Features of starting a business in the UAE

The United Arab Emirates remains one of the most attractive countries for doing business. A number of factors contribute to this: a stable economy, flexible tax policy, well-developed infrastructure, and international recognition of the principality as an economic, financial, and cultural center. In this article, we will discuss in detail the issues of promising areas of business development in the UAE, the specifics of its registration and management, as well as the difficulties that can be encountered at different stages of commercial activity.

Promising business areas

An important factor in the growing popularity of the Emirates as a global business center is the multitude of business development areas.

According to surveys, information technology is the most promising area from the point of view of entrepreneurs themselves, 88% of respondents believe so. The respondents ranked the construction industry in second place (74% of the votes). This is followed by the service sector – 62%, trade and logistics – 51%, and the cryptocurrency business – 33%.

Information technology

The strategic objective of developing the Emirati economy is to move away from oil dependence. Hydrocarbons are an exhaustable resource, and despite the fact that the region has the world’s largest deposits, they will eventually run out. Therefore, it is necessary to reorient the economy from extractive to industrial and post-industrial. The IT sector belongs to the post-industrial sector of the economy and is crucial all over the world. All industrial and social facilities are rapidly being digitized, and the use of AI is expanding.

Against this background, the UAE has quickly become one of the world’s leading technology development centers. Dozens of global IT giants work here, as well as hundreds of smaller firms. Favorable tax conditions have been created for them, start-ups are provided with benefits and various incentives, universities train specialists by attracting the best teaching staff from all over the world.

Construction and real estate

The second most important industry. Almost 90% of the country’s population are expats. They come to study or work, then stay and transport their families. It is not surprising that there is a constant high demand for housing in the principality. At the same time, not only ordinary apartments are in demand, but also premium class facilities. Buying a property gives you the right to obtain residency, which is attractive to many foreigners who want to move to a comfortable and safe environment. A separate category of foreigners are rich pensioners, who are provided with numerous benefits during resettlement. Also, the purchase of real estate is a passive income option for renting out housing.

Trade and logistics

This is the third most important priority business area. Due to the low VAT, the cost of goods, including expensive brands, is lower than in European countries. Thanks to this, the Emirates has become a global shopping center. Dozens of malls and shopping and entertainment centers have been built here, where tourists and locals spend millions of dirhams daily.

In addition, the UAE is a major maritime and aviation hub between the West, East and North Africa. The favorable geographical location contributes to the development of trade relations between different countries. Representative offices of hundreds of trade, transport, and logistics companies are located in Dubai and Abu Dhabi.

The Crypto Industry

This area enjoys special government support. A legal framework has been developed for it, high-tech platforms have been created, and cryptocurrencies can be traded and paid for. An additional incentive for development is tax benefits for entrepreneurs working with cryptocurrencies.

Tourism

Another area that is developing due to its advantageous geographical location. The UAE is one of the most popular places to relax by the sea. Thousands of hotels along the coast offer comfortable holidays for young people, family guests, and the elderly. There are many historical and modern attractions in the country. The country attracts primarily with dozens of unique construction sites, as well as unique types of entertainment, including extreme ones.

Beauty and HoReCa Sphere

The hotel and restaurant business is developed due to the large number of tourists and the multicultural society that has developed in the country over the past two decades. Restaurants in Dubai alone serve dishes from 200 different cuisines around the world. HoReCa is in demand due to the year-round influx of tourists. At the same time, many do not come for a week, but live on the coast for months.

The beauty industry is also in demand among both guests and locals, especially cosmetologists, manicurists, hairdressers, and makeup artists.

Entertainment industry

The Emirates is not just about oil, technology, and business. It’s also a holiday all year round. Shows, exhibitions, concerts, festivals, presentations, and fashion shows are constantly organized here, attended by celebrities from the fashion and art worlds. For this reason, the services of event agencies are in high demand.

Types of companies and features of jurisdictions

Commercial activity in the Emirates begins with choosing the type of company:

• onshore (onshore), registered in frison;
• offshore (offshore), is registered in the free zone;
• Mainland – mainland.

Onshores or free economic zones (SEZs, free zone) are special jurisdictions with their own governing bodies and business rules, but most importantly, commercial specialization. There are more than 50 of them throughout the country. The point of creating such zones is to concentrate conditions for the development of a particular sector of the economy (IT, logistics, trade, medicine), as well as to create a more flexible tax climate. It is necessary to choose a zone based on what you plan to do.

Mainland is a mainland company, i.e. located off–shore. She has the right to work within the country, but most often requires the involvement of UAE citizens as co-owners and agents to contact the authorities.

Offshore companies are created for commercial real estate transactions. They can only work outside the state and are not allowed to have an office, full-time employees, or storage facilities. Table 1 below provides general information about the types of companies and their capabilities that can be established in the Emirates. Table 2 contains information about the most significant FEZs and the advantages of working in them.

Table 1

Table 2

Registration stages 

When the line of business and the type of company are determined, you can proceed to the registration of the company.

Trade Name registration

It is an important stage in opening an enterprise, since the name is what should become a recognizable brand and an effective management tool in the future. The name should reflect the general direction of activity and meet the requirements of the law, for example, it should not have abbreviations or combinations that may be interpreted negatively or sound offensive in Arabic.

The application is submitted to the Department of Economic Development (DED) at the place of registration. It should be accompanied by:

• applicant’s identity card;
• the charter of the organization;
• confirmation of the legal address;
• documents confirming the right to use the chosen name;
• a receipt for payment of the fee.

When the name is approved, it is necessary to notarize it in the same department.:

• Memorandum of Cooperation (MOA);
• The Charter (AOA).

Obtaining a license

You must obtain a license to conduct any type of commercial activity. The permit is issued for one year, after which it must be renewed.

There are 4 main types of licenses in the Emirates:

• commercial (trade);
• industrial (for manufacturing enterprises);
• professional (for the service sector);
• tourist information.

A commercial license will be required for businesses engaged in:

• import and export activities;
• by selling real estate;
• logistics.

To practice e-commerce, you will need a special permission to work on the Internet + open a trading account through DED. An office is not required.

An industrial license is required to organize a business related to:

• production of goods;
• import/export of goods or materials;
• production or packaging of raw materials or products obtained by combining two or more types of raw materials.

The conditions for granting such a permit include the presence of:

• storage space;
• permits from the Chamber of Commerce and Industry, Ministry of Health;
• extracts from the industrial register.

A tourist license will be required for companies, as well as guides and guides involved in organizing:

• city tours;
• field events.

A professional license is a work permit that allows you to use any skills to earn money. For example, a lawyer by training can open a legal consulting agency, and a person who speaks foreign languages professionally can open a translation agency. This type of permit can be considered as a permit for individual entrepreneurship, since it gives the right to 100% ownership of the business. To get it, you need to confirm your professional skills, and sometimes you need to complete additional training.

Several narrow-profile license permissions are also provided. For example:

• A general trade license gives the right to trade one type of product.;
• a license to carry out operations with cryptocurrency.

If the company is registered in Frison, the application must be submitted to the local Department of Economic Development, if outside the FEZ, then to the Department of Economic Development of the emirate. Tourist licenses are issued by the Ministry of Tourism.

Required documents:

• photocopies of the passports of directors and shareholders, as well as proof of their place of residence;
• a copy of the confirmation of the brand name from the registry;
• photocopying an application for a license permit;
• initial approval letter from government agencies;
• MOA;
• AOA;
• business plan;
• a copy of the lease agreement or ownership rights to the physical address of the company;
• receipt of payment of the state fee.

Obtaining a resident visa and Emirates ID

In most cases, the personal presence of the founder is required to register a commercial organization. You can enter the principality, for example, with a tourist visa that allows you to stay in the territory for up to 90 days. This is enough to register a company and get a residency. The tourist visa must then be changed to a resident visa.

The package of documents includes:

• company registration certificate;
• photocopying a commercial license;
• the organization’s migration card;
• photocopying the applicant’s passport;
• an extract from a bank account on depositing the authorized capital;
• passport-size photo on a white background;
• medical insurance;
• a medical examination document.

If all the documents are in order, the applicant is granted a residence visa. After that, you need to get an identity card – Emirates ID. To do this, you will have to undergo a fingerprinting procedure.

Emirates ID entitles you to:

• opening a bank account;
• registration of a driver’s license;
• connection to telecommunications;
• rent of premises for any needs.

Office rental

A lease agreement is one of the conditions for registering an enterprise. The space requirements depend on how many employees will work in it.In some cases, it is enough to rent several tables in a common room (Flexi Desk). Renting an entire office is expensive. A lot depends on the repair, the presence or absence of furniture, location. The lower limit is $15,000 per year. A small room of about 150 squares in the center will cost $ 100,000 per year. 

Most of the office space is located in areas with good infrastructure. Many landlords rent out the space with the possibility of further purchase.

Opening a bank account

If you have an Emirates ID, you can contact the bank to open an account. The standard package of documents includes:

• originals of international passports, visas and Emirates IDs of the head and founders;
• MOA;
• business plan;
• license permission;
• link to the company’s LinkedIn profile;
• information about the source of origin of the founders’ funds.

Additionally, banks may request:

• lease agreement;
• statement on the movement of funds on the account for the last six months;
• information about partners.

Some banks open accounts for free, while others charge fees that can reach up to 60,000 AED. Some credit institutions do not charge a fee for opening an account, but they set a condition: opening a deposit and a non-deductible balance, the amount of which can reach up to 50 000 AED.

Types of accounts

1. The commercial one is designed for conducting transactions and bookkeeping.
2. An investment account is needed to work with securities, such as stocks or bonds.
3. A savings account is set up to accumulate earned funds. A reserve fund is formed on such accounts, money is stored on it for a long time, and banks offer a higher percentage.

It is better to open a corporate account not through electronic services or payment systems, but in a regular bank with the submission of a package of documents. Verification of the applicant’s trustworthiness will take a long time. However, if the candidate is approved, the client will receive a reliable financial partner for the long term.

Advantages and disadvantages of doing business in the UAE

Advantages

1. Tax benefits:
   • no income tax, as well as taxes on dividends and capital gains;
   • zero income tax, provided that the annual profit does not exceed 375 thousand AED, and if it does, the tax rate is 9% (this is the lowest in the world), while frison firms can be exempt from it if they comply with a number of requirements.;
   • 5% VAT for annual turnover of more than 375 thousand AED, but 0% if exported outside the Persian Gulf;
   • offshore companies conducting commercial operations outside the state are fully exempt from all taxes.;
   • Small firms with annual revenues of less than 3 million AED are exempt from corporate tax until 2026.
2. The possibility of 100% ownership of a company registered in the FEZ.
3. A simple company registration procedure.
4. Lax documentation management at the stage of the organization’s formation.
5. In most cases, it is not necessary to rent an entire office, it is enough to have a workplace (table and chair) in a common room, the so-called flexible desk or Flexi Desk.
6. No restrictions on currency transfers.
7. A well-developed banking system.
8. High level of protection of bank deposits.
9. Low inflation.
10. High level of confidentiality when conducting business transactions.
11. The opportunity to register an enterprise in a specialized FEZ, where conditions are created for certain types of entrepreneurship.
12. The lack of influence of political unrest in the world on the work of local credit institutions.

There are few disadvantages, but they are there:

1. The Tax Office has direct access to the accounting department of any commercial organization. This corresponds to the installation of a transparent business, prevents fraudulent and questionable schemes.
2. The registration process is simple but expensive. To open a business, you must have a license, which, depending on the type of activity, can also be expensive. However, it is issued only for one year, after which it must be extended and paid again.
3. Banks conduct a very thorough check of each potential customer, which can take several months.
4. You cannot open accounts with several banks at the same time. You can apply to the second one only if the first one is refused.
5. High rental value of commercial space.

Conclusion

To summarize, let’s once again touch on the main points that are important to consider when starting a business in the United Arab Emirates:

1. Opening a business in the UAE brings with it many advantages, including flexible tax policy, efficient logistics, economic stability and security.
2. Before registering, you must select the type of company, as well as the jurisdiction with the most favorable conditions.
3. Registration in Frison (each of which specializes in the development of one or more industries) is the best option.
4. Starting a business allows you to obtain a resident visa, which provides many opportunities for living in the principality.

You can start a business in the UAE on your own. However, without knowing all the features of the process, without professional help, you will spend proudly more time and effort.

By contacting our company, you will receive professional advice, as well as assistance in registration with support from submitting an application to opening a bank account.