This is everything you need to know about setting up a company in Dubai and expanding your business into the United Arab Emirates
17 June 2024
Since the turn of the millennium, Dubai’s dreaming spires have risen in lockstep with the city’s appeal to global entrepreneurs. Not just the United Arab Emirates but the whole Middle East’s most popular spot for expats, Dubai is humming with foreign capital.
Huge multinationals like ExxonMobil and Mitsubishi have set up Regional Headquarters in the city, attracted by its tax-free incentives, business-friendly policies, free trade zones, gleaming infrastructure and luxury lifestyle offerings. But smaller ventures and solopreneurs are also taking advantage of the Emirate’s network of incubators, VC firms and angel investors.
If you’re interested in joining them and setting up a company in Dubai, you’ll need to follow these steps:
Step 1: Choose Your Business Activity
The first step in setting up a company in Dubai is to determine your business activity. The Department of Economic Development (DED) in Dubai provides a list of over 2,000 business activities to choose from. It’s crucial to select the activity that best aligns with your business goals and expertise. Some popular industries in Dubai include trading, manufacturing, consulting, and technology.
When selecting a business activity, consider product-market fit. Some commercial ventures that would work in a Western country might be ill-suited to the different demands of the UAE market. Before you open a company in Dubai, do thorough research on the feasibility and profitability of the activity.
Step 2: Choose Your Jurisdiction
When setting up a company in Dubai, one of the key decisions you’ll need to make is the jurisdiction you operate in.
Companies have the choice of setting up on the Mainland, Offshore, or in one of the many Free Zones. Let’s examine these options and their pros and cons.
Mainland (Onshore)
Mainland companies are licensed by the DED and can operate anywhere in the UAE.
Advantages:
- No restrictions on business activities: Mainland companies can conduct business across the UAE and internationally.
- Access to government contracts: Mainland companies can bid for government projects and contracts.
- No restrictions on office space: Freedom to choose any location for office space.
Disadvantages:
- Ownership Restrictions
Although recent changes allow 100% foreign ownership in many sectors, certain strategic sectors still require local partnership or sponsorship.
- Taxation
Mainland companies are subject to UAE corporate tax, which is set to be introduced in 2023, whereas many Free Zones offer tax exemptions for a specified period.
- Office Space Requirements
Mainland companies must lease physical office space, which can be more expensive compared to the flexible office solutions offered by Free Zones.
- Customs Duties
Importing goods into the Mainland may incur customs duties, whereas Free Zones often offer exemptions on import and export duties.
Best for:
- Businesses targeting the local UAE market.
- Companies planning to engage in government contracts or large-scale infrastructure projects.
2. Free Zones
Free Zones are designated areas that offer specific economic incentives and benefits. There are over 30 Free Zones in Dubai, including Dubai Multi Commodities Centre (DMCC), Jebel Ali Free Zone (JAFZA), Dubai Silicon Oasis (DSO), and Dubai International Financial Centre (DIFC).
Advantages:
- 100% foreign ownership: No need for a local sponsor.
- Tax benefits: Exemption from corporate and income taxes.
- Simplified setup: Streamlined setup process with less regulatory hassle.
- Customs advantages: Duty-free import/export within the Free Zone.
- Repatriation of profits: Businesses can repatriate 100% of their profits and capital.
Disadvantages:
- Geographical restrictions: Limited to operating within the Free Zone and internationally; cannot directly trade in the mainland market without a local distributor.
- Office requirements: Must lease or purchase office space within the Free Zone.
Best for:
- International businesses or startups looking for a streamlined setup.
- Companies in specific industries, such as tech, finance, media, and logistics.
3. Offshore
Offshore companies are primarily used for international business and tax planning. Their jurisdiction will be either the Jebel Ali Free Zone Authority (JAFZA) or Ras Al Khaimah International Corporate Centre (RAK ICC).
Advantages:
- Asset protection: Excellent for holding assets and intellectual property.
- Privacy: Greater privacy and confidentiality of ownership.
- No taxes: Exemption from all local taxes and customs duties.
Disadvantages:
- Operational limitations: Cannot conduct business activities within the UAE.
- Banking restrictions: Some limitations on opening local bank accounts.
Best for:
- Holding companies.
- International trading businesses.
- Companies focused on asset protection and wealth management.
Your choice of jurisdiction will rely on the nature of your business, how much you value your ownership structure and whether you wish to trade within the UAE.
Step 3: Select the Right Business Structure
Once you’ve identified your business activity and ideal jurisdiction, the next step is to choose the appropriate business structure. The most common company formation structures for business setup in Dubai are:
- Limited Liability Company (LLC)
- Sole Proprietorship
- Civil Company
- Branch of a Foreign Company
Each structure has its own advantages and requirements. For example, an LLC offers limited liability protection and can have up to 50 shareholders, while a sole proprietorship is suitable for small businesses with a single owner.
Choosing the right legal incorporation structure for your business is one of the most important decisions you can make when setting up a company in Dubai. It will determine how you deal with profits and losses and how you should organise your resources and assets.
Decide the legal form or your company structure during the initial planning stages. Without a firm decision, you will not be able to apply for your business license.
Step 4: Choose a Trade Name
Your company’s trade name is its official business name. When selecting a trade name in Dubai, keep the following guidelines in mind:
- The name should not contain any offensive or blasphemous language
- It should not include the name of Allah or any other religious references
- It should be unique and not similar to any existing trade names
You can check the availability of your desired trade name online through the DED’s e-portal. The trade name should be related to your business activity. Once you receive the approvals, you will have to submit documents to apply for your UAE trade license and begin the process of opening a company in Dubai.
Step 5: Obtain Initial Approval
Before proceeding with the registration process, you must obtain initial approval from the DED or the relevant Free Zone/Offshore authority. This involves submitting an application along with the required documents, such as:
- Passport copies of the shareholders and directors
- Proposed trade name
- Business plan outlining your activities and objectives
The DED/Free Zone authority will review your application and provide initial approval if everything is in order. Initial approval doesn’t automatically mean final approval. Rather, it means you’re on track to establishing your business in Dubai.
You can, however, interpret an initial approval as the UAE Government – via the Department of Economic Development or respective Free Zone authority – expressing its willingness for your company to be established there.
Step 6: Draft the Memorandum of Association
The Memorandum of Association (MOA) is a legal document that outlines the company’s structure, objectives, and shareholders’ rights and responsibilities. It should be drafted in accordance with the UAE’s laws and regulations specific to your chosen jurisdiction.
It’s recommended that you seek the assistance of a legal professional to ensure the MOA is properly prepared.
Whether you operate in a Free Zone, Mainland or Offshore jurisdiction will influence how you construct this document.
Your MOA should include the following elements:
- Company Name: The name must be unique and comply with the naming regulations of the UAE. It should not be offensive or religiously sensitive.
- Company Purpose: Detailed description of the business activities the company will engage in. It must align with the categories specified by the DED or the relevant Free Zone or Offshore authority.
- Registered Office: The official address of the company’s registered office in Dubai.
- Capital Structure: The amount of share capital the company will have, including the number and value of shares.
- Shareholders: Details of the shareholders, including names, nationalities, and addresses. For companies registered in the Mainland, such as LLCs, a local sponsor (Emirati partner) owning 51% of the shares might be required.
- Directors: Names and details of the directors and their responsibilities.
- Liability: Statement of the liability of shareholders, typically limited to the amount unpaid on their shares.
- Duration: The term for which the company is incorporated, if not perpetual.
Step 6: Lease Office Space
To complete the registration process, you will need physical office space in Dubai. The size and location of the office will depend on your business requirements and budget. You can either lease an office in the mainland or opt for a free zone, which offers additional benefits such as 100% foreign ownership and tax exemptions.
It’s compulsory for all businesses in Dubai to have a physical address. Fortunately, setting up in a Free Zone will help you find your new office space easily.
Free Zones offer a large range of commercial property, office buildings and business center accommodation to rent, hire or lease to any size and type of business. All offices are well equipped with WiFi, access to meeting rooms, support services and all utilities available. With many towers around the area, you’re sure to find the right office space.
Step 7: Obtain External Approvals
Depending on your business activity, you may need to obtain additional approvals from relevant authorities. For example, if you’re setting up a restaurant, you’ll need to get approval from the Dubai Municipality’s Food Safety Department. Similarly, if your business involves importing or exporting goods, you’ll need to obtain a customs code from Dubai Customs.
DED may request additional approvals from other government or non-government agencies, depending on your business activity. For instance, some businesses may be asked to get approvals from the municipality, specific banks, embassies, etc. It’s important to familiarise yourself with the UAE’s laws and regulations and ensure that you meet all requirements to avoid potential risks.
Step 8: Register with the DED/Free Zone Authority
With all the necessary approvals and documents in place, you can now proceed with the final registration process. This involves submitting the following documents to the DED or Free Zone/Offshore authority:
- Initial approval certificate
- Memorandum of Association (MOA)
- Lease agreement for office space
- Passport copies of shareholders and directors
- External approvals (if applicable)
Once your application is approved, you’ll receive your trade license which officially establishes your company in Dubai. Company registration and licensing is a simultaneous process. However, the entire process of documentation and approvals goes through various stages. In this step, you also have to get all the approvals from relevant government authorities as requested by the Department of Economic Development. And, the documents required are different for each company type and activity.
Step 9: Obtain a Corporate Bank Account
To conduct business transactions and manage your finances, you’ll need to open a corporate bank account in Dubai. Most banks require the following documents:
- Trade license
- Memorandum of Association (MOA)
- Passport copies of shareholders and signatories
- Proof of office address
It’s important to choose a bank that meets your business needs and offers competitive services. The UAE has many banks, both local and international, to choose from. These include but are not limited to HSBC, Citibank, Barclays, Abu Dhabi Commercial Bank, and Commercial Bank of Dubai.
Step 10: Obtain Visas for Employees
If you plan to hire or transfer employees for your company in Dubai, you’ll need to obtain work visas for them. These are known as labour cards. The process involves:
- Applying for an establishment card from the Ministry of Human Resources and Emiratisation (MOHRE)
- Determining your labour quota, based on your business size and activity
- Applying for work permits and residence visas for your employees
It’s crucial to comply with the UAE’s labour laws and regulations to avoid any legal issues. If you want to save time and avoid mistakes, our experts can handle the entire visa process for you in record time.
Step 11: Register for VAT
If your company’s annual turnover exceeds AED 375,000, you’re required to register for Value Added Tax (VAT) with the Federal Tax Authority (FTA).
The VAT rate in the UAE is currently 5%, and you’ll need to file VAT returns on a quarterly basis. It’s important to familiarize yourself with the tax implications of each business structure in the UAE for financial planning.
Frequently Asked Questions About Setting Up A Company in Dubai
How long does setting up a company in Dubai take?
The process typically takes 2-4 weeks, depending on the complexity of your business and the approvals required. The UAE government states you can set up your company in 15 minutes if you do so online – or in 4 days if you prefer to do so in person.
Can I set up a company in Dubai without physically being there?
Yes, you can set up a company in Dubai remotely through a power of attorney or by engaging a local business setup consultant. Previously, the UAE required that at least 51% of the shareholders in a company reside within the country. However, this is no longer the case under the Amending Commercial Companies Law. Today, you can incorporate an LLC in the United Arab Emirates with 100% of the shareholders residing abroad.
What are the costs involved in setting up a company in Dubai?
The costs vary depending on factors such as business activity, office space, and visa requirements. On average, you can expect to spend around AED 20,000-30,000 for the entire setup process. The cost of setting up a business Dubai depends a lot on the company type and scope, and also where exactly you choose to base it. In a free zone, a one person company is likely to cost around 4,000 USD, while a larger company employing about 4 people who may need visas and office space could cost from around 17,000 USD.
Do I need a local partner to set up a company in Dubai?
In most cases, Dubai allows for 100% foreign company ownership, especially in Free Zones. However, for certain business activities on the mainland, you may need a local partner who owns 51% of the company.
Can I set up a company in Dubai without an office space?
While having a physical office space is a requirement for most business activities, some free zones offer flexi-desk options or virtual offices that can fulfil this requirement.
Dubai Government entities have also launched the Dubai Virtual Commercial City Program for global entrepreneurs and investors. This program allows investors to open a virtual company in the Emirates even if they do not reside in the UAE.
Start doing business in Dubai with expert help
Setting up a company in Dubai requires handling a fair deal of bureaucracy and procedure. If you don’t want to do it alone, you don’t have to.
Our dedicated legal team on the ground will handle every legal and administrative step in your Dubai company formation journey. We can deal with company formation, visa and immigration applications and expat tax matters. You can track and manage it all through our cutting-edge SaaS platform. If you ever have any questions about any aspect of the process, our Centuro AI tool will give you the latest regulatory information for the UAE on demand.
Let’s get started on your Dubai business plan today.