Top 10 Challenges of Doing Business in Abu Dhabi

by Zaara 28, Apr 2020

Top 10 Challenges of Doing Business in Abu Dhabi

The UAE has great potential to set up or develop businesses, but of course, before you begin your business, you need to do proper research about the market. Abu Dhabi is one of the world's wealthiest and most rising markets. 

The Emirate is a viable place of choice for a business person who wants to start a company in the Middle East. Corporate standards and business procedures in the emirates take just a few days for setting up a business.

Challenges of Company Formation in Abu Dhabi

1. Knowledge of Business Formation in Abu Dhabi

The first one is the knowledge of all business ideas and corporate regulations, licensing, visa regulations, markets, regional specifics, etc. Improving your knowledge would save you from potential problems you may face if you do not do such research in advance. 

You need to put together all the points which you need to know for a business setup in Abu Dhabi and get them clarified by visiting various authorities and checking this one by one of the consulting companies in the Emirate.

2. Initial setup

Companies looking to operate in Abu Dhabi are required to register a legal entity. Every company active in the country needs a company license, which is linked to the recorded activity of the entity. 

In general, there are two choices when starting a business in the Emirate.

⮚Free Trade Zone

Free zone companies are not required to have any UAE national shareholder or split ownership, a foreign company or person that has 100 percent ownership of the corporation. Each zone has its laws. There are also other Common Law Free Zone jurisdictions with their regulators and systems of justice. 

Industries in the Free Zone are limited to business setup within their Free Zone, in other Free Zones or globally, they are limited in what they can do within the Abu Dhabi mainland.

⮚Onshore

The onshore jurisdictions are subjected to federal regulations and laws with regulatory and authority bodies in the emirate under the Ministry of Economy. Representative offices, Limited Liability Companies, and branch offices are the most common forms of companies under onshore jurisdiction. 

An LLC needs a 51 percent owner. A local service provider wants a branch or representative office to be their point of contact with local authorities. 

Being onshore-based enables you to do business anywhere in Abu Dhabi.

3. Language 

Arabic is the national language in the UAE, but English is commonly used for business meetings and transactions. However, all employment records, including agreements, and other files, such as instructions to employees, should be in Arabic. 

It is the dominant language in the event of inconsistency in terms contained in English documents.

4. Maintaining the Hierarchy for Company Setup in Abu Dhabi

Hierarchy remains a critical concept that you should consider when doing business setup in the UAE. It is essential to respect the titles and positions of people in society. 

The UAE is modernizing rapidly, but traditional Muslim practices are still at the heart of Emirati society. Organizations setting up a business in Abu Dhabi must understand the balance between the new and the old. 

Participating in a cross-cultural training program for business management will help you develop strategies to operate effectively in the UAE, thus enhancing the success of your organization.

5. Ramifications of VAT

In January 2018, the UAE presented 5% esteem including expense, forced all through the Gulf Cooperation Council (GCC). This expense is connected to practically all merchandise and ventures except fundamental nourishment things, training, and medicinal services. 

Enrolling for VAT and going further through the procedure can demonstrate the challenge.

6. Work Permits and Visas

The UAE is a reasonably young country and has a diverse population. All foreign employees are required to obtain a work permit or a residence permit to work and live in the UAE and so in Abu Dhabi. 

This means it is essential to pay special attention to ensure you are compliant with all regulations set by the General Directorate of Residency and Foreigners Affairs and the Ministry of Human Resources & Emiratisation.

7. Finding Office Space

An entity established in the Abu Dhabi Emirate is always a combination of a license, a legal entity, and a facility. The UAE is a real estate-driven economy, and it is a law that a corporate license is always linked to a physical space of an office. 

Most of the free zones offer flexible desk solutions to provide companies with affordable office space options. The conditions for minimum office space vary from jurisdiction to jurisdiction, and the size of the office space will be linked to the company's visa quota.

8. Finding a Local Sponsor

The task of a financial specialist is to find support that is reliable concerning the more significant part of the lawful business; having local support is an unquestionable requirement. Therefore, finding a local sponsor in Abu Dhabi that could claim a real stake in the organization and give you the freedom to manage a business on your terms could be an overwhelming challenge.

9. Paying Employees

For an almost tax-free economy, the payroll system is not as easy as one would imagine. Diverse expatriate nationalities and ever-local regulations make local payrolls a complicated process. 

An adequately documented payroll system has become essential for all companies operating in the UAE following the implementation of the Wage Protection System, mandated by the Ministry of Human Resources & Emiratisation. End-of-service gratuity payments instead of pension schemes require specialized computation and cautious processing.

10. Overseeing Revenue

Even though the UAE can give plenty of chances to broaden your business in Abu Dhabi, it very well may be similarly unsafe. It was accounted for by the Association of Chartered Certified Accountants that 82% of the new companies bomb because of inadequate income by the board. 

Consequently, the cost of business setup and your underlying capital necessities should be overseen by app development and after that connected.

Establishing a company is a simple task, but it needs the eye of an experienced professional. If you've put together your thoughts to set up a company, then please connect with us. 

FAQs

Why is finding a local sponsor a challenge in Abu Dhabi?

The task of a financial specialist is to find support that is reliable concerning the more significant part of the lawful business; having local support is an unquestionable requirement.

Which authority mandated an adequate documented payroll system in UAE?

Ministry of Human Resources and Emiratisation.

What knowledge is required for business setup in Abu Dhabi?

Knowledge of all business ideas and corporate regulations, licensing, visa regulations, markets, regional specifics, etc. Improving your knowledge would save you from potential problems you may face if you do not do such research in advance.

Why maintaining hierarchy is important in the UAE?

Hierarchy remains a critical concept that you should consider as it is essential to respect the titles and positions of people in society. The UAE is modernizing rapidly, but traditional Muslim practices are still at the heart of Emirati society. 

Organizations setting up a business in Abu Dhabi must understand the balance between the new and the old.

Why is finding an office space a challenge in Abu Dhabi and the other Emirates?

An entity established in the Abu Dhabi Emirate is always a combination of a license, a legal entity, and a facility. The UAE is a real estate-driven economy, and it is a law that a corporate license is always linked to a physical space of an office.

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