Business Setup in Dubai

Dubai is a global city, and the business hub of the Middle East. It is the most populous city in the UAE and is located in the north-eastern part of the country. Dubai is one of the world's fastest-growing economies, with the most significant contributors to its GDP being real estate, trade, tourism, and financial services industries. Despite the Emirate's infrastructure having built on the oil exports over three decades ago, oil and natural gas contribute to less than 5% of its GDP now.

Dubai has gained the reputation of a leading trading hub in UAE, owing to premier business locations and an environment that is not unduly restrictive. It offers business people the most liberal operating conditions, tax exemptions, asset protection, complete privacy, and limited liability, in establishing a business in Dubai. The tax haven also offers tremendous promise to overseas companies, as it has:

  • Excellent growth trajectory (imports have doubled since 1990) and unique policies of liberalization
  • Prosperous market located in one of the world's wealthiest regions that are diversified and offers ample opportunities to traders
  • No trade barriers, quotas, exchange controls (open market)
  • High accessibility through air or water (around 90 airlines and 170 shipping lines)

Types of Company Formation in Dubai

Commitbiz is well-versed with the company formation laws and regulations in Dubai. We can help you set up your business here by availing the licenses like Industrial/Service License, Trading/Commercial License, and Professional/General Trading License). You can choose from among a free zone, mainland, or offshore company in Dubai.

Onshore and offshore sectors dominate the UAE economy. The difference between these two is that offshore industries contain free zones that bring foreign investment. And onshore sectors put restrictions on foreign ownership and take care of local business interests. Here's a little summary on the three types of company formation in Dubai:

1. Free Zone Company

Free zones in Dubai are the most sought-after locations for international business operations. They attract foreign direct investment due to their policies that generate employment while supporting economic reforms. Free zone company registration Dubai is a highly profitable investment option for organizations because of incentives like:

  • 100% foreign ownership
  • Exemption of taxes
  • Customs privileges
  • More significant growth potential due to the strategic location
  • Well established transport network and road connectivity
  • Proximity to a large customer base
  • Affordable cost for high-quality labor

There are many such positive aspects of setting up a company in Dubai free zone.

2. Offshore Company

Many businesses prefer to set up an offshore company, also known as the non-resident company, in Dubai, as the income obtained from a holding company (offshore company) is not taxable.

Other than tax savings, people prefer having an offshore company as a holding company so that they can hold:

  • The interest of other companies in a separate jurisdiction
  • Licensing of franchises
  • Intellectual property rights like patent, trademark, copyright, etc.

There are many features of offshore company formation Dubai like,

  • Complete tax exemption
  • Virtual office facilities
  • No exchange control
  • Provision to open a multi-currency bank account
  • Stringent privacy laws and reliable confidentiality

Offshore business setup in Dubai has several benefits associated with it, due to which many established businesses outside Dubai go for this option.

3. Mainland Company

A business entity falling under commercialized geographical areas and directly registered under the Emirates government and its authorities are known as a mainland company. A mainland company in Dubai can carry out business across the UAE but permits maximum foreign shareholder equity capped at 49%. Mainland represents the most developed economy as it is set up directly following the legal structures of the Government policies.

Difference between Mainland, Free Zone, and Offshore in Dubai

For a foreigner, it might get difficult to understand the concept of 'free zone,' 'offshore,' and 'mainland' in Dubai. One must have complete knowledge of what each jurisdiction provides to its businesses. Hence, to clear away the confusion, a differentiation table has been prepared.

 

Mainland

Free Zone

Offshore

Ownership

An expat can own 49% of shares in their company for business setup in mainland Dubai. A local sponsor must be appointed who will own the majority of shares

A foreigner can have complete ownership of their business in any of the Dubai free zones. There is no need for appointment of local sponsor or a service agent

A full ownership is granted to an expat in offshore Dubai only if they have a business outside the UAE

Visa

A residence visa can be obtained depending on the size of the work premises

A residence visa can be obtained depending on the size of the work premises

There is no need for an office space for an offshore company, hence residence visa is not granted

Cost of Business Setup

High

Medium

Low

Audit Requirement

It is mandatory for mainland companies to prepare audit by the end of financial year

Only a free zone company and a free zone establishment have to prepare audit in free zone

It is not mandatory for an offshore company to prepare audit for the company

There are many such differences when it comes to these three jurisdictions. Read our blog on the difference between the mainland, free zone, and offshore company in the UAE to find out more.

Why Invest in Dubai?

With unabashed architecture and exciting skylines, it is easy to comprehend why Dubai remains the fastest growing metropolis in the world and the tourism hub of the UAE. Growth here has been expediential, having transformed from a tiny fishing village to a major trading hub in less than 30 years. There are many reasons why one must invest in Dubai; they are as follows-

1. Dubai Expo 2020

One of the most talked after event currently in the world is Expo 2020. Dubai got the honor of hosting the World Expo in the year 2020. With the visitor number expected to reach 25 million, it will help to boost rental demand and deliver a strong ROI for investors. Scheduled to run between October 2020 and April 2021, this six-month-long carnival will be based on the theme' Connecting minds, creating future.' For the first time, this will bring together the best of innovation, trade, and products from all over the world to the UAE

2. Travel and Tourism

The hospitality and tourism industry is accountable for about 18% of Dubai's GDP. The Emirate has several attractions and events that promote tourism. The city hosts various art and cultural festivals like Dubai International Film and Festival and Dubai Jazz Festival and sporting events like Dubai Golf Desert Classic, Formula 1 Race, Rugby 7's, Dubai World Cup of Horse Racing and International Cricket Matches

3. Trade and Investment

Dubai has developed as a Forex and Derivatives hub through initiatives of the Dubai Gold and Commodities Exchange. It is a regional hub for trade and investment of commodities such as gold and precious metals, diamonds and colored stones, energy, tea as well as pearls and fashion jewelry. They accounted for 26.5% of UAE's non-oil foreign trade in 2008

4. Ease of Doing Business

According to the Ease of Doing Business 2019 report, the UAE scored 11th rank globally and 1st rank regionally. The indices on which UAE scored these ranks are-

  • Getting electricity - 1st rank
  • Paying taxes - 2nd rank
  • Dealing with construction permits- 5th rank
  • Registering property – 7th rank
  • Enforcing of contracts - 9th rank
  • Protecting minority investors – 15th rank

5. Growing Economy

Dubai's economy has little to no dependence on oil and has instead diversified into aviation, trade, tourism, financial services, and other industries. As any other UAE countries have suffered due to the recent oil crisis, Dubai's economy has grown with growth expected to increase by 3.1% in 2017

6. Strategic Location

The UAE is blessed with a strategic location between the east and west. The country is accessible to major emerging economies, linking shipping routes and facilitating goods' transportation between the various regions in the Middle East, Asia, Europe, and Africa.

In the global environment that we live today, there are plenty of opportunities to participate in the increase of a country/region by investing in it. The investment opportunities in Dubai are one such chance.

Benefits of Company Incorporation in Dubai

Apart from the advantages mentioned above, there is more to Dubai and its business culture. Dubai's strategic location is just the first in a long list of causes to invest in the city. It provides a gateway towards Eastern businesses and is an excellent hub for imports and exports. Not just this, its growing and diverse economy makes it possible for the foreign investors to concentrate their attention on areas different from the one that made the city famous. Oil, logistics, trade, transportation, tourism, and real estate are some of the business areas that have become essential over the last few years. Regardless of the business field one chooses to enter; the Emirate has a qualified workforce. The city also attracts expats from around the world, and the labor policies make it very easy for employers to hire personnel from different parts of the globe. Dubai is considered as one of the safest cities in the world and one that has a high quality of life. Here are a few benefits if you want to open a company in Dubai-

  • No limitation on visas
  • Flexibility to rent office anywhere
  • No restrictions in office space requirement
  • Great opportunity to expand by forming branches
  • New permit to grow the business in the mainland without establishing a branch office
  • No minimum capital investment required
  • Permission to undertake government projects
  • Easy accessibility of office space

To know more about such advantages of starting a company in Dubai, read our blog.

Types of Business Entities in Dubai

As per the Federal Law, a commercial company in Dubai must have not less than 51% local equity (participation of UAE nationals). The law also defines seven categories of business organizations that are permitted to register a business in Dubai. These are:

Sole Proprietorship

Sole Proprietor Company in Dubai is a separate legal entity and is operated by one individual. A sole proprietor is in complete control of the company's operations, and he/her completely bare the profits and losses. A sole proprietor is fully liable for the company's debts or obligation.

General Partnership Company

General Partnership Company in Dubai is owned by two or partners who bear unlimited liability, and are responsible for the debts and obligations of the company in a personal capacity. A general partnership may dissolve in the event of bankruptcy, withdrawal, insanity, or death of a partner.

Partnership-en-Commendam

Partnership-en-Commendam in Dubai consists of one or more general partners who bear the unlimited liability and are responsible for the company's profits, losses, debts, obligations. The joint partners in Dubai need nationals of the UAE due to partners involved in the financial commitments in a limited partnership

Limited Liability Company

Limited Liability Company (LLC) is the one whose liability is limited to the extent of their shareholding in the company. An LLC may conduct any type of business activity except insurance, banking, and or money investment. Trading LLCs are permitted to carry out business in their local Emirate as well as to export and import easily.

Joint Venture Company

Joint Venture Company in Dubai is a contractual agreement between an international party and a regional party licensed to conduct the coveted business activity. An exclusive license is not issuable in the name of the company. The license belonging to the original partner is enough for the implementation of the project with the collaboration of the other partner who engages in running of the company.

Public Shareholding Company

Public Shareholding Company in Dubai is also called as a Public Joint Stock Company. It is the one where the business capital is split into equal shares, with each shareholder's liability limited to the number of shares in the company

Private Shareholding Company

Private Shareholding Company in Dubai is also called as a Private Joint Stock Company and is owned by a non-governmental organization. The minimum capital required to register a private shareholding company in Dubai is AED 2 million.

Professional Company

Professional Company in Dubai is an organization which operates out of the intellectual efforts of its partners. The UAE has explicit norms that guide the conduct of professional companies. One needs to have a professional license to start a Professional Company.

Out of these seven company types, Limited Liability Company (LLC) is the most commonly chosen one by foreign investors.

Moreover, 51% participation of UAE nationals is the general norm in the seven company mentioned above types, except for the following scenarios:

  • Where 100% of local ownership is required
  • Free Trade Zones, where 100% foreign ownership is allowed
  • In activities with 100% Arabian Gulf Cooperation Council (AGCC) ownership, where wholly owned AGCC companies partner with UAE nationals
  • Where foreign companies register a representative office or branch in Dubai
  • In artisan or professional companies, where 100% foreign ownership is allowed

What are the Types of Business Licenses Available in Dubai?

The Department of Economic Development (DED), Dubai is the licensing authority that issues a license for significant activities. A fundamental prerequisite for all business activity in Dubai is to apply for and procure one of the following three categories of licenses:

1. Commercial License

If an investor wants to involve in trading activities or buying and selling of goods, they have to obtain a commercial license in Dubai. The DED issues this license for the businesses.

2. Industrial License

The industrial license in Dubai is issued for those businesses which transform natural material or natural resources into their final products.

3. Professional License

professional license in Dubai is issued to an individual or a company to practice any profession which he/she relies on talent and intellectual abilities. It is meant for artisans, craftsmen, and other professional service providers.

Apart from this, one can apply for other licenses such as-

  1. Import/Export License
  2. Manufacturing License
  3. Spa License
  4. Freelance License
  5. E-commerce License

To get a comprehensive overview of different licenses, read our business licenses in Dubai section.

Things to Know Before Company Formation in Dubai

There are many terminologies that one is unaware of before new company formation in Dubai. They are as follows-

1. Local Sponsor

Local Sponsor in the UAE refers to a local service agent or a nominee shareholder in mainland companies with foreign investment. A sponsor has to be an Emirati with a family membership card. If one wants to open a business in mainland Dubai, then they must have a local sponsor. A local sponsor will own 51% of the shares in the company, while the foreign investor will own the remaining 49%.

2. PRO Services

In Dubai, setting up a business involves legal guidelines following the Department of Economic Development (DED), Dubai Immigration, the Ministry of Labour, and other public departments. PRO services can come in handy if one is new to the corporate milieu in Dubai or doesn't have considerable experience in business set up here.

3. Dubai Business Centre

To start a business in Dubai, you must have a registered office. For that, one must research the market they wish to cater to. It can be the mainland, free zone, or an offshore. The different types of office space options are-

  • Serviced office
  • Onshore office
  • Free zone office

4. Tax Residency Certificate

Also known as the Tax Domicile Certificate, TRC is issued by the Ministry of Finance, to take advantage of the double taxation avoidance signed between the foreign jurisdictions and the UAE. It means that if you are an expat with a business in the UAE, you can avoid paying taxes in your home country by obtaining a TRC. This can be done only if your country is in agreement with the UAE.

How to Start a Business in Dubai?

Dubai is a commercial capital of the United Arab Emirates. The 'City of Gold' provides vast business opportunities and innovative commercial modules for enterprises from around the capital. International exposure and an investor-friendly government are just two of the factors that motivate entrepreneurs to start a business in Dubai. Don't forget about the perks on investments and tax benefits when compared to other countries.

For new company registration in Dubai, these steps may be followed:

1. Choose the Trade Name for your Business

The first step is to secure a trading name and do the necessary research to make sure that the name isn't already in use. Submit the proposed company name and registration application to the Department of Economic Development (DED)

2. Determine the Type of Business

From the list mentioned above, determine the corporate entity you wish to incorporate in Dubai. The type of business depends on the business activity that you choose. In Dubai, a Limited Liability Company is the most-preferred business entity in the Emirate

3. Choose a Business Activity

The nature of the business can have a bearing on which business jurisdictions one chooses. For example, if an investor wants to start a company in any of the Dubai free zones, the different free zone is dedicated to different business activity. And an investor can choose depending on what they want their business to be.

4. Draft a Memorandum of Association

An MoA includes the details of shareholders and the company. Minimum share capital is usually set out in the Memorandum of Association of your proposed company. Get the company's Memorandum of Association in notarized in the DED

5. Submit Required Documents

Apply for registering a Dubai business at the Dubai company register. Attach documents of the company with the DED to obtain a trade license from the Chamber of Commerce and Industry. While perhaps the most difficult of all these steps, the paperwork does not have to be too taxing providing it is undertaken with expert help. A business setup partner can advise you on the paperwork required and help you complete it.

6. Other Approvals

Certain activities require special approval from a corresponding Ministry/Department. These are:

Business Activity

Licensing Ministry/Department

Medical Pharmacy

Ministry of Health

Telecommunication Equipment

Ministry of Communication

Air transport, Air Cargo

Department of Civil Aviation

Financial Institutions, Banks, Money Exchange

Central Bank

Agriculture, Veterinary

Ministry of Agriculture

Engineering & Construction

Municipality

Industrial Project Expansion

Ministry of Finance and Industry

Legal Consultancy

Ruler's Office

Education, Training

Ministry of Education

Publishing, Printing, Newspaper, Advertising, Video Film, Photography

Ministry of Information

Branch of Foreign Company, Insurance Company, Chartered Accountancy

Ministry of Economy

Customs Clearance, Freight Forwarding Sea Cargo

Seaports and Customs Authority

Once these steps are done with, an entrepreneur can officially start a business in Dubai. We also provide a guide on Dubai business setup, to get in-depth information on the procedure.

Documents Required

  • License Application
  • Attested LLC agreement
  • Governmental forms
  • Name reservation certificate
  • Initial approval certificate
  • External departments approval
  • Tenancy contract
  • EJARI registration certificate
  • Passport copies partners and NOC for partners (if any)
  • Dubai Chamber of Commerce and Industry Registration

Things to do After Business Incorporation in Dubai

What happens after an investor register their business in Dubai? Are there any added formalities? These questions are common when one is new to the country and is less aware of the guidelines and formalities. The post-incorporation compliances are as under-

1. Rent Business Premises

Having a physical existence is obligatory for every business in Dubai. The tenancy agreement, EJARI, and Real Estate Regulation Authority (RERA) documents need to be submitted, following which the DED grants the initial approval during the business registration process.

2. Open a Business Bank Account

Dubai is home to many banks, both local and international. The requirements to open a bank account in Dubai vary from bank to bank, but the process requires the presence of a director and a shareholder.

Banking options in Dubai are-

  • Emirates NBD
  • Commercial Bank of Dubai
  • HSBC
  • Barclays
  • Mashreq Bank etc.

For an offshore company, before Dubai business formation, they are required to open an offshore account.

3. Apply for an Establishment Card

An establishment card in Dubai is issued by the Ministry of Labor (MoL). Having this card allows a business to hire staff, obtain work permits, and apply for visas on behalf of its employees. The card verifies that the company is registered with the Ministry of Labor and has a registration number.

4. Visa Application

After obtaining the establishment card, one can apply for a visa in Dubai along with staff and dependents. This advantage is available in any of the Dubai free zones, but the number of applications to be sent depends on which free zone one chooses to set up from.

5. Register Employees with Social Security

Social security in the United Arab Emirates is the old-age pension for retired workers and employees. Once an individual reaches the official age of retirement, they are entitled to a pension. It is based on their average salary during the few years of employment and the number of years they have contributed

What is the Cost of Setting up a Business in Dubai?

For someone wanting to start a venture in the Emirate, the cost factor can be a significant deterring factor. Having a clear idea of how much it may costs to set up a business in Dubai can make the going easy for companies aspiring to have a presence in Dubai.

Mainland Business Setup Cost

Various factors depend on the total fees one has to pay for mainland incorporation. They are as follows-

  • Nature of Business
  • Visa permit
  • Office premises
  • Notary fees
  • Trade License
  • Registration at the government department

Free Zone Business Setup Cost

Under this, the cost varies depending on the free zone one chooses. Other than that, the prices incurable are-

  • One-time fee for registering a company in the city
  • One-time fee for trade name-reservation
  • A yearly fee for a business license
  • An annual fee for building
  • Visa fee/person

We at Commitbiz have broken down the cost depending on various factors. To know more about the business setup cost in Freezone and mainland Dubai, click here.

Business Opportunities in Dubai for Investors

Now that the basics of the business process in Dubai are covered, it is essential to know as an investor, in which business sector they must invest to gain profits. Here are few booming industries in Dubai for investment.

Travel and Tourism Business

There are many significant tourist attractions in Dubai, like Burj Khalifa, Dubai Fountain, Palm Island, Dubai Creek, and Aquarium. Naturally, many tourists flock into the Emirates to see and enjoy these places. To start this business, one needs to have a tourism license in Dubai issued by the Department of Tourism and Commerce Marketing (DTCM)

Restaurant Business

Dubai's population includes people from different parts of the world, and that brings a variety of cuisines offered by the city. The food industry has the highest growth out of all the other sectors in Dubai. Increasing growth is one of the reasons to choose this industry for business in the city. The restaurant business in Dubai can be set up after getting 'Food Code' from the Food Control Department.

E-commerce Business

Dubai is not far behind to become 100% active e-commerce business. The area is known for high internet penetration and literacy rate, the e-commerce is set to achieve a market of AED 40 billion. It has become increasingly essential that companies increase their footprint to get users attention. Hence, the e-commerce business is something an investor can look forward to investing in Dubai.

Freelancing Business

Dubai has come up with different projects in all different divisions. It is on the way of getting the projects channelized through digitalization. Digitization creates a lot of opportunities for international investors to take their footsteps towards forming a business as well as individuals and experts to work as a freelancer in Dubai to meet the projects at a speedy pace.

Construction Business

There is a massive competition in GCC and the Middle-east region for skyscrapers and Dubai has the upper hand. The city is a hub to the world's highest building and has helped it to become number one in the construction business. To start this business, investors need to obtain a construction license in Dubai from the Department of Economic Development.

Import/Export Business

The import and export market contributes to a significant scale in the economy of Dubai. It is most profitable for investors and business owners to set up business in the import and export industry in Dubai. Obtaining import and export license from the registered authority is one of the most crucial steps to start a trading company.

For more information, read our guide on business opportunities in Dubai for investment.

Our Business Setup Services in Dubai

We at Commitbiz our company formation consultants in Dubai and can help you with the following business setup services. Our Dubai company formation services are-

  • Company incorporation
  • Company registration
  • Local sponsorship
  • Public Relations Officer (PRO) services
  • Accounting and bookkeeping
  • Auditing
  • Tax consulting
  • Value Added Tax (VAT) registration
  • Legal advisory
  • Setting up a branch office in Dubai
  • Intellectual property protection

Why Commitbiz?

Commitbiz helps entrepreneurs and firms in doing business in Dubai through company registration, incorporation, and legal consulting services. Our business setup consultants take care of the banking, visa, legal, and licensing formalities, following the UAE laws. We guide you through your company formation, with your business objectives at the center of our ecosystem, all the way.

If you are thinking of starting a business in Dubai, Commitbiz can help you with strategic consultation, legal and documentation formalities, and negotiations with local stakeholders. We have liaisons that help us handle the entire company formation procedures cost-effectively in an efficient and timely manner. Contact us for business setup in Dubai – our advisors will be glad to help out.