The United Arab Emirates is one of the world's largest business centers, serving as a worldwide and preferred destination for entrepreneurs, investors, and tourists alike. This guide is intended for business professionals who want a comprehensive understanding of the numerous factors to consider when starting a business in the UAE.
A Brief Overview of the Emirates
The United Arab Emirates, or the Emirates, situated in the Middle East, assembled with seven emirates consisting of Abu Dhabi, Dubai, Ajman, Sharjah, Fujairah, Umm Al-Quwain and Ras Al Khaimah.
The federation's economy was initially driven by petroleum generated primarily in the emirate of Abu Dhabi. However, the present scenario is different since Dubai, whose economy is based on commerce rather than oil, acts as a regional commercial and financial hub and leads the country in economic diversification.
So Dubai is a leading worldwide metropolis and a popular tourist destination for entrepreneurs, investors, and visitors.
All of this has been made possible by the UAE government's market-friendly economic policies over the last three decades, encouraging foreign investment, sustainable growth, innovation, and research.
If you want to start a business in the UAE, this treatise will help you get the necessary information before you invest.
An Introduction to Economic Growth of the UAE
Following a predicted 3.8% increase in 2021, activity is expected to go up in Q1 2022.
This year's economic growth is significantly higher than in 2021. The burgeoning oil industry will fuel the acceleration, while a recovering non-oil economy could provide further momentum thanks to the government's reform effort.
According to reports, GDP is expected to grow 5.2 percent in 2022, up 0.2 percentage points from last month's prediction, and 4.4 percent in 2023.
Starting a company in UAE allows business investors to generate significant returns on their investment.
Thriving Business Sectors in the Emirates
UAE is making it easier for a variety of businesses to establish themselves and settle.
Among the potential business areas that have contributed to the progressive pattern of economic sector diversification are:
- Construction and Infrastructure
- E-commerce
- Travel and Tourism
- Real Estate
- Health and Hospitality
- Consulting Services
- Hotel chains and Restaurants
- Marketing and Advertising
- Fashion Products and Jewellery
If you want to set up an e-commerce business in Dubai, for example, then read about 5 easy steps for launching successful e-commerce business.
Investing Possibilities in the UAE
The UAE is one of the rare countries with a smart economy, minimal crime, a high safety index, no personal taxes, and 100% foreign ownership in important businesses. In addition, it is well-known for its political stability, ease of communication, excellent infrastructure, and affordable luxury. But the investor, innovator, or entrepreneur in you has a lot more in store.
Let’s have a look at the advantages of doing business in the emirates:
Economic Stability
Due to its strategic position, robust financial reserves, significant sovereign wealth funds, and continued government investment, the UAE has tremendous economic stability and a favorable business climate.
Leading Infrastructure
In 100 global development indices, UAE is among the top countries in the world due to the presence of doing business in the emirates.
Suitable Location
It has direct aircraft flights to over 250 destinations worldwide and is a prominent participant in international commerce networks, having shipping lines to over 400 places.
Strong Governmental Regulations
Over 40 free zones offer competitive advantages and capabilities that attract long-term investments. In addition, the country enables foreign ownership to be 100 per cent.
With the exception of oil firms and international bank branches, it does not levy income tax on people, investors, or corporations.
Open Economy
The UAE promotes private sector growth and competition while also enforcing anti-monopoly laws. It has strong relations with significant regional and international trade groups.
Incentives for investment
In the UAE, customs charges range from 0% to 5%. In addition, the United Arab Emirates has a 10-year Golden Visa programme. The long-term residence programme is for investors, company owners, and critical industry experts. Now, you set up business in Dubai and now you need visa. Learn more about visa services in Dubai.
Leading Industries in the UAE
In the GCC, the UAE has the most diverse economy. For generations, the country has been dependent on oil and gas; nevertheless, the government has recently begun to provide equal weight to all industries.
The move has assisted the government in boosting income and has resulted in significant growth in areas such as tourism, retail, and manufacturing. Some of the top sectors in the UAE that have made significant contributions to the country's economy include:
Retail Industry
The UAE's medium-term retail sales are expected to climb by 5.7 per cent yearly, reaching $7.5 billion by 2025; however, internet shopping is expected to grow by 14.8% annually.
Travel and Tourism
Prior to the pandemic, the World Travel and Tourism Council anticipated that travel and tourism would contribute $133.6 billion to the Middle East's GDP by 2028.
Manufacturing Industry
According to the Ministry of Industry and Advanced Technology, industrial exports from the UAE reached a 'historic high' of Dh120 billion ($32.6 billion) in 2021, as 220 plants opened across the nation.
The Operation 300bn plan aims to increase the industrial sector's contribution to the GDP from Dh133 billion in 2021 to Dh300 billion by 2031. It also aims to help 13,500 small and medium businesses over the next ten years.
Additionally, the digital transformation is evident in the UAE impacting the manufacturing business. Learn more about how digital transformation is affecting manufacturing industries.
Healthcare Industry
Medical tourism sales reached AED 8.4 billion ($10.3 billion) in 2021. From 2019 to 2023, the UAE's healthcare market is expected to grow at a CAGR of over 10%.
Different Legal Business Entities in UAE
In that case, the emirates offer everyone a legal business structure suitable for their business situations. Therefore, UAE is appropriate for every business investor or entrepreneur. Based on different types of business structures, here are the following main divisions:
- Sole Proprietorship
- Limited Liability Company
- Public Shareholding Company
- Private Shareholding Company
- Civil Company
- Partnership Company
- Branch of a Foreign Company
- Representative Company
Learn in detail about the types of business entities in the UAE 2019.
Framework for Laws and Regulations
The nation has got specific laws based on the different business zones, which are discussed below:
The Economic Substance Regulations
The UAE's commitment to international tax cooperation and openness is shown in the Economic Substance Regulations (ESR). The laws compel UAE onshore and free zone firms and other company forms to have an acceptable 'economic presence' in the UAE concerning the activities they engage in, as defined in the regulations' framework. Learn more about economic substance regulations on the official sites of the ministry of finance.
Business Laws for Mainland Businesses
Except for the following, the UAE Federal Law No. 2 of 2015 on Commercial Companies, as amended, applies to any economic entity that engages in any commercial, financial, industrial, agricultural, real estate, or other types of economic activity on the mainland:
- Accordingly, the UAE Cabinet has decided to exclude some corporations.
- Firms entirely owned by federal or municipal governments and corporations held in whole by such companies, providing the company's memorandum has a unique clause.
- Companies functioning in various oil, gas, and power sectors in which the federal or municipal government owns 25% or more, if a stipulation to that effect is included in their Memorandum of Agreement.
Business Regulations for Free Zone Businesses
- In some situations, the free zone authority will control your firm if it is established and another government organization.
- Your business will be governed by specific regulations relevant to the commercial activity you engage in.
Tax Scenario in the UAE
The tax structure has been set by the emirate government in a way that benefits the business in several ways.
- There is no income tax in the UAE.
- For taxable income surpassing 375,000 UAE dirham ($102,000), the country's statutory tax rate will be 9%.
- To "help small firms and startups," taxable income up to that level is nil.
- The federal corporate tax is a profit tax distinct from the cost of doing business in the UAE, including licenses, visas, health insurance, and other running expenses. As a result, companies in the UAE will face corporation tax rates ranging from 0% to 15%, computed depending on their net taxable revenue.
- The UAE has 123 double tax treaties in place or in the works that benefit expatriates and businesses.
Different Kinds of Business Jurisdiction
The UAE government has made it easier for business investors by establishing three different jurisdictions. These three jurisdictions are characterized by the additional features and offer various business activities for the business investors suitable for other business activities. The three jurisdictions are as follows:
Mainland Companies
The Commercial Companies Law, Federal Law No. 2 of 2015, governs the legal forms on the UAE mainland (CCL). As a result, the Limited Liability Firm (LLC) or a branch/representative of a foreign company is the most frequent business structures in the UAE mainland.
If you wish to setup a mainland company in the UAE, then learn about mainland company formation.
Free Zone Companies
- Another alternative for foreign investors is to start a firm in a Free Zone. A Free Zone is a defined region inside the UAE where foreign investors can own up to 100% of their business and benefit from tax and tariff exemptions. To entice international investment into the UAE, free zones have been developed.
- In the UAE, there are over 40 Free Zones, each with its own set of laws and regulations and agencies in charge of licensing and registration for international companies wishing to set up shop in that particular Free Zone. In addition, in the UAE, free zones are often formed to support certain businesses.
In Dubai, for example, specific Free Zones cater to enterprises in the technology, media, finance, and import/export industries. The following are some of the most popular UAE Free Zones:
- Dubai Airport Free Zone Authority (DAFZA) - Appropriate for the aviation and logistics industry.
- Dubai Multi Commodities Center (DMCC) - Appropriate for businesses engaged in the commodity trade and services sector.
- Dubai International Financial Center (DIFC) - Appropriate for the financial services industry.
- Dubai Media City (DMC) - Appropriate for the technology, media and telecommunication industry.
- Jebel Ali Free Zone Authority (JAFZA)- Appropriate for trade, import and export.
- Abu Dhabi Global Market (ADGM) – Appropriate for the financial services industry.
- Khalifa Industrial Zone Abu Dhabi (KIZAD) – Appropriate for industrial services.
- Ras Al Khaimah Free Trade Zone (RAKFTZ)
- Fujairah Free Zone (FFZ)
- Ajman Free Zone (AFZ)
Offshore Companies
A few Free Zones, such as JAFZA and RAKFTZ, allow foreign investors to set up offshore firms that can operate as a holding company within their group structure and cannot conduct business in the UAE (Free Zone or mainland). Offshore firms in the UAE are controlled by the appropriate Free Zone's offshore regulatory rules and regulations.
If you want to learn more about new tax laws and regulations in the offshore company formation service industry.
Business Licenses in the UAE
The nature of the economic activity determines the legal structure of the firm and the type of license necessary. There are six types of business licenses available for different activities, which are as follows:
- Industrial license
- Commercial license
- Crafts license
- Tourism license
- Agricultural license
- Professional license.
For example, if you need to obtain a commercial license in Dubai, then go on and learn more about commercial license in Dubai.
Stages of UAE Company Formation
The stages for the company formation in the UAE are as follows:
1. Finalize the Business Activities
There are hundreds of possible actions to select from, and you must include all of them on your license application.
Failure to identify each of your anticipated actions might lead to later problems. You can consult with some business professionals. Such professionals are aware of allowed activities and may recommend those most appropriate for your company.
2. Choose a Trade Name
Now that you've detailed your business operations, it's time to pick a company name. When naming a company in the UAE, a few factors to consider. First, you must follow a set of naming rules that are both stringent and simple to follow. This is another phase where a company setup specialist may assist you.
3. Finalize the Jurisdiction
As mentioned above, there are three types of business jurisdictions in the UAE, mainland, offshore and free zone. Select the appropriate one based on your business requirements.
Learn more about business setup in UAE free zone.
4. Register Your Company
Get the required approvals from the respective government authority and submit all the relevant documents.
5. Apply for the Business License
You can apply for the mainland trade license, which varies from the UAE free zone business license. It depends on the business activities you carry out.
6. Find a Local Sponsor (If required)
If you open your companies in the UAE mainland, then get yourself a local agent as he or she will be holding 51% of the share of your business.
7. Apply for the Visa
A UAE visa is another essential need for starting a small business. The application process for your visa and that of your staff are unique yet simple.
If you have a UAE company license you can also sponsor others. For example, a domestic worker, such as a housekeeper, might be a spouse, parent, or kid.
If you want to know more about visas, learn about visa services in Dubai, for example.
8. Open a Bank Account
Lastly, open a bank account for your future transactions.
Things to Do after the Company Incorporation in the UAE
Establish a Digital Presence
Businesses are now conducted at the press of a button. The COVID-19 scenario has increased the number of remote business prospects available to entrepreneurs.
Having a web presence is a beautiful way to quickly get into the foreign market. However, make sure to choose a good domain name before moving on with hosting your website.
Begin your accounting and bookkeeping
Before the first closure, keeping a proper record of the business's income and spending begins. Keeping track of every dime is necessary for monitoring your firm's progress.
Recruit the Required Personnel
The next step is to recruit the necessary personnel to maintain your organization’s essential activities and ensure that it runs properly.
The UAE also gives company owners the freedom to employ exceptional people from all around the world.
Documents Required for Company Formation in the UAE
You need to submit some documents prior to your trade license application. Check below for those:
- The Business Plan Application Form
- The authority has officially notarized the MOA and AOA.
- Passports of the Company's Executives
- Sponsor's passport, proving that he or she is a UAE national
- Sponsor's approval
- Each shareholder will receive a bank reference letter.
Aside from the above documents, the following documents must be given for an industrial license:
- Feasibility Report Copies
- Existing Business Profile
- Information concerning the Investor
- Establishing Branch Offices
- Copy of the Certificate of Incorporation, MOA, and AOA that has been attested
- Resolution of the Company's Board of Directors
- Three months' worth of bank statements for the parent firm
- Original Power of Attorney and a copy of your passport
UAE Company Formation Cost
UAE Mainland Company Formation Cost: USD 18,000- 20,000
UAE Offshore Company Formation Cost: USD 3500 (Registered Office Fee is included)
UE Free Zones Company Formation Cost: USD 20,500 (Registered Office Fee is included)
*All the price mentioned above is average pricing. Cost can vary depending on the places.
UAE Business Scenario Post Covid-19
The UAE Government strives to balance pandemic control and economic activity following the open economy.
The markets have recovered after a temporary disruption caused by the pandemic in 2020, demonstrating the resilience of the UAE economy and global investors' faith in the UAE.
For example, Dubai Financial Market (DFM) reported net earnings of AED38.8 million in the first half of 2021 on the stock exchange.
Furthermore, according to a report from the UAE Central Bank, Abu Dhabi's quarterly average Financial Market Index increased by 17% in the first quarter of 2021, and the average market capitalization of companies listed on the Abu Dhabi Securities Exchange increased by AED101 billion to AED826.7 billion in the same quarter.
Our Business Setup Services in UAE
Business Setup Worldwide offers a wide range of services regarding your business setup process in the UAE. Have a look at some of the services provided by our consultancy:
- Company Formation Services
- Accounting bookkeeping
- Visa Processing
- Assisting in bank accounting
- Virtual Office Space Setup
- Intellectual Property Services
Learn more about company formation services offered by Business Setup Worldwide.
Why Business Setup Worldwide?
While the processes to create a business in the UAE are not particularly difficult, they need some prior understanding of the process. Furthermore, it is critical to remember that the application procedure is only simple if your business application is complete and error-free at the time of submission.
When forming a new business in the UAE, it's good to engage with a company formation professional to guarantee that this is the case.
A business formation specialist may help you create corporate bank accounts, choose the best financial institution for your unique needs, and manage your licensing application.
We at Business Setup Worldwide can assist you with the required services regarding your company set up in the UAE.
Contact us for any further queries; we’d be glad to help you.
