The United Arab Emirates is among the top ten countries with the most favorable and comfortable conditions for entrepreneurship. Thanks to the reforms, which took more than a year to implement, the government managed to change the outlook of local residents, instill tolerance for the European way of life, create comfortable living and working conditions for representatives of any cultural communities, create a business infrastructure that meets the highest technological level.
It is not surprising that entrepreneurs from all over the world poured into the country like a river. Several types of companies are available for them in the UAE. They are easy to register, but the main thing is that they open up huge opportunities for foreigners to develop their business, earn money and live in cities with views resembling something between the scenery of oriental fairy tales and fantastic alien worlds.
Advantages and disadvantages of doing business
First about the pros:
- Bureaucracy, corruption, bribery and other eternal enemies of entrepreneurship have been completely eradicated on the territory of the state.
- The Government and the police managed to eradicate crime, including minor domestic violations of the law. This is one of the safest countries in the world to live in.
- The state does not need to give the lion’s share of income in the form of taxes. Unprecedented tax benefits have been provided to entrepreneurs. At the same time, a businessman is protected from double taxation at the legislative level. This means that if he is a citizen of another country, but works in the United Arab Emirates, he does not have to pay taxes in his homeland. The UAE has signed agreements on this with most economically developed countries.
- Office, production, warehouse, concert, exhibition, and other premises are located in new buildings and equipped with modern communications and equipment.
- You can save not only on taxes, but also on many everyday needs, such as paying for utilities, buying office equipment.
- The very fact that your company is registered on the territory of the Emirates, it will make your partner’s reputation respectable.
- Simplicity of the procedure for opening your own business and bank account.
Disadvantages, of course, are also there. But they are incomparably small compared to the advantages:
- The Emirates is a state of the Arab world. Despite the loyal attitude of local residents to representatives of other cultures, the requirements to observe Arab cultural traditions remain strict, and this will have to be taken into account.
- The country is located in a tropical climate zone, so the temperatures here are very high all year round.
- Entering a business requires start-up capital: you need to rent an office, buy a license, pay for paperwork.
- It’s easy to open your own business, and there is no bureaucracy in the European concept here, but you need to be prepared for the fact that every document will be checked and rechecked, especially financial reports. The authorities are taking all measures to ensure that the country of a legitimate tax haven does not turn into a convenient tax haven for shadow business.
- Closing a company is much more difficult and takes longer than opening it.
Types of companies in the UAE
There are only three of them:
- Offshore. This is the cheapest option for registering a business in the UAE, granting the right only to open an account. You can work anywhere in the world, except the Emirates. At the stage of registration, the owner must clearly formulate answers to questions about the purpose for which he creates a company and what his ultimate goals are. Thus, if things go uphill in the future and there is a question of expansion, renting premises, obtaining a resident visa, hiring people, etc., then it will be impossible to do this. Such companies are usually opened to reduce the tax burden on businesses that are well established at home.
- Onshore (Free zone). The possibilities are much wider here. A foreign citizen can register an enterprise on his own behalf in one of the free economic zones (FEZ). The organization will be 100% owned by a foreigner. He will be able to rent real or virtual premises, engage in international entrepreneurship, open bank accounts, issue several resident visas (the number depends on the office area). The more money invested at the start, the more opportunities the owner gets. But you can only work within the FEZ in which the organization is registered. This is the main drawback: it is forbidden to expand the enterprise at the expense of other FEZs or other regions. More than 40 frisons have been created in the country, each of which has its own narrow specialization, which expands opportunities for a specific area of entrepreneurship. This is the main advantage of an offshore company.
- Local (Limited Liability Company or LLC), giving the right to work throughout the country. But there are options here:
- if the firm works in the service sector, then the owner has the right to 100% ownership;
- if the entrepreneur wants to work in real estate, then he will have to register his organization with a local partner;
- in which there is a division of the company: 49% is taken over by a foreigner, 51% by a local partner (locale). However, the shares are 100% owned by a foreigner, the locale receives compensation in the form of a cash payment in the amount of 5,000 to 15,000 dirhams per year, which is stipulated at the conclusion of the contract.
Forms of ownership of companies
There are seven of them:
- Joint partnership. Suitable for opening an LLC. If both co–owners are locales, then their shares in the company will be divided equally – 50% each. If one of the co–owners is a foreigner, then 49% of the shares will be provided to him by law, and 51% to the locale.
- Limited liability company. They are chosen if there are two partners, one of whom will conduct all business, and the second is a nominal figure who only appears in the documents.
- A joint venture. There are two or more partners here, and all of them are equally involved in management, are equally responsible for income and losses.
- Public joint-stock companies. Ten shareholders act as owners, who can raise the authorized capital in the amount of 10 million AED. This type is suitable for insurance, banking, investment companies.
- Private Joint-stock company. To open it, an authorized capital of at least 2 million AED and at least 3 founders is required. A private joint-stock company can be transformed into a public one, provided that within two years the company will bring high profits to all shareholders.
- Limited partnership. The number of shareholders can be from one to fifty. Each of them has the right to contribute any amount to the authorized capital, but its total amount should be 300 thousand AED for Dubai and 150 thousand AED for Abu Dhabi or another region. The income of each partner is proportional to the amount invested.
- JSC with limited liability. The requirements are as follows: one of the shareholders is a local, the amount of the authorized capital is not less than 500 thousand AED. The duties and responsibilities of shareholders are proportional to the investments made.
The license form is the same for all regions and contains the following information:
- registration number;
- where and by what authority issued;
- company name;
- registration date;
- expiration date;
- the name of the owner (or owners, if there are several);
- the name of the manager;
- license conditions.
Professional organizations are called organizations engaged in the non-profit sphere, for example, medicine, law, technical consulting, literary creativity, etc. The success of this type of entrepreneurship depends not on trade transactions, but on the intellectual level of employees. Partners have the right to engage only in activities that correspond to education. A trade union company can belong to both a local and a foreigner, while being 100% owned by him. In the latter case, it will be necessary to involve a local agent who must have an education corresponding to the profile of the organization. This makes it difficult to obtain a professional license.
The permission of the relevant ministries, as well as the competent state bodies of the emirate, is one of the requirements for registration. Doctors must have permission from the Ministry of Health, lawyers – from the Ministry of Justice, etc.
How much money does it take to start a business
To register a company, you must have an amount from 2 000 to 30 000 dollars (from 7,500 to 110,000 dirhams). It is most expensive to open a business in Dubai: its cost without hiring employees starts from 13,500 dirhams. In Dubai , mandatory:
- license acquisition;
- physical office rental;
- payment of the memorandum.
The cost of all this together with registration can reach up to 100 000 dirhams. The cost of the license starts from 20,000 per year, office rent depends on its area.
You can save money on rent. For example, if we are talking about a Dubai company, then the most profitable option is DMCC free–zone, where you can rent a virtual office for 17,000 dirhams per year. In this FEZ, own premises are mostly rented out, there is an opportunity to communicate directly with the landlord, which allows you to bargain. The price per square meter is from 120 to 220 dirhams, but if you take a room without finishing, you can negotiate a price of 35-55 dirhams.
The authorities are considering the introduction of the so-called basic package for registration in the frison. Its cost will be 8,000 dirhams. It will not give the right to rent an office, hire employees, or formalize residency, but it will give a certain set of rights and opportunities sufficient to check the profitability of a new enterprise. If it is confirmed, it will be possible to pay extra later and expand the case.
Accounting and auditing
The absence of bureaucracy, paperwork, simplified paperwork are the main advantages of doing business in the Emirates. There are no requirements for mandatory accounting documentation (this should be done for yourself), reporting to the state. In some frizons, it is necessary to submit an audit report once a year, but in others, this is not required. If an entrepreneur enters into an agreement with a firm providing accounting services, then they will be concluded rather in advice about a more profitable investment of funds, about what you can save on, made on the basis of an analysis of the movement of funds over the past reporting period.
How to avoid trouble when starting a business in the UAE
The main trouble that can lie in wait for a foreigner who is going to enter the local market for the first time is the excess of the budget when opening an enterprise. I.e., the entrepreneur expects one amount, but in fact it turns out to be 4000-5000 AED more. In order not to face unforeseen expenses, it is better to contact a company specializing in registration assistance.
Lawyers know the advantages of all types of companies in Dubai and other regions, as well as all the rules and features of registration (list of documents, rules for filling them out, features of communication with various Departments, Police Department, etc.). This will allow you to start working in safe mode.
- know all the prices;
- will accurately calculate the budget based on what you want to do;
- will tell you what you can save on;
- will do everything quickly.
Which is better: a separate organization in the UAE or a branch of an existing one?
Both options have their pros and cons. A branch of an existing company:
- will allow to keep the name and legal identity;
- will be able to work as a full-fledged enterprise;
- will allow not to conduct an annual audit.
An independent company in the UAE, regardless of the type, can choose profitable areas of activity, use the capabilities of highly specialized frisons, choose the number of shareholders and much more. However, for such organizations, the authorized capital is required, which will be blocked until the end of registration, as well as the annual submission of audit results.