A guide for foreigners who aspire to set-up business in Dubai
Jay Krishnan, Partner
The city of Dubai doesn’t require any special introduction as it is one of the most popular places in the world. We all know the position Dubai enjoys as a tourist destination; but its much more than that. A fertile ground for new businesses, Dubai, is any investor’s dream. Establishing your business in Dubai is not just easy, but highly profitable as well.
There are a couple of things that you should be aware of before you kick-start your business in Dubai.
Economic zone and ownership
Once you decide to setup your business in Dubai, the first step is to figure out the business zone that suits your company. One can choose from mainland, free zone or offshore, to establish their entity, all of which offer diverse advantages.
• Free zone
Free zones are the strongest pillars of UAE’s robust economy. They have been fruitful in attracting remarkable amount of foreign investment, generating thousands of jobs and facilitating technology transfer into the country. The business-accommodating laws, easier labour and immigration procedures and tax structures make these free zones the most sought-after business locations in UAE.
Dubai alone is home to more than 30 free zones, contributing significantly to the economy of the city. The free zones accounted for 32 per cent of Dubai’s total direct trade in the year 2015, driving about 500 billion AED of commerce. As per 2015 data, there were 20,000 free zone firms operating in Dubai, with 100 ‘Global Fortune 500’ companies having established their base in JAFZA.
A mainland company is an onshore company licensed by the Department of Economic Development (DED) of the related emirate. The companies registered in the UAE mainland can do business in the local market as well as outside UAE without any restriction.
An offshore company is a legal business entity that operates outside its registered jurisdiction for the purpose of legally minimizing tax payment.
Types of License
To conduct any form of business in the UAE, one must acquire a trade license. Licenses in Dubai can be divided into three;
- Commercial licenses covering all kinds of trading activity
- Professional licenses covering professions, services, craftsmen and artisans
- Industrial licenses for establishing industrial or manufacturing activity
Carrying out business without a trade license is illegal in UAE and is subject to penalties. In addition, the license needs to be renewed every year.
Starting a business in Dubai begins with selecting the category of business. There are more than 2,100 industrial, commercial, professional and tourism activities available in Dubai.
This is followed by finding the right legal form, which will depend on the business activity, location, the number and the nationality of owners and the ownership options. One will have to check the legal forms that match specific business activities.
A trade name that matches the kind of services the company offers, must be selected. The next step involves applying for an initial approval certificate, stating that Dubai DED has no objection in you starting a business.
Depending on the legal form of the company, a Memorandum of Association (MOA) will have to be signed by the partners and owner and in some cases, a Local Service Agent (LSA) / Corporate Agent agreement between the company owner and the UAE national who is in charge of representing your business.
All businesses in Dubai should have a physical address. For this, tenancy contract must be signed with the landlord and registered with Ejari.
Certain business activities demand special licensing approvals, apart from the one from DED. If your business activity requires additional approvals, the relevant government departments need to be contacted.
Non-UAE nationals seeking to establish an entity in Dubai mainland need to team up with a UAE national. The UAE national will own 51 percent of shares and the non-UAE national will own the remaining 49 percent. But of late, the UAE government has announced a new law that will permit complete foreign ownership in certain sectors selected by the government. This will come into force by the end of 2019.
The new law does not apply to free zones and offshores where 100% foreign ownership is already permitted.
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