The United Arab Emirates is well known for having a business-friendly environment, favourable tax structure, and a straightforward legal framework. However, the UAE, like any other country, also goes through a set of problems that potentially results in some challenges while investing in the country.
But if you are a career-driven, dedicated individual who is enthusiastic about the broader scope and outreach this country has to offer, make sure you build yourself up for these common challenges that come your way while forming a business in the UAE.
Business Setup in UAE
Setting up a business in UAE is the best decision you will take as an entrepreneur. Why? UAE offer a lot of advantages to business people like –
- It offers highly competitive costs in other vital areas critical to starting a company, such as import duties, labour, energy, and financing.
- It is privy to an extensive foreign trade network, giving investors access to global marketing outlets for their goods and services.
- It is a central re-export hub for the region that gives it a privileged location for firms in those fields.
- No foreign exchange controls, trade quotas and the UAE dirham are pegged to the US dollar, ensuring a stable exchange rate.
But there are always two sides to the coin. If there are advantages, there are disadvantages as well.
Let’s have a look at a few of the most common challenges that are likely to be faced by an entrepreneur or firm in the UAE:
1. UAE Company Ownership
If an individual wants to start an onshore or LLC (Limited Liability Company) in the UAE, they’d mandatorily require a local sponsor. This compels an individual to have a UAE national as a partner who shall own 51% ownership. While few businessmen agree on this criterion, it can be tedious for others to develop trust and reliability.
2. Finding a Local Sponsor
The challenge for an investor is to find a trustworthy sponsor for most legal business; having a local sponsor is a must. Thus, finding a local partner in the UAE who would own a significant stake in the company and give you the liberty to deal with business on your terms could be daunting.
3. Implications of VAT
In January 2018, the UAE introduced a 5% value-added tax imposed throughout the Gulf Cooperation Council (GCC). This tax is applied to almost all goods and services except essential food items, education, and healthcare. Registering for VAT and going further through the process can prove to be challenging.
4. Project Funding
If your business is in its commencement phase, it can be challenging to obtain funds from the UAE bank. Because the main requirement for any application for business loans is to provide at least three years of audited balances with positive figures and growth indicators.
5. Cultural Tenets
Islamic culture needs to be addressed before you set up a business in Dubai or the UAE. It plays a crucial role in people’s everyday lives, in the office and outside. Islamic customs should be observed, and the effects of the Islamic religion on business interactions must be respected when doing business in the UAE.
6. Communication Style
An individual setting up a business in the UAE must be aware of some of the niceties in communication they might be expected to know. Men and women are also communicated within different tones. The level of formality in the UAE may also be hard to adapt for some of the ex-pats.
7. Job Market
Once you start a company, you have to hire employees to run a business, and the UAE has specific rules and procedures for the same. This includes the obligation of a company to provide visas to its employees; an employee cannot work in the company until they get their visa. Once you get the basic ideas of the regulations followed in the UAE, there might not be many surprises.
8. Managing Revenue
Even though the UAE can provide many opportunities for widening your business, it can be equally risky. The Association of Chartered Certified Accountants reported that 82% of the startups fail due to poor cash flow management. Therefore, the cost of business setup and your initial capital requirements need to be managed and then applied.
9. Business Specifics
One has to have complete knowledge related to business setup in Dubai or the UAE. Since there are different regions to set up a business, each one has certain particulars regarding business habits and lifestyle. Business in Dubai, unquestionably, has its specifics, and you need to be aware of them to proceed with your company setup smoothly.
10. People Management
Managing people will have a significant bearing on one’s success anywhere in the world. Perhaps the most notable aspect is the level of diversity present in most workforces across the emirate. As you will be working with people from different diversities, people management can take some learning to be carried out elegantly.
Finding a local sponsor, managing your finances, and getting a clear idea about the various rules and regulations can be unnerving. And many a time, business requirements that you come across can be misleading and incomplete. We at
How can we help?
Commitbiz offers to answer your questions on the various challenges in starting a business in Dubai and help you get through it. Our staff will study your requirements and cater to your needs. What’s more, we even provide services that can assist you in having your business grow further. Contact us today, even it’s for friendly advice
In the UAE, how long does it take to obtain a work permit?
The Ministry normally issues the work permit within five working days after receiving all required documentation.
Is it easy to get a work permit visa in the United Arab Emirates?
Obtaining work permits and visas in the United Arab Emirates may be challenging.
Can a company be set up in Dubai mainland without a sponsor?
No, you do not need a sponsor to open a company in Dubai Mainland as per the new Law.
What are the things you should know before starting a business in UAE?
Before starting a business in the UAE, one should know about corporate regulations, licensing, visa regulations, markets, and regional specifics.
Is time management required for a business setup in UAE?
Do small businesses in the UAE require a license?
A business license is, of course, one of the most important requirements for starting a small business. For both free zone and mainland businesses, obtaining a small business license is easy.