How Low-cost Business Setup in Dubai is Attracting Foreign Investors

by commitbizadmin 12, Jun 2020

How Low-cost Business Setup in Dubai is Attracting Foreign Investors

Dubai is one of the seven emirates of the UAE. It is a globally renowned business destination and a metropolis with a vast global diaspora. Due to the strategic location in the Middle-East region, it connects the Western world with the Asian continent. Dubai is one of the major transport hubs for goods and passengers alike via its most successful regional airlines and the innovative off-shore ports.

The economy of Dubai is highly diversified with tourism, logistics, finance, real estate, manufacturing sectors. They provide a significant contribution to the economy with less than 5% contribution from Oil, which is depleting with the passage of time. The open culture of Dubai and the business-friendly policies of the visionary Government has played a vital role in attracting many foreign companies to UAE. Its accommodative policies in assisting global businesses ensure everyone gets a piece of the cake, no matter the size of the business. Dubai provides companies with world-class facilities to establish themselves and expand further into other regional markets in the Middle East and North Africa.   

Why You Should Start a Business in Dubai?

There are many advantages in setting up a business in Dubai. The below act as significant driving factors for companies.

Dubia is Gateway to MENA (Middle-east and North Africa) Region

The strategic location of Dubai with land borders connecting to Oman and Saudi Arabia via Abu Dhabi and sea routes connecting to other Middle East countries of Bahrain, Qatar, Kuwait, Iraq and Iran has enabled the coastal town of Dubai to thrive as a trade hub for many centuries. It is one of the busiest airports and one of the largest commercial port in the world with a high occupancy rate. Having good diplomatic connections with many countries in the Middle East and Africa, Dubai has evolved as a Supplier base for many global multinationals. The new ‘Industrial strategy 2030’ enables Dubai to become a regional manufacturing hub.

Global City Status

Dubai is a thriving metropolis with a tolerant society and variety of cultures thriving alongside each other without any friction. Due to the strict anti-crime policies of the Government, it has one of the lowest crime rates in the world. It has many malls and global hospitality establishments to its credit which serve Global palette of food, entertainment and leisure facilities. These policies have resulted in making Dubai a booming tourist destination.   

Dubai’s Diversified Economy

Unlike the other economies Of the Middle East and neighbouring Emirates, the economy of Dubai is least dependent on Oil. As Dubai is not blessed with as many oil resources as its other partner states, this has paved the way for Dubai to adopt business-friendly policies and thereby helped Emirate in the transformation of the economy with a major contribution from diverse sectors. The Government has continued to uphold and maintain its open economic policies to encourage investors.

Tax Advantages for Businesses in Dubai

The companies who set up business in Dubai have many tax benefits. Most of the companies have no corporate taxes and Incomes taxes. Based on the zones where the company is based, there are very low or practically zero taxes on imports and exports carried out by the business. The companies can also avail full repatriation of their profits. Although there is a 5% VAT charged on many goods since 2018, many free zones offer VAT exemptions for companies operating in their zone.   

Dubai World-Expo 2020

Dubai is the host to World Expo-2020. The event is poised to generate billions of dollars in revenue and create thousands of job opportunities. The Government is investing millions of dollars for building infrastructure and availing other facilities for the biggest ever show in the Middle-East region. The event has created an opportunity for companies to take advantage of the wave.

Types of companies in Dubai

The following are the legal business entities available for companies to set up business in  Dubai based in different trade zones:

  • Proprietorship firm
  • Civil company
  • Limited Liability company
  • Partnership firm
  • Private shareholding company
  • Public shareholding company
  • Branch Offices

Ever wonder why the costs for business setup are low in Dubai?

UAE is consistently placed among the top rankers in the ease of doing Business index. The Government of Dubai has always been a pioneer in adapting the forward-looking policies for the development In order to make the become investor-friendly state and encourage players from all sections of the industry to set up business in Dubai, they created three zones for companies- Mainland Zone, Free-Zone and Off-Shore Zone. Each zone has a different set of rules and regulations in terms of setting up companies and many taxes incentives with fewer restrictions.

Mainland  zone

The Mainland companies which are on-shore companies that are set up in mainland Dubai. They require a local sponsor who holds a minimum of 51% shares in the company. They can trade with any company based in the UAE, including free zone companies without any restrictions. There are minimum Capital and space requirements to set up the company. They also require several permits from different authorities in setting up and running the business. The main advantage of these companies is the unlimited access to the local markets.   

Free zone

Free trade zones areas are one of the many means adopted by the many Arab countries to attract foreign investments in the process of moving away from the hydrocarbon economy. Dubai has taken this model in the year 1985 with Jebel Ali as the first free zone. There are around 40 free zones spread across Dubai. Although the free zones are restricted to trade with companies within their zones, there are many other benefits. However, there are also new initiatives by DED, which permits Free zone companies to operate in the mainland.

They offer single-window clearance for any permits to set up business in free zones and complete foreign ownership. There are no corporate taxes, import & export taxes and personal income taxes. The companies have no restriction on currency restrictions and 100% repatriation of profits. There are also dedicated free zones to different sectors with comprehensive facilities to increase competition and productivity.  

Off-Shore zone

Off-shore companies are companies with parent companies based in a foreign land. They cannot have a physical presence in Dubai. However, they can provide tax-related advantages to their parent companies abroad along with many benefits. There are no tax impositions on the Off-shore companies. Stringent privacy laws are guarding the off-shore companies.

Role of Business Setup Consultants in Dubai

These days foreign companies approach business setup consultants for advice and business setup queries. The reason is that consultants are subject matter experts who have perfected the art of business setup over many years. Consultants having experienced many hurdles in the process have fine-tuned the process of business setup. The advice has resulted in saving precious time and loads of resources for companies which otherwise may struggle with the entire process. The role of consultants is also one of the factors that has impacted the costs positively by reducing unwanted hassles in the process.

Our expert consultants at Commitbiz can guide companies in the process of business setup. We can provide our clients with the relevant insights about the ground reality and help in accelerating the process without any hassles. Please feel free to contact us for any queries regarding setting up a business in Dubai.