Is it time to expand internationally or to obtain a global address? Business setup in the UAE is likely to be on your options list.
Why the UAE?
The UAE is an excellent destination for businesses. Located at the crossroads of three continents, it is a gateway to a considerable number of consumer markets in Europe, Asia, and Africa, representing billions of consumers. It also has world-class ports, airports, and logistics infrastructure to ensure smooth trade and, of course, a government with forward-thinking programs and regulations.
The country's fiscal incentives enhance its appeal. In the past, it had 0% corporate income tax (CIT). The UAE has since then introduced a 9% federal corporate tax rate, but free zone businesses largely retain their 0% CIT rate on free zone income. Businesses also generally enjoy a 0% rate for taxable income up to AED 375,000.
The relatively low CIT tax rate allows small businesses and startups to thrive. The UAE remains free of personal taxes, and businesses operating in free zones enjoy zero customs duties on goods they do not distribute or sell to the UAE mainland.
The UAE also consistently ranks high on global ease-of-doing-business indices, thanks to streamlined bureaucratic processes and advanced e-government services.
Your Options: Mainland or Free Zone
The UAE offers two primary business setup options: mainland and free zone, each tailored to different needs. Understanding how they're different is crucial to choosing your location.
Mainland Businesses
Setting up on the mainland means flexibility to operate anywhere in the UAE. Mainland companies can sell and provide services to residents and citizens of mainland UAE.
A mainland license requires compliance with UAE regulations, including corporate taxes. While full foreign ownership is allowed in many sectors, some may still require local sponsorship or a UAE national partner.
Takeaway: Choose a mainland setup to operate across the UAE or cater to the local market.
Free Zone Businesses
Free zones cater to companies whose operations are mainly contained within its free zone, other free zones, and international markets. Tax advantages (including a 0% CIT rate), 100% foreign ownership, full profit and capital repatriation, and zero customs duties are default to free zone companies.
Free zone businesses are restricted to conducting business within their zone or other countries unless they partner with a local distributor. Free zones also provide specialized infrastructure and facilities.
Takeaway: Choose a free zone setup if you want a UAE address but are not operating on the mainland. It's also an option if you're willing to work with a local distributor or set up a branch on the mainland to circumvent free zone restrictions.
Why Dubai?
The UAE has seven emirates. Why choose Dubai?
Dubai offers unique advantages that make it a top choice among global organizations. It is a leading global hub – a reputation it earned through visionary initiatives and opportunities.
- Sector-specific opportunities: Dubai hosts diverse businesses in industries like tourism, real estate, technology, and financial services. Initiatives like segmenting free zones (e.g., Dubai Internet City, Dubai Media City, and Dubai International Financial Centre) clarify their messaging and branding and simplify location selection for business owners. The segmentation also informs infrastructure and facilities development, ensuring the sites provide best-in-class facilities that meet the concerned industry's needs.
- Tourism and trade hub: Dubai has a thriving tourism industry supported by its iconic landmarks (e.g., Burj Khalifa, Burj Al Arab, Palm Jumeirah) and magnificent global events like Expo 2020 Dubai. This means plenty of opportunities in hospitality, retail, entertainment, and other tangential domains. Dubai's position as a re-export hub further boosts sectors like trade and logistics and makes the emirate an attractive base for import and export businesses.
- Innovation ecosystem: Dubai leads in embracing new technologies with dedicated innovation zones and programs like Dubai Startup Support, Data First, AI Lab, the Dubai Blockchain Strategy, and the Dubai Paperless Strategy. Dubai also provides access to funding opportunities, accelerators, and venture capital firms.
- Global connectivity: Dubai International Airport and Jebel Ali Port rank among the busiest global ports, connecting Dubai to a significant portion of the world.
How to Set Up a Business in Dubai?
Business setup in Dubai involves these steps, with slight variations depending on whether you're starting a business in a free zone or on the mainland.
1. Define your business activity.
Identify the type of business you intend to conduct. Both mainland and free zone authorities require this as it determines licensing requirements and suitable locations.
2. Choose your legal structure.
Decide on the legal form of your business (e.g., LLC, sole proprietorship, branch office). Free zones typically have constrained options (e.g., free zone liability company, free zone company, free zone establishment), while the mainland offers many options, from general partnerships to holding companies.
3. Select a location.
Mainland businesses must secure a physical office anywhere across the UAE. Free zone businesses need an office within their free zone. Free zone companies can choose from a variety of office configurations, including hotdesks.
4. Register your trade name.
Reserve a unique name that adheres to the UAE's business-naming conventions. Check with the Department of Economic Development for permitted and unavailable trade names.
5. Apply for initial approvals.
Submit the required documents to the government agency in charge of initial approval. Some businesses, even if they're located in free zones, may require the approval of specific governing ministries.
6. Secure your trade license.
Obtain the necessary business license (e.g., commercial, industrial, professional). The free zone authority is in charge of free zone enterprises, while the Department of Economic Development (DED) awards licenses to mainland companies. Free zone authorities also assist with visa processing.
7. Open a corporate bank account.
Once your business is registered, set up a UAE bank account.
Get Some Help
The UAE is an attractive destination for business setup, and Dubai is an excellent location. Applying for a business license is also a straightforward process, whether you choose the mainland or a free zone.
While the steps are clear, it's better to course your application through a business setup consultant in Dubai. If you decide to do it yourself, you might suffer delays because you didn't realize you needed a particular document until it was time to file for approval. You might also incur unnecessary expenses accomplishing something you might not actually need, given the scope and economic activity of your UAE business.
