirates?
It is due to the country’s 0 percent tax on both personal and corporate income. In addition, the UAE’s strategic location in the Middle East makes it an ideal hub for worldwide trade.
There are many advantages of company formation in UAE country’s free zones, including a 100 percent exemption from customs duty, no currency restrictions, and the option to repatriate all capital and profits.
To avoid setting up an office in the US, many American and European companies are looking to invest in the Middle East to avoid the time and cost involved. The five categories below serve as a guide to establishing a new venture in the Emirates. Before looking for an office space or even a staff, make sure you have these five points covered.
Dubai Laws and Culture
There are two different laws on the books that define what may or may not qualify as a limited partner (LP) or turnkey company in the Emirates.
Company Law
Dubai Company Law Article 3 prohibits “illegal agreements, arrangements, and agreements with immediate effect concerning business, trade, business organizations, profit-earning interests, and investments.” The previous law forbidding these types of arrangements did not specifically mention the internet. Because the internet, among other things, has become a focal point in company formation discussions, the Dubai government plans to amend the company law to include internet use.
Merger and Sale Laws
A merger or sale of a company is illegal, as is the ownership of a company by someone who is not the actual founder. This entity structure is often helpful to obscure the source of bootleg company profits and so evade taxes.
Companies are required to file and pay fees for an annual company meeting where the government can review the company’s legal structure. Companies with a legitimate legal system may be permitted entry into the country, whereas illegal structures risk expropriation under the law.
Personal Sector Laws/Businesses
The personal sector laws will govern the management of common areas like parking spaces and restaurants. Ownership of common areas may not transfer to someone other than the actual owner, and this ownership cannot be bartered or exchanged without the government’s approval.
If you roll up to a coffee shop in the middle of the night in the “cafes,” you know that if you don’t pay, the government will come to get you—same game with the malls or office locations. Content production, magazine or newspaper offices, and restaurants may be trendy. Exceptions to these laws are for limited articles or small-scale consulting.
Companies are also required to hire employees, and this is where things get interesting. Many employees working abroad cannot legally enter the country to operate without government permission.
While the country has many emerging companies, the global head start for many large corporations tends to be set in the United States, Western Europe, and Australia. So far, this trend has meant that wealthy individuals and companies are buying massive portfolios of shares in a handful of companies here—companies such as Delta Airlines, Etisalat, and United Arab Emirates-owned merchant banks. However, choosing to set up a business there has meant higher costs and time involved for residents.
So let’s explore some revelations you have at least a solid understanding of around the formation of your company in the Emirates. (It’s worth mentioning to you that these don’t apply to foreign nationals on working visas; they apply only to foreign nationals who wish to own a business there on their own.
Direction to you from the emirate
Here is a post about the emirate of Abu Dhabi. By reading and paying attention to these directions, you will know what the legal (and not-so-legal) topic areas are regarding the establishment of your business.
Dubai is a land territory that is part of the Peninsula. The emirate is formed apart from the state of Dubai, which beaches the east coast of the Arabian Peninsula. The two sides of the Peninsula regularly meet and are often located on the same latitude and longitude (because they are connected by the Jebel Ali Strait that separates the two). Your company will establish its headquarters within the boundaries of the emirate.
Business tax
If you wish to own a business in the emirate of Abu Dhabi, you are responsible for paying Dubai tax. It is one of the reasons the emirate has become famous for investment. By law, the emirate facilitates and enforces business tax, with individuals responsible for paying.
Business registration
Before other start-ups decide on taking advantage of the country as a market to target, you should know what type of business you intend to establish. The registration is cumbersome and may even require the involvement of multiple people.
The law states that your business should only represent you—not yourself, your partner(s), business partners, or anyone who is working for you at the same time. However, with overseas investments and no physical presence in the country, it might be pretty tricky for you to be the sole proprietor of your venture. You may need to hire a license or register it as a SAB (separate and distinct business). For numerous other businesses, you will not even have to register it at all.
ACCORDING TO A GOVERNMENT OF THE EMIRATES REPORT, the UAE has the highest per capita income in the UAE region and among the highest in the world,” according to a Government of the Emirates report. Inflation is low — currently sitting at 2.2% — and real disposable personal income for the average post-tax household in 2022 is $102,670, 58% higher than the global figure of $62,500. Official statistics confirm that the regional placement of Dubai in terms of the 2018–2020 Financial Reporters’globally.
The admirable performance attributes to the efficient governmental policies and relaxed business environment. The much higher capital of doing business in Dubai, straddling the lines between traditional financial centers such as Dubai and the more advanced business districts such as Sharjah, make it even more desirable for corporate businesses.
Being a strategic country, the country has established itself as a go-to destination for exporting goods, services, technology, and people. Having a suitable business license in the UAE is a required legal requirement even when starting your company. Business licenses are issued through the General Company Law (GCL) Branch and the Business Registration Department (BRD), with branches located in every Abu Dhabi city and emirate.
Besides establishing a business, you will need to apply for many licenses, approvals, KWA (Know-Your-Customer) checks, and other administrative measures. A myriad of documents is required to start a business in the UAE, including copies of your passport, attorney-client privilege, and a company’s financial statements.
With COVID-19 bearing down, many international firms such as Uber, Paypal, etc., started shifting their operations overseas, eager for a business presence in safe countries with favorable business environments.
Companies that do not comply will be deemed unauthorized by local authorities and deported. Many firms set up regional offices in another country such as Kuwait or Saudi Arabia but work from Dubai, allegedly avoiding import duties and paying lower corporate income tax rates.
To qualify for a business license, you will need to-
The UAE adopted the Dubai International Financial Center Law in 2009, which obligates all financial companies incorporated to establish their office in the emirate’s financial district. This legal mandate has allowed the appointment of banks in Dubai and other areas, including Sharjah and Ras Al Khaimah.
The GCC (Gulf Cooperation Council) countries have followed suit by enacting Dubai’s Competent Domestic Companies Law, which obligates domestic companies incorporated in these countries to establish their headquarters in the emirates. In addition, the law requires that the foreign seats locate in one of the GCC countries or one of its dependencies.
Companies can be formed in less than a week in Dubai thanks to the accommodating environment of the free zones.