Setting up a business in the UAE
There are several advantages to starting a business in the United Arab Emirates. According to the “Ease of Doing Business” report (a World Bank Flagship report), the United Arab Emirates ranks 16th worldwide. It ranked 17th worldwide for starting a business and 13th in terms of protecting minority investors.
Expatriates who set up their business in the UAE enjoy its strategic location as the gateway to both the East and West. With excellent transportation networks connecting major parts of the world, it is a great move to consider. The UAE is also politically and socially stable, which makes it attractive to investors. As a business owner in the UAE, you also benefit from not having to pay corporate tax.
Can expats start a business in the UAE?
Starting a business as an expat in the UAE is relatively easy — at least when it comes to related formalities. What's more, the UAE government actually encourages foreign investment and entrepreneurship with a number of specialized programs and incentives.
The one very important thing to keep in mind here is that most company types (with the exception of sole proprietorship) require you to have a local partner who should own at least 51%. In some cases, there are also specific requirements for startup capital.
One major benefit of starting a business in the UAE is the areas called Free Zones. Here, you won't need to pay any corporate or personal tax and will benefit from import and export tax exemptions and fully foreign company ownership options.
Types of businesses in the UAE
One of the first things you will need to decide when opening a business in the UAE is your business structure. There are several different company types that are typically opened in the country.
Sole Proprietorship
As the name suggests, a sole proprietorship company is fully owned by one person. As an expat, you can register a sole proprietorship company in the UAE only to provide professional services. Commercial and industrial companies can only be opened by UAE and GCC nationals.
Limited Liability Company
A Limited Liability Company is a company in which each shareholder's financial liability is limited to the value of the shares they hold. If you want to open a Limited Liability Company as an expat, you will need to have a local partner who owns at least 51% of the shares.
Civil Company
If you are a doctor and want to open your own practice, a lawyer who wants to start their own law firm, etc., you will need to register a civil company. In this case, you will also need a local partner who owns at least 51% of the business shares.
Free Zone company
If you are opening your company in one of UAE's Free Zones, your company will need to have from two to five shareholders. As we've mentioned earlier, companies in Free Zones can be fully foreign-owned, are exempt from personal and corporate tax, and more. With that, there are certain limitations and requirements. For instance, companies established in the Free Zone can't be involved in trading activity directly with the UAE. In certain Free Zones, there are also minimal capital requirements. Some of these for the most popular free zones in the UAE are:
- Twofour54 Abu Dhabi – No minimum capital requirement;
- Khalifa Industrial Zone Abu Dhabi (KIZAD) – Minimum share capital of AED 150,000;
- Dubai Airport Free Zone – Minimum share capital of AED 1,000;
- Dubai Multi Commodities Centre (DMCC) – Minimum share capital of AED 50,000 and AED 10,000 per shareholder. If the company is to be issued a General Trading License, it requires a minimum share capital of AED 1 million;
- Hamriya Free Zone Sharjah – Minimum share capital of AED 150,000.
Foreign branch
If a foreign company is established in the UAE, this company is fully owned by the parent company. However, if said company is involved in trading activity, all the goods they import will need to be imported via a local trading company.
UAE representative
LLC, Private Joint Stock (PJSC), and Public Joint Stock (PrJSC) companies require partnering with a UAE national. This regulation is also applicable if you set up a civil company that is involved in engineering. Your Emirati partner will be the one to sponsor the business and can also take full responsibility for the company in terms of the lease, bank account management, etc.
Local service agent
Some businesses will require a local service agent, such as if you open a foreign company branch or a civil company (with no engineering activity). A local service agent must be either a local citizen or a company whose capital is held exclusively by Emiratis. The agent will handle all procedures for obtaining work and residence visas, but he is not involved in the management of the company.
Working freelance in the UAE
To work freelance in the UAE, you will need to apply for a freelance license in the emirate that you plan to work in. Typically, to apply, you will need the following documents: a copy of your ID, a reference letter from a bank, certificates proving your qualifications in the field you will be freelancing in. You will also need to make your own visa and health insurance arrangements. As a freelancer, you won't be able to hire employees or sponsor visas for your family members in order for them to come to the UAE.
Once your license has been approved, you will be able to apply for a Green Visa. This visa has a validity of 5 years and is not dependent on a sponsor. In order to obtain this visa, you will need to submit:
- Your freelance license as issued by the Ministry of Human Resources and Emiratisation (MoHRE);
- Relevant educational certificates such as a bachelor's degree or diploma;
- Proof of annual income from the past 2 years of no less than AED 360,000, or financial means to sustain your stay in the UAE.
Starting an e-commerce business in the UAE
If you are planning to start an e-commerce activity in the UAE, you will first need to file an application via the Department of Economic Development. Next, you will need to apply for an eTrade license from the Telecommunications and Digital Government Regulatory Authority.
Once you've settled on a company you want to start in the UAE, you will need to complete several steps. One of the first things you will need to look into is getting a visa to the UAE that will allow you to start and operate your business.
Once you have your visa in order, you will need to obtain a trade name for your company. This will need to be done through the Department of Economic Development in the UAE. Be mindful of the name you choose, as it must be legal in the UAE (it cannot include any offensive language or anything that goes against religion). You will then need to apply for an e-commerce permit, which can also be obtained through the Department of Economic Development.
Finally, you will need to establish a payment gateway for your business. To do this, you must set up a merchant account with your bank. You will need to submit the following documents:
- Your trade license;
- Copy of your passport and original Emirates ID;
- Memorandum of Association;
- Business address.
How to apply for a business visa to the UAE?
To start a business in the UAE, you will need to apply for a long-term visa that allows you to live and work in the country. There are two main options here: a five-year visa or a ten-year visa.
To apply for a five-year visa to the UAE, you will need to:
- present proof that you are part of an existing business project in the country (with a minimum capital of 500,000 AED);
- get approval from an accredited business incubator in the UAE;
- get approval from the authorities in the emirate which you are working in.
If you want to apply for a ten-year visa, you will need to:
- either make a public investment of at least 2 million AED;
- or set up a business with at least 2 million AED in capital.
Good to know:
People with special talents may be granted a ten-year visa if they are approved by the UAE.
How to register a company in the UAE?
To register a business in the UAE, you will need to do the following:
Select a business name
To name your business, you will need to consult a Free Zone Authority or the Department of Economic Development in your emirate. The business name you choose should not have been previously registered and must comply with your company's activity. It should also be in compliance with the UAE's public values and morals.
Apply for a license
Your next step is to get a business license. The type of business license you will need to apply for depends on the nature of your business activity. There are four main business license types in the UAE: commercial, industrial, professional, and tourism.
Commercial licenses are meant for companies that are involved in trading goods and services. You will need an industrial license if you plan to do manufacturing in the UAE. Professional licenses are granted to those who want to start a business in a specific field based on their qualification: publishing, graphic design, consultancy, beauty services, repairs, translation, etc. Finally, a tourism license is for businesses involved in offering stays and hotels, guide services, operating restaurants and travel agencies, and more.
In most cases, you will be able to apply for a business license at the Department of Economic Development or via your chosen Free Zone. In some cases (for instance, if you are applying for an industrial license), you will need to get approval from the Ministry of Finance and Industry.
If you are starting a business in one of the Free Zones, you will need to apply to a specific zone based on your business activity. For instance, Jebel Ali Free Zone (JAFZA) is the best destination for import and export companies. Dubai's DMCC Zone, on the other hand, is a better fit for companies working in shipping, healthcare, construction and others.
Generally, to register a company in the UAE, you will need to get the following documents ready:
- The filled-in application form;
- A completed business plan;
- Passport copies for all involved shareholders and directors and their specimen signatures;
- A letter of intent;
- A resolution that appoints the manager of your company;
- Articles of association;
- Share capital information.
Opening a bank account for your business in the UAE
After you've registered your business and obtained your business license, you will be able to open a bank account in the UAE.
In order to do this, you will need to get a face-to-face interview at the bank you've chosen and present the following documents:
- The filled-in application form;
- Incorporation certificate;
- Trade licence;
- Share certificates;
- Articles of association;
- Passport copies of all company directors;
- And more.
If your application is approved, you can expect your bank account to be opened in about two weeks' time.
Some of the most popular banks for opening corporate accounts in the UAE include Emirates NBD, First Abu Dhabi Bank, and others — as well as international bank branches like HSBC and Standard Chartered.
Paying business taxes in the UAE
There are two main taxes levied on businesses in the UAE: VAT and excise tax.
VAT is paid in the amount of 5% and is levied on all tax-registered businesses in the country, including the Free Zones. You will need to register for VAT if your company's taxable imports and assets exceed 375,000 AED per year. You can easily register your business for VAT online on the FTA website.
Excise tax is applied to products that are typically considered harmful to human health or the environment (tobacco, electronic cigarettes, carbonated beverages, etc.). You can register for excise tax on the FTA website.
Hiring staff for your company in the UAE
Once your business is ready to start operations, you will probably want to hire people. It's important to know that in some industries, hiring employees requires meeting local employment quotas.
To hire UAE nationals, you will need to fulfill several conditions:
- the social security and pension that you offer must match that of government employees;
- if you have hired over 100 employees, you will need to employ a UAE citizen to act as a mediator between your company and the Ministry of Human Resources & Emiratisation (MOHRE);
- if you want to hire expat employees in the UAE, you will need to file an application via the MOHRE and the General Directorate of Residency and Foreign Affairs. If your company is set up in one of the Free Zones, you will need to file your application via the local authority in that zone. Note that some zones set visa quotas — and it's best to inquire about these in advance.
To apply for a visa for your foreign employee, you will need to have a valid business license and an e-signature card. You will need to provide your new employee with health insurance, 30 days of annual leave, and 90 days of sick leave. Foreign employees are also entitled to housing allowance, return tickets to the UAE, and education allowance for their children.
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